S-1 1 a2219379zs-1.htm S-1

Use these links to rapidly review the document
TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS

Table of Contents

Filed with the Securities and Exchange Commission on March 31, 2014.

Registration Statement No. 333-            

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Ares Management, L.P.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  6282
(Primary Standard Industrial
Classification Code Number)
  80-0962035
(I.R.S. Employer
Identification Number)

2000 Avenue of the Stars
12th Floor
Los Angeles, California 90067
(310) 201-4100
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Michael D. Weiner
c/o Ares Management, L.P.
2000 Avenue of the Stars
12th Floor
Los Angeles, California 90067
(310) 201-4100
(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies of all communications to:

Michael A. Woronoff
Philippa M. Bond
Proskauer Rose LLP
2049 Century Park East, Suite 3200
Los Angeles, California 90067
(310) 557-2900/(310) 557-2193 (Facsimile)

 

Joshua Ford Bonnie
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017-3954
Telephone: (212) 455-2000
Facsimile: (212) 455-2502

 

Kirk A. Davenport II
Cynthia A. Rotell
Latham & Watkins LLP
355 South Grand Avenue
Los Angeles, California 90071
(213) 485-1234/(213) 891-8763 (Facsimile)



Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.



           If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

           If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o



CALCULATION OF REGISTRATION FEE

 
Title of Each Class of Securities
to be Registered

  Proposed Maximum
Aggregate Offering
Price(1)(2)

  Amount of
Registration Fee

 
Common Units Representing Limited Partner Interests   $100,000,000   $12,880
 
(1)
Includes additional common units that the underwriters have the option to purchase.

(2)
Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

           The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission acting pursuant to said Section 8(a), may determine.

   


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion
Preliminary Prospectus dated March 31, 2014

PROSPECTUS

Common Units

Representing Limited Partner Interests

LOGO

Ares Management, L.P.



          This is Ares Management, L.P.'s initial public offering. We are selling                    common units, representing limited partner interests in Ares Management, L.P.

          We expect the public offering price of our common units to be between $        and $        per common unit. Currently, no public market exists for our common units. We intend to apply for our common units to be listed on the New York Stock Exchange under the symbol "ARES."

          We are managed by our general partner, which is wholly owned by Ares Partners Holdco LLC, an entity owned and controlled by our Co-Founders. Our common unitholders will have limited voting rights and will have no right to remove our general partner or, except in limited circumstances, elect the directors of our general partner. Moreover, immediately following this offering, our Co-Founders will have sufficient voting power to determine the outcome of those few matters that may be submitted for a vote of our limited partners. In addition, our partnership agreement limits the liability of, and reduces or eliminates the duties (including fiduciary duties) owed by, our general partner to our common unitholders and restricts the remedies available to our common unitholders for actions that might otherwise constitute breaches of our general partner's duties. Moreover, there are certain conflicts of interest inherent in our structure between our Co-Founders on behalf of our general partner respecting our common unitholders and on behalf of our funds respecting investors in our funds.

          Investing in our common units involves risks that are described in the section entitled "Risk Factors" beginning on page 25 of this prospectus. These risks include:

    A complex regulatory and tax environment, which could restrict our operations or the operations of our funds and portfolio companies and subject us to increased compliance costs and administrative burdens, as well as restrictions on our business activities.

    The potential enactment of legislation that would preclude us from qualifying for treatment as a partnership for U.S. federal income tax purposes under the publicly traded partnership rules. If this or any similar legislation or regulation were to be enacted and were to apply to us, we would incur a material increase in our tax liability.

    Poor performance by our funds due to market conditions, political environments, monetary and fiscal policy or other conditions beyond our control.

    The reputational harm that we would experience as a result of inappropriately addressing conflicts of interest, poor performance by the investments we manage or the actual or alleged failure by us, our employees, our funds or our portfolio companies to comply with applicable regulations in an increasingly complex political and regulatory environment.

    Potential variability in our period to period earnings due primarily to mark-to-market valuations of our funds' investments. As a result of this variability, the market price of our common units may be volatile and subject to fluctuations.

    The increasing demands of the investing community, including the potential for fee compression and changes to other terms, which could materially adversely affect our revenues.

    An investment in our common units is not an investment in our underlying funds. Moreover, there can be no assurance that projections respecting performance of our underlying funds or unrealized values will be achieved.

    As discussed in "Material U.S. Federal Tax Considerations," the status of Ares Management, L.P. as a partnership for U.S. federal income tax purposes, as a result of which our common unitholders will be required to take into account their allocable share of items of income, gain, loss, deduction and credit of Ares Management, L.P. We may not make cash distributions in an amount sufficient to pay the tax liability that results from that income and gain.



       
 
 
  Per Common Unit
  Total
 

Initial public offering price

  $               $            
 

Underwriting discount

  $               $            
 

Proceeds, before expenses, to us

  $               $            

 

          The underwriters may also exercise their option to purchase up to an additional                    common units from us, at the initial public offering price, less underwriting discounts, for 30 days after the date of this prospectus to cover overallotments, if any.

          Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

          The common units will be ready for delivery on or about                , 2014.

J.P. Morgan       BofA Merrill Lynch

Goldman, Sachs & Co.

 

Morgan Stanley

 

Wells Fargo Securities

 

Barclays   Citigroup   Credit Suisse

 

Deutsche Bank Securities   RBC Capital Markets   UBS Investment Bank

 

BMO Capital Markets   SunTrust Robinson Humphrey

   

The date of this prospectus is                , 2014.


Table of Contents


Assets Under Management

GRAPHIC

Capital Base   Fee Revenue Base


GRAPHIC

 


GRAPHIC

Table of Contents


TABLE OF CONTENTS

 
  Page

Prospectus Summary

  1

Ares

  1

Business Model

  3

Competitive Strengths

  5

Industry Trends

  7

Growth Strategy

  8

Investment Risks

  10

Organizational Structure

  10

Implications of Being an Emerging Growth Company

  16

Restrictions on Ownership of Our Common Units

  16

The Offering

  18

Summary Historical Financial and Other Data

  22

Risk Factors

  25

Summary of Risks

  25

Risks Related to Our Businesses

  25

Risks Related to Our Funds

  46

Risks Related to Our Organization and Structure

  60

Risks Related to Our Common Units and this Offering

  71

Risks Related to U.S. Taxation

  75

Special Note Regarding Forward-Looking Statements

  82

Market and Industry Data and Forecasts

  82

Organizational Structure

  83

Reorganization

  83

Exchange Agreement

  84

Offering Transactions

  84

Our Organizational Structure Following this Offering and the Offering Transactions

  85

Holding Partnership Structure

  88

Use of Proceeds

  90

Cash Distribution Policy

  91

Distribution Policy for Common Units

  91

Distributions to Our Existing Owners

  93

Capitalization

  94

Dilution

  95

Unaudited Pro Forma Consolidated Financial Data

  97

Selected Financial Data

  109

Management's Discussion and Analysis of Financial Condition and Results of Operations

  112

Our Business

  112

Trends Affecting Our Business

  114

Reorganization and Offering Transactions

  116

Managing Business Performance

  118

Overview of Combined and Consolidated Results of Operations

  121

Results of Operations

  127

Segment Analysis

  135

Results of Operations by Segment

  138

Liquidity and Capital Resources

  171

Critical Accounting Policies

  175

Quantitative and Qualitative Disclosures About Market Risk

  181

Recent Accounting Pronouncements

  184

i


Table of Contents

 
  Page

Off-Balance Sheet Arrangements

  184

Contractual Obligations, Commitments and Contingencies

  184

Implications of Being an Emerging Growth Company

  186

Business

  188

Overview

  188

Investment Groups

  189

Competitive Strengths

  195

Industry Trends

  199

Growth Strategy

  201

Operations Management Groups

  202

Business Development and Investor Relations

  203

Investment Operations and Information Technology

  204

Investment Process

  204

Structure and Operation of our Funds

  204

Fee Structure

  205

Capital Invested In and Through Our Funds

  207

Regulatory and Compliance Matters

  208

Competition

  212

Legal Proceedings

  213

Properties

  213

Employees

  213

Management

  214

Our General Partner

  214

Directors and Executive Officers

  214

Biographical Information

  214

Composition of the Board of Directors After this Offering

  217

Management Approach

  218

Limited Powers of Our Board of Directors

  218

Committees of the Board of Directors

  218

Compensation Committee Interlocks and Insider Participation

  219

Compensation of Our Directors and Executive Officers

  220

Director Compensation

  220

Executive Compensation

  220

Equity Incentive Plan

  222

IPO Awards Under the 2014 Equity Incentive Plan

  224

Vesting; Transfer Restrictions for Senior Professional Owners

  224

Certain Relationships and Related Person Transactions

  226

Reorganization and Offering Transactions

  226

Our General Partner

  226

Tax Receivable Agreement

  227

Investor Rights Agreement

  229

Ares Operating Group Governing Agreements

  229

Exchange Agreement

  230

Firm Use of Our Co-Founders' Private Aircraft

  231

Co-Investments and Other Investment Transactions

  231

Statement of Policy Regarding Transactions with Related Persons

  231

Indemnification

  231

Principal Unitholders

  233

Pricing Sensitivity Analysis

  234

Conflicts of Interest and Fiduciary Responsibilities

  236

ii


Table of Contents

 
  Page

Conflicts of Interests

  236

Potential Conflicts

  237

Fiduciary Duties

  239

Description of Common Units

  243

Common Units

  243

Restrictions on Ownership and Transfer

  243

Transfer of Common Units

  244

Listing

  245

Transfer Agent and Registrar

  245

Material Provisions Of Ares Management, L.P. Partnership Agreement

  246

General Partner

  246

Organization

  246

Purpose

  246

Power of Attorney

  246

Capital Contributions

  247

Limited Liability

  247

Issuance of Additional Securities

  248

Common Unit Ownership Limitations

  248

Distributions

  249

Amendment of the Partnership Agreement

  249

Corporate Transactions

  251

Election to be Treated as a Corporation

  252

Dissolution

  252

Liquidation and Distribution of Proceeds

  252

Withdrawal or Removal of the General Partner

  253

Limited Call Right

  253

Sinking Funds; Preemptive Rights

  254

Meetings; Voting

  254

Election of Directors of General Partner

  255

Non-Voting Common Unitholders

  256

Status as Limited Partner

  256

Non-Citizen Assignees; Redemption

  257

Indemnification

  257

Forum Selection

  258

Books and Reports

  258

Right to Inspect Our Books and Records

  259

Common Units Eligible for Future Sale

  260

General

  260

Registration Rights

  261

Lock-Up Arrangements

  261

Ares Transfer Restrictions

  261

Material U.S. Federal Tax Considerations

  263

Taxation of Ares Management, L.P. and the Ares Operating Group

  264

Consequences to U.S. Holders of Common Units

  268

Consequences to Non-U.S. Holders of Common Units

  277

Surtax on Unearned Income

  278

Administrative Matters

  278

Underwriting

  284

Commissions and Discounts

  284

Option to Purchase Additional Common Units

  284

iii


Table of Contents



        This prospectus is solely an offer with respect to our common units, and is not an offer, directly or indirectly, of any securities of any of the funds we advise, manage or sponsor. An investment in our common units is not an investment in any of our funds, and the assets and revenues of our funds are not directly available to us.

        This prospectus does not constitute an offer of, or an invitation to purchase, any of our common units in any jurisdiction in which such offer or invitation would be unlawful. We and the underwriters are offering to sell, and seeking offers to buy, our common units only in jurisdictions where offers and sales are permitted.

        You should rely only on the information contained in this prospectus or in any free writing prospectus we may authorize to be delivered to you. Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus we have prepared. Neither we nor the underwriters take any responsibility for, or can provide any assurance as to the reliability of, any other information that others may give you. The information in this prospectus is current only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our common units.

        Our business has historically been conducted through operating subsidiaries held directly or indirectly by Ares Holdings LLC and Ares Investments LLC (or "AI"). These two entities have been principally owned by Ares Partners Management Company LLC ("APMC") and entities affiliated with the Abu Dhabi Investment Authority ("ADIA") and Alleghany Corporation (NYSE: Y) ("Alleghany") that own minority interests with limited voting rights in our business. We refer to these owners collectively as our "existing owners." APMC is controlled by our Co-Founders. Ares Management, L.P. was formed on November 15, 2013 to serve as a holding partnership for our businesses. Ares Management, L.P. has not commenced operations and prior to the consummation of this offering will have nominal assets and liabilities. Unless the context suggests otherwise, references in this prospectus to (1) "Ares," "we," "us" and "our" refer to our businesses, both before and after the consummation of our reorganization into a holding partnership structure as described under "Organizational Structure" and (2) "Pre-IPO Ares" refer to Ares Holdings Inc. ("AHI") and Ares Investments LLC, our accounting predecessors, as well as their wholly owned subsidiaries and managed funds, in each case prior to our Reorganization (as defined under "Organizational Structure"), which we will consummate prior to this offering. References in this prospectus to "our general partner" refer to Ares Management GP LLC, an entity wholly owned by Ares Partners Holdco LLC, which is in turn owned and controlled by our Co-Founders.

iv


Table of Contents

        Under generally accepted accounting principles in the United States ("GAAP"), we are required to consolidate (a) entities in which we hold a majority voting interest or have majority ownership and control over the operational, financial and investing decisions of that entity, including Ares-affiliates and affiliated funds and co-investment entities, for which we are the general partner and are presumed to have control, and (b) entities that we concluded are variable interest entities ("VIEs"), including limited partnerships in which we have a nominal economic interest and the CLOs, for which we are deemed to be the primary beneficiary. When a fund is consolidated, we reflect the assets, liabilities, revenues, expenses and cash flows of the fund in our combined and consolidated financial statements on a gross basis, subject to eliminations from consolidation, including the elimination of the management fees, performance fees and other fees that we earn from Consolidated Funds. However, the presentation of performance fee compensation and other expenses associated with generating such revenues are not affected by the consolidation process. In addition, as a result of the consolidation process, the net income attributable to third-party investors in Consolidated Funds is presented as net income attributable to non-controlling redeemable interests in Consolidated Funds in our combined and consolidated statements of operations.

        In this prospectus, in addition to presenting our results on a consolidated basis in accordance with GAAP, we present revenues, expenses and other results on a (i) "segment basis," which deconsolidates these funds and therefore shows the results of our reportable segments without giving effect to the consolidation of the funds and (ii) "Stand Alone basis," which shows the results of our reportable segments on a combined segment basis together with our Operations Management Group. In addition to our four segments, we have an Operations Management Group (the "OMG") that consists of five independent, shared resource groups to support our reportable segments by providing infrastructure and administrative support in the areas of accounting/finance, operations/information technology, business development, legal/compliance and human resources. The OMG's expenses are not allocated to our four reportable segments but we consider the cost structure of the OMG when evaluating our financial performance. This information constitutes non-GAAP financial information within the meaning of Regulation G, as promulgated by the SEC. Our management uses this information to assess the performance of our reportable segments and our Operations Management Group, and we believe that this information enhances the ability of unitholders to analyze our performance. For more information, see "Management's Discussion and Analysis of Financial Condition and Results of Operation—Reorganization and Offering Transactions—Consolidation and Deconsolidation of Ares Funds," "—Managing Business Performance—Non-GAAP Financial Measures" and "—Segment Analysis—Combined ENI and Other Measures."

        When used in this prospectus, unless the context otherwise requires:

    "assets under management" or "AUM" refers to the assets of our funds. For our funds other than CLOs, our AUM represents the sum of the net asset value of such funds, the drawn and undrawn debt (at the fund-level including amounts subject to restrictions) and uncalled committed capital (including commitments to funds that have yet to commence their investment periods). For our funds that are CLOs, our AUM represents subordinated notes (equity) plus all drawn and undrawn debt tranches;

    "CLOs" refers to collateralized loan obligations;

    "Consolidated Funds" refers collectively to certain Ares-affiliated funds, related co-investment entities and certain CLOs that are required under GAAP to be consolidated in our combined and consolidated financial statements;

    "distributable earnings" refers to a component of ENI that is used to assess performance and amounts potentially available for distributions to members. Distributable earnings differs from income before taxes computed in accordance with GAAP as it adjusts for foreign, state and local taxes paid by operating entities, expenses arising from transaction costs associated with acquisitions, placement fees and underwriting costs, expenses incurred in connection with corporate reorganization, depreciation and the items included in the calculation of ENI and also adjusts ENI

v


Table of Contents

      for unrealized performance fees, unrealized performance fee compensation expenses and unrealized investment income from Consolidated Funds and non-consolidated funds;

    "economic net income" or "ENI" refers to net income excluding (a) income tax expense, (b) operating results of our Consolidated Funds, (c) depreciation expense, (d) the effects of changes arising from corporate actions, and (e) certain other items that we do not believe are indicative of our performance. Changes arising from corporate actions include equity-based compensation expenses, the amortization of intangible assets, transaction costs associated with acquisitions and capital transactions, placement fees and underwriting costs and expenses incurred in connection with corporate reorganization;

    "fee earning AUM" refers to the AUM on which we directly or indirectly earn management fees. Fee earning AUM is equal to the sum of all the individual fee bases of our funds that contribute directly or indirectly to our management fees;

    "fee related earnings" or "FRE" refers to a component of ENI that is used to assess the ability of our business to cover direct base compensation and operating expenses from management fees. FRE differs from income before taxes computed in accordance with GAAP as it adjusts for the items included in the calculation of ENI and further adjusts for performance fees, performance fee compensation, investment income from our Consolidated Funds and certain other items that we believe are not indicative of our performance;

    "gross IRR" refers to the annualized internal rate of return ("IRR") for the period indicated on invested capital based on contributions, distributions and unrealized value before giving effect to taxes, management fees, the general partner's carried interest and other expenses;

    "management fees" refers to fees we earn for advisory services provided to our funds, which are generally based on a defined percentage of fair value of assets, total commitments, invested capital, net asset value, net investment income, total assets or par value of the investment portfolios managed by us and also include ARCC Part I Fees (as defined below) that are classified as management fees as they are predictable and are recurring in nature, are not subject to repayment (or clawback) and are generally cash-settled each quarter;

    "net IRR" refers to the annualized IRR for the period indicated on invested capital based on contributions, distributions and unrealized value after giving effect to management fees, the general partner's carried interest and other expenses, if any;

    "net performance fees" refers to performance fees net of performance fee compensation, which is the portion of the performance fees earned from certain funds that is payable to professionals;

    "our funds" refers to the funds, alternative asset companies and other entities and accounts that are managed or co-managed by the Ares Operating Group (as described in "Prospectus Summary—Organizational Structure"). It also includes funds managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of ARCC, and a registered investment adviser;

    "performance fees" refers to fees we earn based on the performance of a fund, which are generally based on certain specific hurdle rates as defined in the fund's investment management or partnership agreements and may be either an incentive fee or a special residual allocation of income in the form of carried interest;

    "performance related earnings" or "PRE" refers to a measure used to assess our investment performance. PRE differs from income (loss) before taxes computed in accordance with GAAP as it only includes performance fee income, performance fee compensation and investment income earned from our Consolidated Funds and non-consolidated funds;

vi


Table of Contents

    "permanent capital" refers to capital of funds that do not have redemption provisions or a requirement to return capital to investors upon exiting the investments made with such capital, except as required by applicable law, which funds currently consist of Ares Capital Corporation (Nasdaq: ARCC) ("ARCC"), Ares Commercial Real Estate Corporation (NYSE: ACRE) ("ACRE"), Ares Dynamic Credit Allocation Fund, Inc. (NYSE: ARDC) ("ARDC") and Ares Multi-Strategy Credit Fund, Inc. (NYSE: ARMF) ("ARMF"); such funds may be required, or elect, to return all or a portion of capital gains and investment income; and

    "total fee revenue" refers to the sum of segment management fees and net performance fees.

Many of the terms used in this prospectus, including AUM, fee earning AUM, ENI, FRE, PRE and distributable earnings, may not be comparable to similarly titled measures used by other companies. In addition, our definitions of AUM and fee earning AUM are not based on any definition of AUM or fee earning AUM that is set forth in the agreements governing the investment funds that we manage and may differ from definitions of AUM set forth in other agreements to which we are a party from time to time. Further, ENI, FRE, PRE and distributable earnings are not measures of performance calculated in accordance with GAAP. We use ENI, FRE, PRE and distributable earnings as measures of operating performance, not as measures of liquidity. ENI, FRE, PRE and distributable earnings should not be considered in isolation or as substitutes for operating income, net income, operating cash flows, or other income or cash flow statement data prepared in accordance with GAAP. The use of ENI, FRE, PRE and distributable earnings without consideration of related GAAP measures is not adequate due to the adjustments described above. Our management compensates for these limitations by using ENI, FRE, PRE and distributable earnings as supplemental measures to our GAAP results, to provide a more complete understanding of our performance as our management measures it. Please see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Managing Business Performance—Non-GAAP Financial Measures" and "—Reconciliation of Certain Non-GAAP Measures to Consolidated GAAP Financial Measures" and Note 16, "Segment Reporting," to our combined and consolidated financial statements appearing elsewhere in this prospectus for more information on AUM, fee earning AUM, ENI, FRE, PRE and distributable earnings. Amounts and percentages throughout this prospectus may reflect rounding adjustments and consequently totals may not appear to sum.

vii


Table of Contents


PROSPECTUS SUMMARY

        This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider before investing in our common units. You should read this entire prospectus carefully, including the more detailed information regarding us and our common units, the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our combined and consolidated financial statements and related notes included elsewhere in this prospectus, before you decide to invest in our common units.


Ares

        Ares is a leading global alternative asset manager with approximately $74 billion of assets under management and approximately 700 employees in over 15 offices in the United States, Europe and Asia. We provide a range of investment strategies and seek to deliver attractive performance to a growing investor base that includes over 500 direct institutional relationships and a significant retail investor base across our publicly traded and sub-advised funds. Over the past ten years, our assets under management and total management fees, which comprise a significant portion of our total fee revenue, have achieved compound annual growth rates of 31% and 33%, respectively.

        Since our inception in 1997, we have adhered to a disciplined investment philosophy that focuses on delivering strong risk-adjusted investment returns throughout market cycles. We have created value for our stakeholders not only through our investment performance but also by expanding our product offering, enhancing our distribution channels, increasing our global presence, investing in our non-investment functions, securing strategic partnerships and completing accretive acquisitions and portfolio purchases. For the year ended December 31, 2013, we generated total management fees of $517 million and economic net income of $329 million on a Stand Alone basis. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of Certain Non-GAAP Measures to Consolidated GAAP Financial Measures." Our revenues are diversified, with more than 140 active investment funds under management, and stable, with approximately 84% of total fee revenue for the year ended December 31, 2013 derived from management fees. In addition, as of December 31, 2013, approximately 58% of our assets under management was in funds with a contractual life of seven years or more, including 15% that was in our permanent capital vehicles with unlimited duration.

        We believe each of our four distinct but complementary investment groups is a market leader based on assets under management and investment performance and has compelling long-term business prospects. Each investment group has demonstrated a consistently strong investment track record, and we believe each is viewed as a top-tier manager by a loyal, high quality investor base.

GRAPHIC

 

1


Table of Contents

Tradable Credit Group

        We are a leading participant in the tradable, non-investment grade corporate credit markets, with approximately $28 billion of assets under management as of December 31, 2013. We have investment track records of over 15 years in both bank loans and high yield bonds, and we hold top quartile rankings in several of our funds within long-only and alternative credit investment strategies. We are one of the top ten bank loan institutional managers, based on reported trading volume, and our broader investing efforts are supported by a large research team dedicated to non-investment grade corporate credit. Our analysts generate proprietary research on over 1,000 companies in over 30 industries, which benefits our investment professionals across the entire firm.

Direct Lending Group

        We are one of the largest self-originating direct lenders to the U.S. and European markets, with approximately $27 billion of assets under management across over 25 funds as of December 31, 2013. We provide one-stop financing solutions to small-to-medium sized companies, which we believe are increasingly underserved by traditional lenders. We launched our inaugural vehicle dedicated to direct lending, Ares Capital Corporation (Nasdaq: ARCC) ("ARCC"), nearly ten years ago as a business development company. ARCC has grown to become the largest business development company, by both market capitalization and total assets, and has generated a 14% annualized total shareholder return since its 2004 initial public offering, outperforming the Standard & Poor's 500, Credit Suisse Leveraged Loan and Merrill Lynch U.S. High Yield Master II indices by a range of approximately 550-900 basis points over the same timeframe. In 2007, we extended our direct lending capabilities into Europe and raised our first dedicated fund. Our European team has grown to become a market leader in the region and was named the "Specialty Lender of the Year" by Real Deals in each of 2010, 2011 and 2012 and the co-winner of the "Unitranche Lender of the Year" by Private Debt Investor in 2013.

Private Equity Group

        We have one of the most consistent performance records in the United States, as measured by our investment results, with a growing presence in Asia and Europe. With approximately $10 billion of assets under management as of December 31, 2013, we focus on majority or shared-control investments, principally in under-capitalized companies. We launched our inaugural fund dedicated to private equity, Ares Corporate Opportunities Fund, L.P., ten years ago. Since that time, we have achieved compelling returns in both traditional private equity sponsorship and distressed balance sheet investing, which we believe enables us to stay active and disciplined in different market environments. In the aggregate, we have generated a 24% gross IRR on more than $7 billion of capital deployed from our five funds. We hold top quartile rankings for our 2006 and 2008 vintage funds, which were deployed at markedly different points in the economic cycle. Our 2008 fund is ranked as a "Top 10 Best Performing Buyout Fund" by Preqin for all funds it tracks across the 2006 to 2010 vintages, and we were named by PEI the "2012 North American Special Situations / Turnaround Firm of the Year."

Real Estate Group

        We are a leading participant in the real estate private equity markets and have a growing real estate direct lending business. We have developed a comprehensive real estate product offering, through both fundraising efforts and acquisitions, in a relatively short period of time and have approximately $9 billion of assets under management as of December 31, 2013. We focus on investing in assets that have been under-managed or need repositioning in their markets. Our private equity team has investment track records of over 15 years in both the United States and Europe and, in 2013, PERE ranked our team as a Top 15 real estate manager based on equity raised from January 2008 to April 2013. In 2012, we launched a mortgage real estate investment trust ("REIT"), Ares Commercial Real Estate Corporation (NYSE: ACRE) ("ACRE").

 

2


Table of Contents

        We have an established track record of delivering strong risk-adjusted returns through market cycles. We believe our consistent and strong performance in a broad range of alternative assets has been shaped by several distinguishing features of our platform:

    Robust Sourcing Model:  our investment professionals' local market presence and ability to effectively cross-source for other investment groups generates a robust pipeline of high-quality investment opportunities across our platform.

    Multi-Asset Class Expertise and Flexible Capital:  our proficiency at evaluating every level of the capital structure, from senior debt to common equity, across companies, structured assets and real estate projects enables us to effectively assess relative value. This is complemented by our flexibility to deploy capital in a range of structures and different market environments to maximize risk-adjusted returns.

    Differentiated Market Intelligence:  our proprietary research in over 30 industries and insights from a broad, global investment portfolio enable us to more effectively diligence and structure our products and investments.

    Consistent and Replicable Investment Approach:  our rigorous, credit-oriented investment approach is consistent across each of our investment groups, and we believe is a key contributor to our strong investment performance and ability to expand our product offering.

    Talented and Committed Professionals:  we attract, develop and retain highly accomplished investment professionals who not only demonstrate deep and broad investment expertise but also have a strong sense of commitment to our firm.

    Collaborative Culture:  we share ideas, relationships and information across our investment groups, which enables us to more effectively source, evaluate and manage investments.


Business Model

        We provide our investment management capabilities through various funds and products that meet the needs of a wide range of institutional and retail investors.

    Tradable Credit Group:  Our tradable credit investment funds range from commingled and separately managed accounts for institutional investors to publicly traded vehicles and sub-advised funds for retail investors. While each of our approximately 75 tradable credit funds is tailored to specific investment objectives, mandates can be broadly categorized between long-only credit and alternative credit investment strategies. Long-only credit funds primarily focus on long-only and performing credit with a goal of outperforming corresponding performing bank loan or high yield market indices. Alternative credit funds primarily seek to deliver compelling absolute risk-adjusted returns through dynamic capital allocation across asset classes and markets and a focus on both performing and non-performing situations.

    Direct Lending Group:  Our primary U.S. and European direct lending vehicles are ARCC and ACE II, respectively. ARCC is a publicly traded business development company (registered under the Investment Company Act of 1940) and ACE II is a commingled fund dedicated to private direct lending in the European middle market. We generate fees from over 25 other funds that include separately managed accounts for large institutional investors seeking tailored investment solutions, commingled funds and joint venture lending programs with affiliates of General Electric Company.

    Private Equity Group:  We manage five private equity commingled funds: ACOF I ($751 million fund size / 2003 vintage), ACOF II ($2.1 billion fund size / 2006 vintage), ACOF III ($3.5 billion fund size / 2008 vintage) and ACOF IV ($4.7 billion fund size / 2012 vintage), which focus primarily on North America and, to a lesser extent, Europe, and ACOF Asia ($220 million fund size / 2011 vintage), which focuses on growth equity opportunities in China.

 

3


Table of Contents

    Real Estate Group:  We manage U.S. and European real estate, private equity and debt commingled funds and separately managed accounts, and ACRE, our publicly traded commercial mortgage REIT, focused on direct lending on properties owned by commercial real estate sponsors and operators. In addition to our $9 billion of assets under management as of December 31, 2013, we service a portfolio of over $5.5 billion in mortgage loans principally through a subsidiary of ACRE.

        In addition to our four segments, we have an Operations Management Group that consists of five independent, shared resource groups to support our reportable segments by providing infrastructure and administrative support in the areas of accounting/finance, operations/information technology, business development, legal/compliance and human resources. The OMG's expenses are not allocated to our four reportable segments but we do consider the cost structure of the OMG when evaluating our financial performance.

        Most of the funds we manage are structured to earn a fixed management fee and performance fees based on investment performance in the form of incentive fees or carried interest. Management fees comprise the significant majority of our total fee revenue, which has resulted in a stable, predictable revenue stream. In addition, we have been able to mitigate some of the volatility that is typically associated with performance fees because a significant portion of our performance fees is based on net interest income from fixed income investments.

        The following table sets forth certain combined consolidated financial information and certain Stand Alone financial information for the periods presented. Please see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of Certain Non-GAAP Measures to Consolidated GAAP Financial Measures" for a discussion of segment results.

 
  Year Ended December 31,  
 
  2013   2012   2011  
 
  (Dollars in millions)
 

Combined consolidated financial data(1)

                   

Income before taxes

    873     1,262     953  

Net income attributable to AHI, AI and consolidated subsidiaries

    180     221     97  

Stand Alone data(2)

                   

Management fees

  $ 517   $ 415   $ 324  

Net operating expenses(3)

    (364 )   (277 )   (204 )
               

Fee related earnings

    153     138     120  

Net performance fees

    102     157     39  

Net investment income

    74     107     34  
               

Performance related earnings

    176     265     73  
               

Economic net income

  $ 329   $ 402   $ 194  
               

Distributable earnings

  $ 306   $ 302   $ 203  
               

Total fee revenue

  $ 619   $ 572   $ 363  
               

Management fees as % of total fee revenue

    84 %   73 %   89 %
               

(1)
Calculated in accordance with GAAP.

 

4


Table of Contents

(2)
Please see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Managing Business Performance—Non-GAAP Financial Measures" and "—Reconciliation of Certain Non-GAAP Measures to Consolidated GAAP Financial Measures" and Note 16, "Segment Reporting," to our combined and consolidated financial statements appearing elsewhere in this prospectus.

(3)
Net operating expenses refers to the sum of compensation and benefits and general, administrative and other expenses, net of other income.


Competitive Strengths

        Since our inception in 1997, we have grown to become a leading global alternative asset manager. We believe the following competitive strengths position us well for future growth:

Stable Earnings Model

        We believe we have a stable earnings model based on:

    A significant portion of the capital that we manage is long-term in nature.  As of December 31, 2013, approximately 58% of our AUM was in funds with a contractual life of seven years or more, including 15% that was in permanent capital vehicles with unlimited duration. This has enabled and continues to enable us to invest assets with a long-term focus over different points in a market cycle, which we believe is an important component in generating attractive returns.

    A significant portion of our revenue is generated from management fees.  For the year ended December 31, 2013, approximately 84% of our total fee revenue was comprised of management fees and approximately 16% was comprised of performance fees. From 2011 to 2013, management fees averaged 81% of our total fee revenue. Management fees, which are generally based on the amount of committed or invested capital in funds we manage, are more predictable and less volatile than performance fees.

    We have a diverse capital base across funds from four distinct groups.  For the year ended December 31, 2013, approximately 40% of our total fee revenue was generated by our Direct Lending Group, which includes fees generated by over 25 funds, and approximately 33% of our total fee revenue was generated by our Tradable Credit Group, which manages approximately 75 investment funds. We have a well-balanced and diverse capital base, which we believe is the result of demonstrated expertise across each of our four investment groups.

    A majority of our performance fees are linked to credit investment strategies.  Over the last three years, a majority of our performance fees have been generated by funds with credit investment strategies, which generally generate regular interest income. For the year ended December 31, 2013, 55% of our net performance fees were from contractual interest payments on debt investments and dividends received by our funds. As a result, we believe that our performance fees are more predictable and less volatile than investment managers predominantly focused on private equity-style investment strategies, in which performance fees are typically based on market gains and losses.

Broad Alternative Product Offering with Balanced Growth Across Strategies

        To meet investors' growing demand for alternative asset investments, we manage investments in an increasingly comprehensive range of funds across a spectrum of compelling and complementary strategies. We have demonstrated an ability to consistently generate attractive and differentiated investment returns across these investment strategies and through various market environments. As such, we have been able to increase AUM during all phases of an economic cycle. We believe the breadth of our product offering, our expertise in various investment strategies and our proficiency in attracting and satisfying our growing

 

5


Table of Contents

institutional and retail client base has enabled and will continue to enable us to increase our AUM across each of our investment groups in a balanced manner. Our fundraising efforts historically have been spread across investment strategies and have not been dependent on the success of any one strategy.

Diverse and Growing Investor Base

        Our investor base includes direct institutional relationships and a significant retail investor base across our publicly traded and sub-advised funds. Our high quality institutional investor base includes large pension funds, sovereign wealth funds, banks and insurance companies and we have grown the number of these relationships from approximately 200 in 2011 to over 500 as of December 31, 2013. In many instances, investors have increased their commitments to subsequent funds in a particular investment strategy and deployed capital across our other investment groups. We believe that our deep and longstanding investor relationships, founded on our strong performance, disciplined management of our investors' capital and diverse product offering, have facilitated the growth of our existing businesses and will assist us with the development of additional strategies and products, thereby increasing our fee earning AUM. We have a dedicated in-house Business Development Group that includes approximately 45 investor relations and marketing specialists. We have frequent dialogue with our investors and are committed to providing them with the highest quality service. We believe our service levels, as well as our emphasis on transparency, inspire loyalty and support our efforts to continue to attract investors across our investment platform.

Integrated and Scalable Global Business Platform

        We operate our increasingly diversified and global firm as an integrated investment platform with a collaborative culture that emphasizes sharing of knowledge and expertise. We believe the exchange of information enhances our ability to analyze investments, deploy capital and improve the performance of our funds and portfolio companies. Through collaboration, we drive value by leveraging our capital markets relationships and access to deal flow. Within this framework we have established deep and sophisticated independent research capabilities in over 30 industries and insights from active investments in over 1,000 companies, 300 structured assets and approximately 300 properties. Further, our extensive network of investment professionals is comprised primarily of local and geographically positioned individuals with the knowledge, experience and relationships that enable them to identify and take advantage of a wide range of investment opportunities. They are supported by a highly sophisticated operations management team. We believe this broad platform and our operational infrastructure provide us with a scalable foundation to expand our product offering, geographic scope and profitability.

Breadth, Depth and Tenure of our Senior Management

        Ares was built upon the fundamental principle that each of our distinct but complementary investment groups benefits from being part of our broader platform. We believe that our strong performance, consistent growth and high talent retention through economic cycles is due largely to the effective application of this principle across our broad organization of over 700 employees. We do not have a centralized investment committee. Our investment committees are structured with overlapping membership to ensure consistency of approach. Each of our four investment groups is led by its own deep leadership team of highly accomplished investment professionals, who average over 22 years of experience managing investments in, advising, underwriting and restructuring leveraged companies. While primarily focused on managing strategies within their own investment group, these senior professionals are integrated within our platform through economic, cultural and structural measures. Our senior professionals have the opportunity to participate in the incentive programs of multiple investment groups to reward collaboration in our investment activities. This collaboration takes place on a daily basis but is formally promoted through sophisticated internal systems and widely attended weekly or monthly meetings.

 

6


Table of Contents

Alignment of Interests with Stakeholders

        The alignment of the interests of our Co-Founders and investment professionals with those of the investors in our funds and our unitholders is fundamental to our business. We and our investment professionals have committed over $1 billion of capital across our various investment funds, aligning our interests with those of our clients. Moreover, a significant portion of our professionals' compensation is in the form of performance fees, which we believe aligns their interests with those of the investors in our funds. We expect that our senior professional owners will own approximately 70% of Ares after this offering, aligning our interests with those of our common unitholders. In connection with this offering, we are establishing a long-term equity compensation plan that we believe will strengthen this alignment, as well as the motivation and retention of our professionals, through the significant and long-term ownership of our equity by our Co-Founders, senior professionals and other employees.


Industry Trends

        We are well positioned to capitalize on the following trends in the asset management industry:

Increasing Importance of Alternative Assets

        Over the past several years, investor groups of all types have meaningfully increased their capital allocations to alternative investment strategies. McKinsey and Co. estimates that alternative investments (which includes private equity, hedge funds and investments in real estate, infrastructure and commodities in a variety of vehicles) grew at a 14% compound annual growth rate versus non-alternative investments at 2% for the six year period from 2005 to 2011. We expect this current trend will continue as the combination of volatile returns in public equities and low-yields on traditional fixed income investments shifts investor focus to the lower correlated and absolute levels of returns offered by alternative assets.

Increasing Demand for Alternative Assets from Retail Investors

        Defined contribution pension plans and retail investors are demanding more exposure to alternative investment products to seek differentiated returns as well as to satisfy a desire for current yield due to changing demographics. According to McKinsey & Co., retail alternative investments will account for 13% of U.S. retail fund assets and 24% of revenues by 2015, up from 6% and 13% as of year-end 2010, respectively. ARCC has benefited from this growing demand, increasing its assets under management from approximately $300 million in 2004 to $9.7 billion in 2013. Our Tradable Credit and Real Estate Groups have raised three publicly traded vehicles over the past two years. With an established market presence, we believe we are well positioned to take advantage of the growing opportunity in the retail channel.

Shifting Asset Allocation Policies of Institutional Investors

        We believe that the growing pension liability gap is driving investors to seek higher return strategies and that institutional investors, such as insurance companies, are increasingly rotating away from core fixed income products towards more liquid alternative credit and absolute return-oriented products to achieve their return hurdles. According to Bain & Company, public pension funds increased their allocations toward alternative strategies to approximately 10% in 2013, up from approximately 8% in 2012. The increase in allocation has also been accompanied by a change in allocation strategy to a more balanced approach between private equity and non-private equity alternative investments. Our combination of credit expertise, total return and multi-strategy product offerings are particularly well suited to benefit from these asset allocation trends.

De-Leveraging of the Global Banking System

        After an extended period of increasing leverage, commercial and investment banks have been de-leveraging since 2008. Bank consolidation, more prudent balance sheet discipline, changing regulatory

 

7


Table of Contents

capital requirements and the increasing cost and complexity of regulatory compliance have led to material changes in the global banking system and have created significant opportunities for other institutional market participants. For example, well-capitalized non-bank direct lenders like ARCC and other of our funds have been able to fill the significant and growing need for financing solutions as traditional lenders have withdrawn from certain middle-market and non-investment grade asset classes. At the same time, tradable debt managers have been able to raise vehicles to capitalize on banks' interest in divesting non-core assets and/or reducing their hold commitments in new financings. Citibank estimates that bank divestments of non-core holdings from the higher-risk areas of the lending market will create an investment opportunity of between $1 trillion and $2 trillion over the next decade.

Increasing Benefits of Scale

        Many institutional investors are focused on limiting the number of their manager relationships and allocating a greater share of their assets to established and diversified platforms. These investors seek to partner with investment management firms that have not only proven track records across multiple investment products, but also highly sophisticated non-investment group functions in accounting, legal/compliance and operations. Given the advantages of scale and a heightened focus on diligence, transparency and compliance, institutional clients are allocating a greater proportion of assets to established asset managers with whom there is a deep level of comfort. This trend is evidenced by the distribution of net asset flows, as firms with more than $1 billion in assets under management garnered approximately 90% of the net asset flows in the six months ended June 30, 2013, according to Hedge Fund Report. Furthermore, the increasing complexity of the regulatory environment in which alternative investment managers operate and the costs of complying with such regulations serve as barriers to entry in the investment management business.


Growth Strategy

        As we continue to expand our business, we intend to apply the same core principles and strategies to which we have adhered since our inception to:

Organically Grow our Core Business

        Alternative assets are experiencing increasing demand from a range of investors, which we and many industry participants believe is part of a long-term trend to enhance portfolio diversification and to meet desired return objectives. We have demonstrated our ability to deliver strong risk-adjusted investment returns in alternative assets throughout market cycles since our inception in 1997, and we believe each of our investment groups is well positioned to benefit from long-term positive industry momentum. By continuing to deliver strong investment and operations management performance, we expect to grow the AUM in our existing products by deepening and broadening relationships with our current high-quality investor base as well as attracting new investors.

Expand our Product Offering

        A key to our growth has been pursuing complementary investment strategies and structuring different types of investment funds that address the specific needs of our investor base. We have expanded our product offering to provide increasingly diversified opportunities for investors and a balanced business model that we believe benefits all of our stakeholders. For example, our Tradable Credit Group has grown its AUM in alternative credit investment funds from zero in 2005 to approximately $9 billion as of December 31, 2013. We take advantage of market trends arising out of an increasingly complex regulatory environment to develop products that meet the evolving needs of market participants. We have demonstrated the ability to expand our product offering in a manner that enhances the investing capabilities of our professionals, provides differentiated solutions for our clients and creates a more balanced business model for our unitholders. There are a number of complementary strategies that we are

 

8


Table of Contents

currently pursuing across our investment groups, such as broadening our capabilities in direct lending and tradable credit to service more end-markets.

Enhance our Distribution Channels

        The growing demand for alternative assets provides an opportunity for us to attract new investors across a variety of channels. As we continue to expand our product offering and our global presence, we expect to be able to attract new investors to our funds. In addition to pension funds, sovereign wealth funds, banks and high net worth individuals, which have historically comprised a significant portion of our assets under management, in recent periods we have extended our investment strategies and marketing efforts increasingly to insurance companies, sub-advisory partners and retail investors with the initial public offerings of two closed-end funds, Ares Dynamic Credit Allocation Fund, Inc. (NYSE: ARDC) ("ARDC") and Ares Multi-Strategy Credit Fund, Inc. (NYSE: ARMF) ("ARMF"), and a REIT, ACRE.

Increase our Global Presence

        The favorable industry trends for alternative asset managers are global in nature and we believe there are a number of international markets that represent compelling opportunities for our investment strategies. Our European platform has 100 total employees, including approximately 70 investment professionals managing approximately $12 billion in assets under management in eight Western European offices as of December 31, 2013. We believe our strong financial position and existing global operations and network enable us to identify and readily pursue a range of expansion opportunities, including acquisitions of existing businesses or operations, partnering with local operators, establishing our own operations or otherwise. We intend to continue to develop our private equity and real estate direct lending capabilities in Western Europe, while opportunistically pursuing the expansion of our direct lending franchise into attractive new international markets.

Secure Strategic Partnerships

        We have established valuable relationships with strategic partners and large institutional investors who, among other things, provide market insights, product advice and relationship introductions. ADIA and Alleghany, minority investors in Ares since May 2007 and July 2013, respectively, have committed significant capital across our investment groups. Our Direct Lending Group has a joint venture with affiliates of General Electric Company that offers U.S. and European middle-market borrowers a differentiated loan product. We also have important relationships with large fund investors, leading commercial and investment banks, global professional services firms, key distribution agents and other market participants that we believe are of significant value. As we expand our offering and global presence, we intend to pursue opportunities with additional strategic partners.

Complete Accretive Acquisitions and Portfolio Purchases

        We continuously evaluate acquisition opportunities that we believe will enable us to expand our product offering, broaden our investor base and increase our global presence. We have a demonstrated ability to acquire companies at accretive valuations and effectively integrate their personnel, assets and investors into our organization. In particular, we believe the unique challenges facing large banks and small boutique asset managers in the current market environment will persist, which we expect will generate compelling opportunities for us to pursue acquisitions of businesses, investment teams and assets.

 

9


Table of Contents


Investment Risks

        An investment in our common units involves substantial risks and uncertainties. Some of the most significant challenges and risks relating to an investment in our common units include those associated with:

    a complex regulatory and tax environment, which could restrict our operations or the operations of our funds and portfolio companies and subject us to increased compliance costs and administrative burdens, as well as restrictions on our business activities;

    the potential enactment of legislation that would preclude us from qualifying for treatment as a partnership for U.S. federal income tax purposes under the publicly traded partnership rules. If this or any similar legislation or regulation were to be enacted and were to apply to us, we would incur a material increase in our tax liability;

    poor performance by our funds due to market conditions, political environments, monetary and fiscal policy or other conditions beyond our control;

    the reputational harm that we would experience as a result of inappropriately addressing conflicts of interest, poor performance by the investments we manage or the actual or alleged failure by us, our employees, our funds or our portfolio companies to comply with applicable regulations in an increasingly complex political and regulatory environment;

    potential variability in our period to period earnings due primarily to mark-to-market valuations of our funds' investments. As a result of this variability, the market price of our common units may be volatile and subject to fluctuations;

    the increasing demands of the investing community, including with respect to fee compression and other terms, which could materially adversely affect our revenues;

    an investment in our common units is not an investment in our underlying funds. Moreover, there can be no assurance that projections respecting performance of our underlying funds or unrealized values will be achieved; and

    as discussed in "Material U.S. Federal Tax Considerations," the status of Ares Management, L.P. as a partnership for U.S. federal income tax purposes, as a result of which our common unitholders will be required to take into account their allocable share of items of income, gain, loss, deduction and credit of Ares Management, L.P. We may not make cash distributions in an amount sufficient to pay the tax liability that results from that income and gain.

        Please see "Risk Factors" for a discussion of these and other factors you should consider before making an investment in our common units.


Organizational Structure

        We currently conduct our businesses through operating subsidiaries held directly or indirectly by Ares Holdings LLC and Ares Investments LLC. These two entities are principally owned by APMC and entities affiliated with ADIA and Alleghany that own minority interests with limited voting rights in our business (ADIA and Alleghany together, the "Strategic Investors"). We refer to these owners collectively as our "existing owners." APMC is controlled by our Co-Founders.

        To facilitate this offering, we will consummate the transactions described below and in "Organizational Structure" in connection with which Ares Management, L.P. will become the successor to AHI and Ares Investments LLC for financial accounting purposes under GAAP. We refer to these transactions as the "Reorganization."

 

10


Table of Contents

Reorganization

        Historically, Ares Holdings LLC has operated and controlled our U.S. fee-generating and many of our non-U.S. fee-generating businesses, while Ares Investments LLC has held a variety of assets, including our carried interests and co-investments in many of the proprietary investments made by our funds.

        In connection with this offering, we will convert Ares Holdings LLC into a limited partnership, Ares Holdings L.P. ("Ares Holdings"), and convert Ares Investments LLC into a limited partnership, Ares Investments L.P. ("Ares Investments"). In addition, we will form Ares Domestic Holdings L.P. ("Ares Domestic"), Ares Offshore Holdings L.P. ("Ares Offshore") and Ares Real Estate Holdings L.P. ("Ares Real Estate") (as described under "Organizational Structure"). Ares Holdings, Ares Domestic, Ares Offshore, Ares Investments and Ares Real Estate are collectively referred to as the "Ares Operating Group."

        Following this offering, the Ares Operating Group will hold:

    in the case of Ares Holdings, interests in the general partners, managing members and other management interests of our U.S. fee-generating and most of our non-U.S. fee generating businesses as well as certain investments;

    in the case of Ares Domestic, interests in certain U.S. investments that are fiscally transparent for U.S. federal income tax purposes;

    in the case of Ares Offshore, interests in the general partners of certain non-U.S direct lending and tradable credit funds and certain other private equity and real estate funds;

    in the case of Ares Investments, interests in the general partners of certain U.S. and non-U.S. tradable credit funds, certain U.S. and non-U.S. private equity funds, certain real estate funds and other investment assets, in each case that are expected to produce primarily interest, dividend income, capital gains and non-U.S. rental income; and

    in the case of Ares Real Estate, interests in the general partners of certain of our real estate funds and certain other real estate investments.

        In exchange for its interest in Ares Management, L.P., APMC will transfer to Ares Management, L.P., prior to this offering, its interests in each of AHI, Ares Domestic Holdings, Inc., Ares Offshore Holdings, Ltd., Ares Real Estate Holdings LLC and a portion of its interest in Ares Investments. Similarly, in exchange for its interest in Ares Management, L.P., an affiliate of ADIA will transfer to Ares Management, L.P., prior to this offering, its interests in each of AHI, Ares Domestic Holdings, Inc., Ares Offshore Holdings, Ltd., Ares Investments and Ares Real Estate Holdings LLC. APMC will retain a        % interest in each of the Ares Operating Group entities. In addition, APMC will be converted into a limited partnership and renamed Ares Owners Holdings L.P.

Offering Transactions

        Upon the consummation of this offering, Ares Management, L.P. will (i) loan a portion of the proceeds from this offering to its wholly owned subsidiary, AHI, which will then contribute such amount to Ares Holdings in exchange for            limited partnership units of Ares Holdings, (ii) contribute a portion of the proceeds from this offering to Ares Domestic Holdings, Inc., which will then contribute such amount to Ares Domestic in exchange for            limited partnership units of Ares Domestic, (iii) contribute a portion of the proceeds from this offering to Ares Offshore Holdings, Ltd., which will then contribute such amount to Ares Offshore in exchange for             limited partnership units of Ares Offshore, (iv) contribute a portion of the proceeds from this offering to Ares Investments in exchange for            limited partnership units of Ares Investments and (v) contribute a portion of the proceeds from this offering to Ares Real Estate Holdings LLC, which will then contribute such amount to Ares Real Estate in exchange for            limited partnership units of Ares Real Estate. See "Material U.S. Federal Tax

 

11


Table of Contents

Considerations—United States Taxes—Taxation of Ares Management, L.P. and the Ares Operating Group" for more information about the expected tax treatment of Ares Management, L.P. and the Ares Operating Group.

Our Organizational Structure Following this Offering and the Offering Transactions

        Following the Reorganization, this offering and the Offering Transactions (as such terms are described and defined under "Organizational Structure"), Ares Management, L.P. will be a holding partnership and, either directly or through direct subsidiaries, will control and hold equity interests in each of the Ares Operating Group entities, which in turn will own the operating entities included in our historical combined and consolidated financial statements. We intend to conduct all of our material business activities through the Ares Operating Group. Ares Management, L.P., either directly or through direct subsidiaries, will be the general partner of each of the Ares Operating Group entities, and will operate and control all of the businesses and affairs of the Ares Operating Group. In addition, Ares Management, L.P. will consolidate the financial results of the Ares Operating Group entities, their consolidated subsidiaries and certain consolidated funds. The ownership interest of the limited partners of the Ares Operating Group entities will be reflected as a non-controlling interest in Consolidated Funds in Ares Management, L.P.'s combined and consolidated financial statements. Following this offering, our senior professional owners will hold their interests in Ares Management, L.P. and in the Ares Operating Group either directly or indirectly through Ares Owners Holdings L.P.

        Following the Reorganization, this offering and the Offering Transactions, the Ares Operating Group will generally be entitled to:

    all management fees payable in respect of all of our funds, as well as transaction and other fees that may be payable by or in connection with portfolio investments of these funds;

    all performance fees payable in respect of all of our funds, other than the percentage we have determined or may in the future determine to allocate to our professionals as described in this prospectus; and

    all returns on investments of our own capital in the funds we sponsor and manage.

        See "Business—Incentive Arrangements / Fee Structure."

 

12


Table of Contents

        The diagram below (which omits certain wholly owned intermediate holding companies) depicts our organizational structure as it will exist immediately following this offering. All entities are organized in the state of Delaware unless otherwise indicated.

GRAPHIC


(1)
Ares Management, L.P. common unitholders will have limited voting rights and will have no right to remove our general partner or, except in the limited circumstances described below, elect the directors of our general partner. On those few matters that may be submitted for a vote of our common unitholders, Ares Voting LLC, an entity owned and controlled by Ares Partners Holdco LLC, which is in turn owned and controlled by our Co-Founders, will hold a special voting unit that provides it with a number of votes, on any matter that may be submitted for a vote of our common unitholders, that is equal to the aggregate number of vested and unvested Ares Operating Group Units held directly or indirectly by the limited partners of the Ares Operating Group that do not directly hold a special voting unit. See "Material Provisions of Ares Management, L.P. Partnership Agreement—Withdrawal or Removal of the General Partner," "—Meetings; Voting" and "—Election of Directors of General Partner."

(2)
Ares Real Estate Holdings LLC will make an election to be treated as a REIT for U.S. federal income tax purposes. Ares Real Estate Holdings LLC will have at least 100 holders of preferred interests representing nominal economic interests.

(3)
Immediately following this offering, Ares Management, L.P. will hold Ares Operating Group Units representing        % of the total number of Ares Operating Group Units, or        % if the underwriters exercise in full their option to purchase additional common units, and Ares senior professional owners will hold Ares Operating Group Units representing        % of the total number of Ares Operating Group Units, or        % if the underwriters exercise in full their option to purchase additional common units. See "Pricing Sensitivity Analysis."

(4)
See "Pricing Sensitivity Analysis" for information regarding the impact on percentage ownership if the initial public offering price per common unit is at the low-, mid- or high-points of the price range indicated on the front cover of this prospectus or if the underwriters' option to purchase additional common units is exercised in full.

(5)
Ares senior professional owners will hold indirectly through Ares Owners Holdings L.P.

 

13


Table of Contents

Holding Partnership Structure

        As discussed in "Material U.S. Federal Tax Considerations," Ares Management, L.P. will be treated as a partnership and not as a corporation for U.S. federal income tax purposes. An entity that is treated as a partnership for U.S. federal income tax purposes generally incurs no U.S. federal income tax liability at the entity level. Instead, each partner is required to take into account its allocable share of items of income, gain, loss, deduction and credit of the partnership in computing its U.S. federal, state and local income tax liability each taxable year, whether or not cash distributions are made. Investors who acquire common units in this offering will become limited partners of Ares Management, L.P. Accordingly, holders of common units will be required to report their allocable share of the income, gain, loss, deduction and credit of Ares Management, L.P., even if Ares Management, L.P. does not make cash distributions. We believe that, for U.S. federal income tax purposes, the Ares Operating Group entities generally will be treated as partnerships for U.S. federal income tax purposes. Accordingly, direct subsidiaries of Ares Management, L.P. that are treated as corporations for U.S. federal income tax purposes and that are the holders of Ares Operating Group Units (as defined below) will be (and, in the case of Ares Offshore Holdings, Ltd., may be) subject to U.S. federal, state and local income taxes in respect of their interests in the Ares Operating Group entities. See "Material U.S. Federal Tax Considerations" for more information about the tax treatment of Ares Management, L.P. and the Ares Operating Group.

        Each of the Ares Operating Group entities will have an identical number of limited partnership units outstanding. We use the term "Ares Operating Group Unit" to refer, collectively, to a limited partnership unit in each of the Ares Operating Group entities. Ares Management, L.P. will hold, directly or through direct subsidiaries, a number of Ares Operating Group Units equal to the number of common units that Ares Management, L.P. has issued. The Ares Operating Group Units that will be held by Ares Management, L.P. and its direct subsidiaries will be economically identical in all respects to the Ares Operating Group Units that are not held by Ares Management, L.P. and its direct subsidiaries following the Reorganization, this offering and the Offering Transactions. Accordingly, the income of the Ares Operating Group will benefit Ares Management, L.P. to the extent of its equity interest in the Ares Operating Group. Immediately following this offering, Ares Management, L.P. will hold Ares Operating Group Units representing        % of the total number of Ares Operating Group Units, or        % if the underwriters exercise in full their option to purchase additional common units, and our senior professional owners will hold Ares Operating Group Units representing        % of the total number of Ares Operating Group Units, or        % if the underwriters exercise in full their option to purchase additional common units.

        Following the Reorganization, the Ares Operating Group Units and our common units held directly or indirectly by our senior professional owners will generally be subject to restrictions on transfer and other provisions. See "Compensation of Our Directors and Executive Officers—Vesting; Transfer Restrictions for Senior Professional Owners."

Certain Corporate Governance Considerations

        Voting Rights.    Unlike the holders of common stock in a corporation, our common unitholders will have limited voting rights and will have no right to remove our general partner or, except in the limited circumstances described below, elect the directors of our general partner. On those few matters that may be submitted for a vote of our common unitholders, Ares Voting LLC, an entity wholly owned by Ares Partners Holdco LLC, which is in turn owned and controlled by our Co-Founders, will hold a special voting unit that provides it with a number of votes, on any matter that may be submitted for a vote of our common unitholders, that is equal to the aggregate number of vested and unvested Ares Operating Group Units held directly or indirectly by the limited partners of the Ares Operating Group entities that do not directly hold a special voting unit. We refer to our common units (other than those held by any person whom our general partner may from time to time, with such person's consent, designate as a non-voting common unitholder) and our special voting units as "voting units." Accordingly, immediately following this

 

14


Table of Contents

offering, on those few matters that may be submitted for a vote of our common unitholders, investors in this offering will collectively have        % of the voting power of Ares Management, L.P., or        % if the underwriters exercise in full their option to purchase additional common units, and our senior professional owners will collectively have         % of the voting power of Ares Management, L.P., or        % if the underwriters exercise in full their option to purchase additional common units. Our common unitholders' voting rights will be further restricted by the provision in our partnership agreement stating that any common units held by a person that beneficially owns 20% or more of any class of our common units then outstanding (other than our general partner, Ares Partners Holdco LLC and their respective affiliates, or a direct or subsequently approved transferee of our general partner or its affiliates) cannot be voted on any matter.

        Election of Directors.    In general, our common unitholders will have no right to elect the directors of our general partner. However, when our Co-Founders and other then-current or former Ares personnel directly or indirectly hold less than 10% of the limited partner voting power, our common unitholders will have the right to vote in the election of the directors of our general partner. This voting power condition will be measured on January 31 of each year, and will be triggered if the total voting power held by holders of the special voting units in Ares Management, L.P. (including voting units held by our general partner and its affiliates) in their capacity as such, or otherwise directly or indirectly held by then-current or former Ares personnel (treating voting units deliverable to such persons pursuant to outstanding equity awards as being held by them), collectively, constitutes less than 10% of the voting power of the outstanding voting units of Ares Management, L.P. See "Material Provisions of Ares Management, L.P. Partnership Agreement—Election of Directors of General Partner." Unless and until the foregoing voting power condition is satisfied, our general partner's board of directors will be elected in accordance with its limited liability company agreement, which provides that directors generally may be appointed and removed by the member of our general partner, an entity owned and controlled by our Co-Founders. See "Material Provisions of Ares Management, L.P. Partnership Agreement—Election of Directors of General Partner." Unless and until the foregoing voting power condition is satisfied, the board of directors of our general partner will have no authority other than that which its member chooses to delegate to it. In the event that the voting power condition is satisfied, the board of directors of our general partner will be responsible for the oversight of our business and operations. See "Management—Limited Powers of Our Board of Directors."

        Conflicts of Interest and Duties of Our General Partner.    Although our general partner will not engage in any business activities other than the management and operation of our businesses, conflicts of interest may arise in the future between us and our common unitholders, on the one hand, and our general partner and its affiliates, on the other. The resolutions of these conflicts may not always be in our best interests or that of our common unitholders. In addition, we have fiduciary and contractual obligations to the investors in our funds and we expect to regularly take actions with respect to the purchase or sale of investments in our funds, the structuring of investment transactions for those funds or otherwise that are in the best interests of the investors in those funds but that might at the same time adversely affect our near term results of operations or cash flow.

        Our partnership agreement will limit the liability of, and reduce or eliminate the duties (including fiduciary duties) owed by, our general partner to our common unitholders. Our partnership agreement will also restrict the remedies available to common unitholders for actions that might otherwise constitute breaches of our general partner's duties (including fiduciary duties). By purchasing our common units, you are treated as having consented to the provisions set forth in our partnership agreement, including the provisions regarding conflicts of interest situations that, in the absence of such provisions, might be considered a breach of fiduciary or other duties under applicable state law. For a more detailed description

 

15


Table of Contents

of the conflicts of interest and fiduciary responsibilities of our general partner, see "Conflicts of Interest and Fiduciary Responsibilities."





        Ares Management, L.P. was formed as a Delaware limited partnership on November 15, 2013. Our principal executive offices are located at 2000 Avenue of the Stars, 12th Floor, Los Angeles, California 90067, and our telephone number is (310) 201-4100.


Implications of Being an Emerging Growth Company

        We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. These provisions include, among other matters:

    a provision allowing us to provide fewer years of financial statements and other financial data in an initial public offering registration statement;

    an exemption from the auditor attestation requirement in the assessment of the emerging growth company's internal control over financial reporting;

    an exemption from new or revised financial accounting standards until they would apply to private companies and from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation;

    reduced disclosure about the emerging growth company's executive compensation arrangements; and

    no requirement to seek non-binding advisory votes on executive compensation or golden parachute arrangements.

        We have determined to opt out of the exemption from compliance with new or revised financial accounting standards. Our decision to opt out of this exemption is irrevocable.

        We have elected to adopt the reduced disclosure requirements and the exemption from the auditor attestation requirement available to emerging growth companies. As a result of these elections, the information that we provide in this prospectus may be different than the information you may receive from other public companies in which you hold, or may contemplate holding, equity interests. In addition, it is possible that some investors will find our common units less attractive as a result of our elections, which may cause a less active trading market for our common units and more volatility in our the price of common units.

        We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common units that are held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.


Restrictions on Ownership of Our Common Units

        Our general partner has determined that electing for one of our direct subsidiaries, Ares Real Estate Holdings LLC, to be taxable as a REIT will reduce the administrative burden of filing certain tax returns in certain states in which we hold real property interests and may otherwise enhance our tax position. To assist Ares Real Estate Holdings LLC, in complying with the requirements for qualification as a REIT under the U.S. Internal Revenue Code of 1986, as amended (the "Code"), our partnership agreement

 

16


Table of Contents

prohibits, with certain exceptions, any common unitholder from beneficially or constructively owning, applying certain attribution rules under the Code, more than the lesser of        % of the number of all outstanding common units and the value of all outstanding units.

        Our general partner may, in its sole discretion, waive the        % ownership limit with respect to a particular common unitholder if it is presented with evidence satisfactory to it that such ownership will not then or in the future jeopardize Ares Real Estate Holdings LLC's qualification as a REIT. Our general partner is expected to establish an excepted holder limit for existing owners who would otherwise exceed the ownership limit.

        Our partnership agreement also prohibits any person from, among other things, beneficially or constructively owning common units that would result in Ares Real Estate Holdings LLC being "closely held" under Code Section 856(h), or otherwise cause Ares Real Estate Holdings LLC to fail to qualify as a REIT.

        In addition, our partnership agreement provides that any ownership or purported transfer of our common units in violation of the foregoing restrictions will result in the common units so owned or transferred being automatically transferred to a charitable trust for the benefit of a charitable beneficiary, and the purported owner or transferee acquiring no rights in such common units. If a transfer to a charitable trust would be ineffective for any reason to prevent a violation of the restriction, the transfer resulting in such violation will be void from the time of such purported transfer.

 

17


Table of Contents


The Offering

Common units offered by Ares Management, L.P. 

              common units. We have granted the underwriters an option to purchase up to an additional            common units.

Common units outstanding after this offering

 

            common units (            common units if the underwriters exercise their option to purchase additional common units in full).

Use of proceeds

 

We estimate that our net proceeds from this offering will be $           million, assuming an initial public offering price of $           per common unit, which is the midpoint of the price range set forth on the front cover of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses. If the underwriters exercise in full their option to purchase additional common units, the net proceeds to us will be approximately $            million. We intend to use the net proceeds to purchase newly issued Ares Operating Group Units concurrently with the consummation of this offering, as described under "Organizational Structure—Offering Transactions," to partially repay outstanding balances under our revolving credit facility (the "Credit Facility") and for general corporate purposes and to fund growth initiatives. The Ares Operating Group will also bear or reimburse Ares Management, L.P. for all of the expenses of this offering, which we estimate will be approximately $           million. Affiliates of J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC (underwriters in this offering) are lenders under the Credit Facility. As described above, we intend to use a portion of the proceeds from this offering to partially repay outstanding borrowings under the Credit Facility. As a result, these affiliates will receive their proportionate share of any amount of the Credit Facility that is repaid with the proceeds of this offering. See "Use of Proceeds."

Voting rights

 

Our general partner, Ares Management GP LLC, will manage all of our operations and activities. Our common unitholders will not hold an interest in our general partner, which is wholly owned by Ares Partners Holdco LLC, an entity owned and controlled by our Co-Founders. Unlike the holders of common stock in a corporation, our common unitholders will have limited voting rights and will have no right to remove our general partner or, except in limited circumstances, elect the directors of our general partner.

 

18


Table of Contents

 

On those few matters that may be submitted for a vote of our common unitholders, Ares Voting LLC, an entity wholly owned by Ares Partners Holdco LLC, which is in turn owned and controlled by our Co-Founders, will hold a special voting unit that provides it with a number of votes, on any matter that may be submitted for a vote of our common unitholders, that is equal to the aggregate number of vested and unvested Ares Operating Group Units held directly or indirectly by the limited partners of the Ares Operating Group entities that do not directly hold a special voting unit. Accordingly, immediately following this offering our Co-Founders will have sufficient voting power to determine the outcome of those few matters that may be submitted for a vote of our common unitholders. Our common unitholders' voting rights will be further restricted by the provision in our partnership agreement stating that any common units held by a person that beneficially owns 20% or more of any class of our common units then outstanding (other than our general partner, Ares Partners Holdco LLC and their respective affiliates, or a direct or subsequently approved transferee of our general partner or its affiliates) cannot be voted on any matter. See "Material Provisions of Ares Management, L.P. Partnership Agreement—Withdrawal or Removal of the General Partner," "—Meetings; Voting" and "—Election of Directors of General Partner."

Cash distribution policy

 

We expect to distribute to our common unitholders on a quarterly basis substantially all of Ares Management,  L.P.'s share of distributable earnings in excess of amounts determined by our general partner to be necessary or appropriate to provide for the conduct of our businesses, to make appropriate investments in our businesses and our funds, to comply with applicable law, any of our debt instruments or other agreements or to provide for future distributions to our common unitholders for any ensuing quarter, subject to a base quarterly distribution target range of 75% to 85% of distributable earnings. We expect that our first quarterly distribution will be paid in the          quarter of          in respect of the prior quarter. The declaration, payment and determination of the amount of any distributions will be at the sole discretion of our general partner, which may change our distribution policy at any time. We cannot assure you that any distributions, whether quarterly or otherwise, can or will be paid or that any cash distribution will be sufficient to cover taxes on any unitholder's allocable share of gain or income. See "Cash Distribution Policy."

 

19


Table of Contents

Exchange agreement

 

Prior to this offering, we will enter into an exchange agreement with the holders of Ares Operating Group Units so that such holders, subject to any applicable transfer restrictions and other provisions, may up to four times each year from and after the second anniversary of the date of the closing of this offering (subject to the terms of the exchange agreement) exchange their Ares Operating Group Units for our common units on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications, or, at our option, for cash. A holder of Ares Operating Group Units must exchange one Ares Operating Group Unit in each of the five Ares Operating Group entities to effect an exchange for a common unit of Ares Management, L.P. If and when a holder exchanges Ares Operating Group Units for common units of Ares Management, L.P., the relative equity percentage ownership of such holder and of the other equity owners of Ares (whether held at Ares Management, L.P. or at the Ares Operating Group) will not be altered.

Tax receivable agreement

 

Future exchanges of Ares Operating Group Units are expected to result in increases in the tax basis of the tangible and intangible assets of the relevant Ares Operating Group entity. These increases in tax basis generally will increase (for U.S. federal income tax purposes) depreciation and amortization deductions and potentially reduce gain on sales of assets, and therefore reduce the amount of tax that the direct subsidiaries of Ares Management, L.P. that are taxable as corporations for U.S. federal income tax purposes would otherwise be required to pay in the future. These direct subsidiaries that are taxable as corporations will enter into a tax receivable agreement with certain existing direct and indirect holders of Ares Operating Group Units whereby they will agree to pay such holders or entities that will hold such Ares Operating Group Units on their behalf (the "TRA Recipients") 85% of the amount of cash tax savings, if any, in U.S. federal, state, local and foreign income tax or franchise tax that these direct subsidiaries actually realize as a result of these increases in tax basis under the tax receivable agreement. See "Certain Relationships and Related Person Transactions—Tax Receivable Agreement."

Risk factors

 

See "Risk Factors" beginning on page 25 for a discussion of some of the factors you should carefully consider before deciding to invest in our common units.

 

20


Table of Contents

Ownership and transfer restrictions

 

To assist one of our direct subsidiaries, Ares Real Estate Holdings LLC, in complying with the requirements for qualification as a REIT under the Code and for other purposes, which our general partner has determined will potentially benefit our common unitholders, our partnership agreement generally prohibits, among other prohibitions, any common unitholder from beneficially or constructively owning more than the lesser of     % of the number of all outstanding common units and the value of all outstanding units. See "Description of Common Units—Restrictions on Ownership and Transfer."

Proposed New York Stock Exchange symbol

 

ARES

        The number of common units outstanding after this offering and the other information based thereon in this prospectus, except where otherwise disclosed, excludes:

    common units issuable upon exchange by holders of Ares Operating Group Units of                      Ares Operating Group Units;

    common units issuable upon exercise of the underwriters' option to purchase additional units; and

    interests that may be granted under our 2014 Equity Incentive Plan, consisting of:

    restricted units that we expect to grant to our professionals at the time of this offering;

    phantom restricted units that we expect to grant to our professionals at the time of this offering;

    units issuable upon exercise of options we expect to grant to our professionals at the time of this offering; and

    additional common units available for future grant under our 2014 Equity Incentive Plan, which amount is subject to automatic annual increases.

        Unless otherwise indicated, all information in this prospectus assumes no exercise by the underwriters of their right to purchase up to an additional                        common units from us.

        See "Compensation of Our Directors and Executive Officers—Equity Incentive Plan" and "—IPO Awards Under the 2014 Equity Incentive Plan."

 

21


Table of Contents


Summary Historical Financial and Other Data

        The following tables present summary historical financial and other data of Pre-IPO Ares. Ares Management, L.P. was formed on November 15, 2013 to serve as a holding partnership for our businesses. Ares Management, L.P. has not commenced operations and has nominal assets and liabilities. To facilitate this offering, we will consummate the Reorganization in which Ares Management, L.P. will become the successor to AHI and Ares Investments LLC for financial accounting purposes under GAAP. See "Organizational Structure."

        We derived the summary historical combined and consolidated statements of operations data of Pre-IPO Ares for the years ended December 31, 2013, 2012 and 2011 and the summary historical combined and consolidated statements of financial condition data of Pre-IPO as of December 31, 2013, 2012 and 2011 from its audited combined and consolidated financial statements, which are included elsewhere in this prospectus. We derived the summary historical combined and consolidated statements of operations data of Pre-IPO Ares for the years ended December 31, 2013 and 2012 and the summary historical combined and consolidated statements of financial condition data of Pre-IPO Ares as of December 31, 2013 and 2012 from its unaudited condensed combined and consolidated financial statements, which are included elsewhere in this prospectus. The unaudited condensed combined and consolidated financial statements have been prepared on substantially the same basis as the audited combined and consolidated financial statements and include all adjustments that we consider necessary for a fair presentation of Pre-IPO Ares' combined and consolidated financial position and results of operations.

        The summary historical combined and consolidated financial and other data is not indicative of the expected future operating results of Ares Management, L.P. following the Reorganization, this offering and the Offering Transactions. Prior to this offering, we will complete a series of transactions pursuant to which our business will be reorganized into a holding partnership structure as described in "Organizational Structure." See "Organizational Structure" and "Unaudited Pro Forma Financial Information."

        The following summary historical consolidated financial and other data should be read together with "Organizational Structure," "Selected Financial Data," "Management's Discussion and Analysis of

 

22


Table of Contents

Financial Condition and Results of Operations" and the historical combined and consolidated financial statements and related notes included elsewhere in this prospectus.

 
  For The Years Ended December 31,  
 
  2013   2012   2011  
 
  (Dollars in thousands,
except as indicated below)

 

Statements of operations data

                   

Revenues

                   

Management fees

  $ 375,572   $ 249,584   $ 185,084  

Performance fees

    79,800     69,491     6,938  

Other fees

    23,283     14,971     14,943  
               

Total revenues

    478,655     334,046     206,965  
               

Expenses

                   

Compensation and benefits

    333,902     288,719     200,784  

Performance fee compensation

    194,294     267,725     120,451  

Consolidated Funds expenses

    135,237     116,505     78,102  

General, administrative and other expenses

    138,464     85,582     68,575  
               

Total expenses

    801,897     758,531     467,912  
               

Other income (expense)

                   

Interest and other income

    5,996     8,431     5,259  

Interest expense

    (9,475 )   (8,679 )   (5,953 )

Debt extinguishment expense

    (1,862 )   (3,032 )   (1,183 )

Net realized gain (loss) on investments

    (6,373 )   6,662     (1,096 )

Net change in unrealized (depreciation) appreciation on investments

    15,095     (1,670 )   (4,387 )

Interest and other income of Consolidated Funds

    1,236,037     1,406,593     1,425,711  

Interest expense of Consolidated Funds

    (534,431 )   (449,377 )   (327,959 )

Debt extinguishment gain of Consolidated Funds

    11,800          

Net realized gain on investments of Consolidated Funds

    64,382     1,794,412     1,040,530  

Net change in unrealized (depreciation) appreciation on investments of Consolidated Funds

    414,714     (1,067,013 )   (917,033 )
               

Total other income

    1,195,883     1,686,327     1,213,889  
               

Income before taxes

    872,641     1,261,842     952,942  

Income tax expense

    59,263     26,154     29,573  
               

Net income

    813,378     1,235,688     923,369  
               

Less: Net income attributable to non-controlling interests and redeemable non-controlling interests in Consolidated Funds

    586,771     933,592     790,529  

Less: Net income attributable to non-controlling interests in consolidated subsidiaries

    46,125     81,450     35,492  
               

Net income attributable to controlling interests in AHI, AI and consolidated subsidiaries

  $ 180,482   $ 220,646   $ 97,348  
               

Other data

                   

Stand Alone economic net income(1)(2)

  $ 328,705   $ 402,376   $ 193,850  
               

Stand Alone distributable earnings(1)(3)

  $ 305,719   $ 302,373   $ 203,209  
               

Fee earning AUM (at period end, in millions)

  $ 59,162   $ 47,582   $ 40,216  
               

Total AUM (at period end, in millions)

  $ 74,005   $ 60,158   $ 49,263  
               

 

23


Table of Contents

 
  As of December 31,  
 
  2013   2012   2011  
 
  (Dollars in thousands)
 

Statements of financial condition data

                   

Cash and cash equivalents

  $ 89,802   $ 68,457   $ 34,422  

Cash and cash equivalents of Consolidated Funds(4)

    1,638,003     1,707,640     1,526,871  

Investments

    89,438     105,753     81,995  

Investments of Consolidated Funds

    20,823,338     21,734,983     21,391,239  

Total assets

    23,705,384     24,495,877     23,734,935  

Debt obligations

    153,119     336,250     205,000  

CLO loan obligations of Consolidated Funds

    11,774,157     9,818,059     8,573,101  

Consolidated Funds' borrowings

    2,070,598     4,512,229     4,969,823  

Mezzanine debt of Consolidated Funds

    323,164     117,527     375,128  

Total liabilities

    16,030,319     16,373,470     14,996,296  

Commitments and contingencies

                   

Redeemable non-controlling interest in Consolidated Funds

    1,093,770     1,100,108     1,024,152  

Redeemable interest in AHI, AI and consolidated subsidiaries

    40,751     30,488     21,807  

Non-controlling interest in Consolidated Funds

    5,847,135     6,367,291     7,183,991  

Non-controlling interest in equity of AHI, AI and consolidated subsidiaries

    167,731     130,835     154,134  

Total controlling interest in equity of AHI, AI and consolidated subsidiaries

    525,678     493,685     354,555  

Total equity

    6,540,544     6,991,811     7,692,680  

Total liabilities, redeemable interest, non-controlling interests and equity

    23,705,384     24,495,877     23,734,935  

(1)
Under GAAP, we are required to consolidate (a) entities in which we hold a majority voting interest or have majority ownership and control over the operational, financial and investing decisions of that entity, including Ares-affiliates and affiliated funds and co-investment entities, for which we are the general partner and are presumed to have control, and (b) entities that we concluded are variable interest entities ("VIEs"), including limited partnerships in which we have a nominal economic interest and the CLOs, for which we are deemed to be the primary beneficiary. However, for segment reporting purposes, we present revenues and expenses on a combined segment basis, which deconsolidates these funds and therefore shows the results of our reportable segments without giving effect to the consolidation of the funds.

(2)
For a discussion about the purposes for which our management uses ENI and the reasons why we believe our presentation of ENI provides useful information to investors regarding our results of operations as well as a reconciliation of economic net income to income (loss) before provision for taxes, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Managing Business Performance—Non-GAAP Financial Measure—Economic Net Income" and "—Reconciliation of Certain Non-GAAP Measures to Consolidated GAAP Financial Measures" and Note 16, "Segment Reporting," to our combined and consolidated financial statements appearing elsewhere in this prospectus.

(3)
For a discussion about the purposes for which our management uses distributable earnings and the reasons why we believe our presentation of distributable earnings provides useful information to investors regarding our results of operations as well as a reconciliation of distributable earnings to income (loss) before provision for taxes, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Managing Business Performance—Non-GAAP Financial Measures—Distributable Earnings" and "—Reconciliation of Certain Non-GAAP Measures to Consolidated GAAP Financial Measures" and Note 16, "Segment Reporting," to our combined and consolidated financial statements appearing elsewhere in this prospectus.

(4)
The entities comprising our Consolidated Funds are not the same entities for all periods presented. Pursuant to revised consolidation guidance that became effective January 1, 2010, we consolidated the existing and any subsequently acquired CLOs where we hold a controlling financial interest. The consolidation of funds during the periods generally has the effect of grossing up reported assets, liabilities and cash flow, and has no effect on net income attributable to Pre-IPO Ares. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Reorganization and Offering Transactions—Consolidation and Deconsolidation of Ares Funds" and "—Critical Accounting Policies—Principles of Consolidation" and Note 2, "Summary of Significant Accounting Policies," to our combined and consolidated financial statements appearing elsewhere in this prospectus.

 

24


Table of Contents


RISK FACTORS

        Investing in our common units involves a high degree of risk. You should carefully consider the following risk factors, as well as other information contained in this prospectus, before deciding to invest in our common units. The occurrence of any of the following risks could have a material adverse effect on our businesses, prospects, financial condition, results of operations and cash flow, in which case, the trading price of our common units could decline and you could lose all or part of your investment.


Summary of Risks

        Our businesses are subject to a number of inherent risks. We believe that the primary risks affecting our businesses and an investment in our common units are:

    a complex regulatory and tax environment, which could restrict our operations or the operations of our funds and portfolio companies and subject us to increased compliance costs and administrative burdens, as well as restrictions on our business activities;

    the potential enactment of legislation that would preclude us from qualifying for treatment as a partnership for U.S. federal income tax purposes under the publicly traded partnership rules. If this or any similar legislation or regulation were to be enacted and to apply to us, we would incur a material increase in our tax liability;

    poor performance by our funds due to market conditions, political environments, monetary and fiscal policy or other conditions beyond our control;

    the reputational harm that we would experience as a result of inappropriately addressing conflicts of interest, poor performance by the investments we manage or the actual or alleged failure by us, our employees, our funds or our portfolio companies to comply with applicable regulations in an increasingly complex political and regulatory environment;

    potential variability in our period to period earnings due primarily to mark-to-market valuations of our funds' investments. As a result of this variability, the market price of our common units may be volatile and subject to fluctuations;

    the increasing demands of the investing community, including the potential for fee compression and changes to other terms, which could materially adversely affect our revenues; and

    an investment in our common units is not an investment in our underlying funds. Moreover, there can be no assurance that projections respecting performance of our underlying funds or unrealized values will be achieved.


Risks Related to Our Businesses

Difficult market and political conditions may adversely affect our businesses in many ways, including by reducing the value or hampering the performance of the investments made by our funds or reducing the ability of our funds to raise or deploy capital, each of which could materially reduce our revenue, net income and cash flow and adversely affect our financial prospects and condition.

        Our businesses are materially affected by conditions in the global financial markets and economic and political conditions throughout the world, such as interest rates, availability and cost of credit, inflation rates, economic uncertainty, changes in laws (including laws relating to our taxation, taxation of our investors, the possibility of changes to tax laws in either the United States or any non-U.S. jurisdiction and regulations on alternative asset managers), trade barriers, commodity prices, currency exchange rates and controls and national and international political circumstances (including wars, terrorist acts and security operations). These factors are outside of our control and may affect the level and volatility of securities prices and the liquidity and value of investments, and we may not be able to or may choose not to manage

25


Table of Contents

our exposure to these conditions. Ongoing developments in the U.S. and global financial markets following the unprecedented turmoil in the global capital markets and the financial services industry in late 2008 and early 2009 continue to illustrate that the current environment is still one of uncertainty and instability for investment management businesses. While there has been some recovery in the capital markets since then, the recovery has been slow and uneven, and the global economy grew at a modest pace in 2013. High unemployment rates in the United States and elsewhere, a sluggish recovery in some real estate markets, continued economic weakness in the Eurozone, increased austerity measures by several European governments, uncertainty about the future of the euro, escalating regional turmoil in the Middle East, concern over growth prospects in China and emerging markets, growing debt loads for certain countries and uncertainty about the consequences of governments eventually withdrawing monetary stimulus measures all indicate that economic and political conditions remain unpredictable. These and other conditions in the global financial markets and the global economy have resulted in, and may continue to result in, adverse consequences for many of our funds, each of which could adversely affect the business of such funds, restrict such funds' investment activities and impede such funds' ability to effectively achieve their investment objectives.

        Difficult economic conditions could adversely affect our operating results by causing:

    decreases in the market value of securities and debt instruments held by some of our funds;

    illiquidity in the market, which could adversely affect transaction volumes and the pace of realization of our funds' investments or otherwise restrict the ability of our funds to realize value from their investments, thereby adversely affecting our ability to generate incentive or other income;

    our assets under management to decrease, lowering management fees payable by our funds; and

    increases in costs or reduced availability of financial instruments that finance our private equity and real estate funds.

        While the adverse effects of late 2008 and early 2009 have abated to a significant degree, global financial markets have experienced volatility at various times since, including in response to the downgrade by Standard & Poor's Financial Services LLC ("S&P") in August 2011 of the long-term credit rating of U.S. Treasury debt from AAA to AA+ and the Federal Reserve's communication in May 2013 that it could slow the pace of asset purchases in the coming months. Although credit spreads are inside of historical averages and all-in financing costs are below those prevailing prior to the recession, there is concern that the favorability of market conditions may be dependent on continued monetary policy accommodation from central banks, especially the U.S. Federal Reserve. Additional reductions in the pace of U.S. Federal Reserve asset purchases (i.e. "tapering") could have unpredictable consequences for credit markets, which may create adverse consequences for deal finance conditions and negatively impact our business. Economic activity and employment in developed economies remain below levels implied by pre-recession trends and financial institutions have not provided debt financing in amounts and on terms commensurate with that provided prior to 2008, particularly in Europe. Continued weakness could result in lower returns than we anticipated at the time certain of our investments were made.

        During periods of difficult market conditions or slowdowns (which may be across one or more industries, sectors or geographies), companies in which we invest may experience decreased revenues, financial losses, credit rating downgrades, difficulty in obtaining access to financing and increased funding costs. During such periods, these companies may also have difficulty in expanding their businesses and operations and be unable to meet their debt service obligations or other expenses as they become due, including expenses payable to us. Negative financial results in our funds' portfolio companies may reduce the value of our portfolio companies and the investment returns for our funds, which could have a material adverse effect on our operating results and cash flow. In addition, such conditions would increase the risk of default with respect to credit-oriented or debt investments. Our funds may be affected by reduced

26


Table of Contents

opportunities to exit and realize value from their investments, by lower than expected returns on investments made prior to the deterioration of the credit markets, and by the fact that we may not be able to find suitable investments for the funds to effectively deploy capital, which could adversely affect our ability to raise new funds and thus adversely impact our prospects for future growth.

Political and regulatory conditions, including the effects of negative publicity surrounding the financial industry in general and proposed legislation, could adversely affect our businesses or cause a material increase in our tax liability.

        As a result of market disruptions and highly publicized financial scandals in recent years, regulators and investors have exhibited concerns over the integrity of the U.S. financial markets, and the businesses in which we operate both in the United States and outside the United States will be subject to new or additional regulations. We may be adversely affected as a result of new or revised legislation or regulations imposed by the Securities and Exchange Commission (the "Commission"), the U.S. Commodity Futures Trading Commission (the "CFTC") or other U.S. governmental regulatory authorities or self-regulatory organizations that supervise the financial markets. We also may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self-regulatory organizations. See "—Regulatory changes in the United States and regulatory compliance failures could adversely affect our reputation, businesses and operations."

        More particularly, legislation has been introduced in the U.S. Congress that would, if it became law, preclude us from qualifying for treatment as a partnership for U.S. federal income tax purposes under the publicly traded partnership rules. If this or any similar legislation or regulation were to be enacted and to apply to us, we would incur a material increase in our tax liability and our cash available for distribution would be reduced, which could reduce the value of our common units. Members of the U.S. Congress have also proposed amendments to the Code, and the rules and regulations thereunder that, if enacted, would raise the tax on carried interest and treat carried interest as ordinary income as well as change the tax treatment of investment managers and investment structures. Over the past several years, a number of similar legislative proposals have been introduced in the U.S. Congress and state legislatures. If this or any similar legislation or regulation were to become law, our effective tax rate could increase significantly. In addition, we and our professionals who receive carried interest may face additional tax consequences. See "—Risks Related to U.S. Taxation."

Our business depends in large part on our ability to raise capital from investors. If we were unable to raise such capital, we would be unable to collect management fees or deploy such capital into investments, which would materially reduce our revenues and cash flow and adversely affect our financial condition.

        Our ability to raise capital from investors depends on a number of factors, including many that are outside our control. Investors may downsize their investment allocations to alternative managers, including private funds and hedge funds, to rebalance a disproportionate weighting of their overall investment portfolio among asset classes. Poor performance of our funds could also make it more difficult for us to raise new capital. Our investors and potential investors continually assess our funds' performance independently and relative to market benchmarks and our competitors, and our ability to raise capital for existing and future funds depends on our funds' performance. If economic and market conditions deteriorate, we may be unable to raise sufficient amounts of capital to support the investment activities of future funds. If we were unable to successfully raise capital, our revenue and cash flow would be reduced, and our financial condition would be adversely affected. Furthermore, while our existing owners, and in particular our Strategic Investors, have committed substantial capital to our funds, there can be no assurance that there will be further commitments to our funds, and any future investments by them in our funds or other alternative investment categories will likely depend on the performance of our funds, the performance of their overall investment portfolios and other investment opportunities available to them.

27


Table of Contents

We depend on our Co-Founders, senior professionals and other key personnel, and our ability to retain them and attract additional qualified personnel is critical to our success and our growth prospects.

        We depend on the diligence, skill, judgment, business contacts and personal reputations of our Co-Founders, senior professionals and other key personnel. Our future success will depend upon our ability to retain our senior professionals and other key personnel and our ability to recruit additional qualified personnel. These individuals possess substantial experience and expertise in investing, are responsible for locating and executing our funds' investments, have significant relationships with the institutions that are the source of many of our funds' investment opportunities and, in certain cases, have strong relationships with our investors. Therefore, if any of our senior professionals or other key personnel join competitors or form competing companies, it could result in the loss of significant investment opportunities and certain existing investors.

        The departure for any reason of any of our senior professionals, or a significant number of our other investment professionals, could have a material adverse effect on our ability to achieve our investment objectives, cause certain of our investors to withdraw capital they invest with us or elect not to commit additional capital to our funds or otherwise have a material adverse effect on our business and our prospects. The departure of some or all of those individuals could also trigger certain "key man" provisions in the documentation governing certain of our funds, which would permit the investors in those funds to suspend or terminate such funds' investment periods or, in the case of certain funds, permit investors to withdraw their capital prior to expiration of the applicable lock-up date. In addition, the departure of certain groups of individuals may constitute an event of default under the Credit Facility. If such an event of default occurs and the lenders exercise their right to accelerate repayment of the loan, we are unlikely to have funds sufficient to make such repayment and the lenders may take control of us. We do not carry any "key man" insurance that would provide us with proceeds in the event of the death or disability of any of our senior professionals, and we do not have a policy that prohibits our senior professionals from traveling together.

        We anticipate that it will be necessary for us to add investment professionals both to grow our businesses and to replace those who depart. However, the market for qualified investment professionals is extremely competitive, both in the United States and internationally, and we may not succeed in recruiting additional personnel or we may fail to effectively replace current personnel who depart with qualified or effective successors. Our efforts to retain and attract investment professionals may also result in significant additional expenses, which could adversely affect our profitability or result in an increase in the portion of our performance fees that we grant to our investment professionals. In the year ended December 31, 2013, we incurred equity compensation expenses of $28.8 million and we expect these costs to materially increase in the future as we increase the use of equity compensation awards to attract, retain and compensate employees.

Our failure to appropriately address conflicts of interest could damage our reputation and adversely affect our businesses.

        As we have expanded and as we continue to expand the number and scope of our businesses, we increasingly confront potential conflicts of interest relating to our funds' investment activities. Certain of our funds may have overlapping investment objectives, including funds that have different fee structures, and potential conflicts may arise with respect to our decisions regarding how to allocate investment opportunities among those funds. For example, a decision to receive material non-public information about a company while pursuing an investment opportunity for a particular fund gives rise to a potential conflict of interest when it results in our having to restrict the ability of other funds to take any action. We may also cause different private equity funds to invest in a single portfolio company, for example where the fund that made an initial investment no longer has capital available to invest. We may also cause different funds that we advise to purchase different classes of securities in the same portfolio company. For example, in the normal course of business our debt funds acquire debt positions in companies in which our private

28


Table of Contents

equity funds own common equity securities. A direct conflict of interest could arise between the debt holders and the equity holders if such a company were to develop insolvency concerns, and we would have to carefully manage that conflict. In addition, conflicts of interest may exist in the valuation of our investments and regarding decisions about the allocation of specific investment opportunities among us and our funds and the allocation of fees and costs among us, our funds and their portfolio companies. Though we believe we have appropriate means to resolve these conflicts, our judgment on any particular allocation could be challenged. While we have developed general guidelines regarding when two or more funds can invest in different parts of the same company's capital structure and created a process that we employ to handle such conflicts if they arise, our decision to permit the investments to occur in the first instance or our judgment on how to minimize the conflict could be challenged. If we fail to appropriately address any such conflicts, it could negatively impact our reputation and ability to raise additional funds and the willingness of counterparties to do business with us or result in potential litigation against us.

The investment management business is intensely competitive.

        The investment management business is intensely competitive, with competition based on a variety of factors, including investment performance, business relationships, quality of service provided to investors, investor liquidity and willingness to invest, fund terms (including fees), brand recognition and business reputation. We compete with a number of private equity funds, specialized funds, hedge funds, corporate buyers, traditional asset managers, real estate development companies, commercial banks, investment banks, other investment managers and other financial institutions, as well as sovereign wealth funds. Numerous factors increase our competitive risks, including:

    a number of our competitors in some of our businesses have greater financial, technical, marketing and other resources and more personnel than we do;

    some of our funds may not perform as well as competitors' funds or other available investment products;

    several of our competitors have raised significant amounts of capital, and many of them have similar investment objectives to ours, which may create additional competition for investment opportunities and may reduce the size and duration of pricing inefficiencies that otherwise could be exploited;

    some of our competitors may have a lower cost of capital and access to funding sources that are not available to us, which may create competitive disadvantages for us with respect to our funds, particularly our funds that directly use leverage or rely on debt financing of their portfolio investments to generate superior investment returns;

    some of our competitors may have higher risk tolerances, different risk assessments or lower return thresholds than us, which could allow them to consider a wider variety of investments and to bid more aggressively than us for investments that we want to make;

    some of our competitors may be subject to less regulation and, accordingly, may have more flexibility to undertake and execute certain businesses or investments than we do and/or bear less compliance expense than we do;

    some of our competitors may have more flexibility than us in raising certain types of funds under the investment management contracts they have negotiated with their investors;

    some of our competitors may have better expertise or be regarded by investors as having better expertise in a specific asset class or geographic region than we do;

    our competitors that are corporate buyers may be able to achieve synergistic cost savings in respect of an investment, which may provide them with a competitive advantage in bidding for an investment; and

29


Table of Contents

    other industry participants may, from time to time, seek to recruit our investment professionals and other employees away from us.

        We may lose investment opportunities in the future if we do not match investment prices, structures and terms offered by our competitors. Alternatively, we may experience decreased profitability, rates of return and increased risks of loss if we match investment prices, structures and terms offered by our competitors. Moreover, if we are forced to compete with other investment managers on the basis of price, we may not be able to maintain our current fund fee and carried interest terms. We have historically competed primarily on the performance of our funds, and not on the level of our fees or carried interest relative to those of our competitors. However, there is a risk that fees and carried interest in the investment management industry will decline, without regard to the historical performance of a manager. Fee or carried interest reductions on existing or future funds, without corresponding decreases in our cost structure, would adversely affect our revenues and profitability.

        In addition, the attractiveness of our funds relative to investments in other investment products could decrease depending on economic conditions. This competitive pressure could adversely affect our ability to make successful investments and limit our ability to raise future funds, either of which would adversely impact our businesses, revenues, results of operations and cash flow.

        Lastly, institutional and individual investors are allocating increasing amounts of capital to alternative investment strategies. Several large institutional investors have announced a desire to consolidate their investments in a more limited number of managers. We expect that this will cause competition in our industry to intensify and could lead to a reduction in the size and duration of pricing inefficiencies that many of our funds seek to exploit.

Poor performance of our funds would cause a decline in our revenue and results of operations, may obligate us to repay performance fees previously paid to us and could adversely affect our ability to raise capital for future funds.

        We derive revenues in part from:

    management fees, which are based generally on the amount of capital committed to or invested in our funds;

    performance fees, based on the performance of our funds; and

    returns on investments of our own capital in the funds we sponsor and manage.

        When any of our funds perform poorly, either by incurring losses or underperforming benchmarks, as compared to our competitors or otherwise, our investment record suffers. As a result, our performance fees may be adversely affected and, all else being equal, the value of our assets under management could decrease, which may, in turn, reduce our management fees. Moreover, we may experience losses on investments of our own capital as a result of poor investment performance, including investments in our own funds. If a fund performs poorly, we will receive little or no performance fees with regard to the fund and little income or possibly losses from our own principal investment in such fund. Furthermore, if, as a result of poor performance or otherwise, a fund does not achieve total investment returns that exceed a specified investment return threshold over the life of the fund or other measurement period, we may be obligated to repay the amount by which performance fees that were previously distributed or paid to us exceeds amounts to which we were entitled. Poor performance of our funds could also make it more difficult for us to raise new capital. Investors in our closed-end funds may decline to invest in future closed-end funds we raise as a result of poor performance. Our fund investors and potential fund investors continually assess our funds' performance independently and relative to market benchmarks and our competitors, and our ability to raise capital for existing and future funds and avoid excessive redemption levels depends on our funds' performance. Accordingly, poor fund performance may deter future investment in our funds and thereby decrease the capital invested in our funds and, ultimately, our

30


Table of Contents

management fee income. Alternatively, in the face of poor fund performance, investors could demand lower fees or fee concessions for existing or future funds which would likewise decrease our revenue.

ARCC's management fee comprises a significant portion of our management fees and a reduction in fees from ARCC could have an adverse effect on our revenues and results of operations.

        For the year ended December 31, 2013, the management fees we received from ARCC comprised approximately 46% of our management fees. The investment advisory agreement we have with ARCC categorizes the fees we receive as: (a) management fees, which are typically paid quarterly and generally increase or decrease based on ARCC's total assets, and (b) incentive fees based on (i) ARCC's pre-incentive fee income ("ARCC Part I Fees") and (ii) ARCC's net capital gains ("ARCC Part II Fees"). We classify the ARCC Part I Fees as management fees because they are paid quarterly, are predictable and recurring in nature, are not subject to repayment (or clawback) and are generally cash-settled each quarter. If ARCC's total assets were to decline significantly for any reason, including without limitation, due to mark-to-market accounting requirements, the poor performance of its investments or the failure to successfully access capital and the amount of the fees we receive from ARCC, including the management fee, would also decline significantly, which could have an adverse effect on our revenues and results of operations. In addition, because the incentive fee is not paid unless ARCC achieves certain performance goals, ARCC's performance fees may be variable.

        ARCC's investment advisory and management agreement renews for successive annual periods subject to the approval of ARCC's board of directors or by the affirmative vote of the holders of a majority of ARCC's outstanding voting securities. In addition, as required by the Investment Company Act of 1940, as amended (the "Investment Company Act of 1940"), both ARCC and its investment adviser have the right to terminate the agreement without penalty upon 60 days' written notice to the other party. Termination of this agreement would reduce our revenues significantly and could have a material adverse effect on our financial condition.

We may not be able to maintain our current fee structure as a result of industry pressure from fund investors to reduce fees, which could have an adverse effect on our profit margins and results of operations.

        We may not be able to maintain our current fee structure as a result of industry pressure from fund investors to reduce fees. Although our investment management fees vary among and within asset classes, historically we have competed primarily on the basis of our performance and not on the level of our investment management fees relative to those of our competitors. In recent years, however, there has been a general trend toward lower fees in the investment management industry. In September 2009, the Institutional Limited Partners Association ("ILPA") published a set of Private Equity Principles (the "Principles") which were revised in January 2011. The Principles were developed to encourage discussion between limited partners and general partners regarding private equity fund partnership terms. Certain of the Principles call for enhanced "alignment of interests" between general partners and limited partners through modifications of some of the terms of fund arrangements, including proposed guidelines for fees and performance income structures. We promptly provided ILPA with our endorsement of the Principles, representing an indication of our general support for the efforts of ILPA. Although we have no obligation to modify any of our fees with respect to our existing funds, we may experience pressure to do so in our funds. More recently institutional investors have been allocating increasing amounts of capital to alternative investment strategies as well as attempting to reduce management and investment fees to external managers, whether through direct reductions, deferrals or rebates. We cannot assure you that we will succeed in providing investment returns and service that will allow us to maintain our current fee structure. Fee reductions on existing or future new businesses could have an adverse effect on our profit margins and results of operations. For more information about our fees see "Management's Discussion and Analysis of Financial Condition and Results of Operations."

31


Table of Contents

Investors in our funds may be unwilling to commit new capital to our funds as a result of our decision to become a public company, which could have a material adverse effect on our business and financial condition.

        Some investors in our funds may view negatively the prospect of our becoming a public company, and may have concerns that as a public company our attention will be bifurcated between investors in our funds and the public unitholders, resulting in potential conflicts of interest. Some investors in our funds may believe that we will strive for near-term profit instead of superior risk-adjusted returns for investors in our funds over time or grow our assets under management for the purpose of generating additional management fees without regard to whether we believe there are sufficient investment opportunities to effectively deploy the additional capital. There can be no assurance that we will be successful in our efforts to address such concerns or to convince investors in our funds that our decision to pursue this offering will not affect our longstanding priorities or the way we conduct our businesses. A decision by a significant number of investors in our funds not to commit additional capital to our funds or to cease doing business with us altogether could inhibit our ability to achieve our investment objectives and may have a material adverse effect on our business and financial condition.

Rapid growth of our businesses, particularly outside the United States, may be difficult to sustain and may place significant demands on our administrative, operational and financial resources.

        Our assets under management have grown significantly in the past, and we are pursuing further growth in the near future, both organic and through acquisitions. Our rapid growth has placed, and planned growth, if successful, will continue to place, significant demands on our legal, accounting and operational infrastructure, and has increased expenses. The complexity of these demands, and the expense required to address them, is a function not simply of the amount by which our assets under management has grown, but of the growth in the variety and complexity of, as well as the differences in strategy between, our different funds. In addition, we are required to continuously develop our systems and infrastructure in response to the increasing sophistication of the investment management market and legal, accounting, regulatory and tax developments.

        Our future growth will depend in part on our ability to maintain an operating platform and management system sufficient to address our growth and will require us to incur significant additional expenses and to commit additional senior management and operational resources. As a result, we face significant challenges:

    in maintaining adequate financial, regulatory (legal, tax and compliance) and business controls;

    in implementing new or updated information and financial systems and procedures; and

    in training, managing and appropriately sizing our work force and other components of our businesses on a timely and cost-effective basis.

        We may not be able to manage our expanding operations effectively or be able to continue to grow, and any failure to do so could adversely affect our ability to generate revenue and control our expenses.

        In addition, pursuing investment opportunities outside the United States presents challenges not faced by U.S. investments, such as different legal and tax regimes and currency fluctuations, which require additional resources to address. To accommodate the needs of global investors and strategies we must structure investment products in a manner that addresses tax, regulatory and legislative provisions in different, and sometimes multiple, jurisdictions. Further, in conducting business in foreign jurisdictions, we are often faced with the challenge of ensuring that our activities are consistent with U.S. or other laws with extraterritorial application, such as the USA PATRIOT Act and the U.S. Foreign Corrupt Practices Act ("FCPA"). Moreover, actively pursuing international investment opportunities may require that we increase the size or number of our international offices. Pursuing non-U.S. fund investors means that we must comply with international laws governing the sale of interests in our funds, different investor reporting and information processes and other requirements. As a result, we are required to continuously

32


Table of Contents

develop our systems and infrastructure in response to the increasing complexity and sophistication of the investment management market and legal, accounting and regulatory situations. This growth has required, and will continue to require, us to incur significant additional expenses and to commit additional senior management and operational resources. There can be no assurance that we will be able to manage our expanding international operations effectively or that we will be able to continue to grow this part of our businesses, and any failure to do so could adversely affect our ability to generate revenues and control our expenses.

We may enter into new lines of business and expand into new investment strategies, geographic markets and businesses, each of which may result in additional risks and uncertainties in our businesses.

        We intend, if market conditions warrant, to grow our businesses by increasing assets under management in existing businesses and expanding into new investment strategies, geographic markets and businesses. Our partnership agreement will permit us to enter into new lines of business, make strategic investments or acquisitions and enter into joint ventures. Accordingly, we may pursue growth through acquisitions of other investment management companies, acquisitions of critical business partners or other strategic initiatives, which may include entering into new lines of business. In addition, consistent with our past experience, we expect opportunities will arise to acquire other alternative or traditional asset managers.

        Attempts to expand our businesses involve a number of special risks, including some or all of the following:

    the required investment of capital and other resources;

    the diversion of management's attention from our core businesses;

    the assumption of liabilities in any acquired business;

    the disruption of our ongoing businesses;

    entry into markets or lines of business in which we may have limited or no experience;

    increasing demands on our operational and management systems and controls;

    compliance with additional regulatory requirements;

    potential increase in investor concentration; and

    the broadening of our geographic footprint, increasing the risks associated with conducting operations in certain foreign jurisdictions where we currently have no presence.

        Entry into certain lines of business may subject us to new laws and regulations with which we are not familiar, or from which we are currently exempt, and may lead to increased litigation and regulatory risk. If a new business does not generate sufficient revenues or if we are unable to efficiently manage our expanded operations, our results of operations will be adversely affected. Our strategic initiatives may include joint ventures, in which case we will be subject to additional risks and uncertainties in that we may be dependent upon, and subject to liability, losses or reputational damage relating to systems, controls and personnel that are not under our control. Because we have not yet identified these potential new investment strategies, geographic markets or lines of business, we cannot identify for you all the risks we may face and the potential adverse consequences on us and your investment that may result from any attempted expansion.

33


Table of Contents

If we are unable to consummate or successfully integrate development opportunities, acquisitions or joint ventures, we may not be able to implement our growth strategy successfully.

        Our growth strategy is based, in part, on the selective development or acquisition of asset management businesses, advisory businesses or other businesses complementary to our business where we think we can add substantial value or generate substantial returns. The success of this strategy will depend on, among other things: (a) the availability of suitable opportunities, (b) the level of competition from other companies that may have greater financial resources, (c) our ability to value potential development or acquisition opportunities accurately and negotiate acceptable terms for those opportunities, (d) our ability to obtain requisite approvals and licenses from the relevant governmental authorities and to comply with applicable laws and regulations without incurring undue costs and delays, (e) our ability to identify and enter into mutually beneficial relationships with venture partners and (f) our ability to properly manage conflicts of interest. Moreover, even if we are able to identify and successfully complete an acquisition, we may encounter unexpected difficulties or incur unexpected costs associated with integrating and overseeing the operations of the new businesses. If we are not successful in implementing our growth strategy, our business, financial results and the market price for our common units may be adversely affected.

Extensive regulation in the United States affects our activities, increases the cost of doing business and creates the potential for significant liabilities and penalties that could adversely affect our businesses and results of operations.

        Our businesses are subject to extensive regulation, including periodic examinations, by governmental agencies and self-regulatory organizations in the jurisdictions in which we operate. The Commission oversees the activities of our subsidiaries that are registered investment advisers under the Investment Advisers Act of 1940 (the "Investment Advisers Act"). Beginning in the first quarter of 2014, the Financial Industry Regulatory Authority ("FINRA") will oversee the activities of our wholly owned subsidiary Ares Investor Services LLC as a registered broker-dealer. We are subject to audits by the Defense Security Service to determine whether we are under foreign ownership, control or influence. In addition, we regularly rely on exemptions from various requirements of the Securities Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Investment Company Act of 1940, the Commodity Exchange Act and the U.S. Employee Retirement Income Security Act of 1974 ("ERISA"). These exemptions are sometimes highly complex and may in certain circumstances depend on compliance by third parties who we do not control. If for any reason these exemptions were to be revoked or challenged or otherwise become unavailable to us, we could be subject to regulatory action or third-party claims, which could have a material adverse effect on our businesses. For example, the Commission recently amended Rule 506 of Regulation D under the Securities Act to impose "bad actor" disqualification provisions that ban an issuer from offering or selling securities pursuant to the safe harbor in Rule 506 if the issuer, or any other "covered person," is the subject of a criminal, regulatory or court order or other "disqualifying event" under the rule which has not been waived by the Commission. The definition of a "covered person" under the rule includes an issuer's directors, general partners, managing members and executive officers; and promoters and persons compensated for soliciting investors in the offering. Accordingly, our ability to rely on Rule 506 to offer or sell securities would be impaired if we or any "covered person" is the subject of a disqualifying event under the rule and we are unable to obtain a waiver.

        Recently, the Commission has indicated that investment advisors who receive transaction-based compensation for investment banking or acquisition activities relating to fund portfolio companies may be required to register as broker-dealers. Specifically, the Commission staff has noted that if a firm receives fees from a fund portfolio company in connection with the acquisition, disposition or recapitalization of such portfolio company, such activities could raise broker-dealer concerns under applicable regulations related to broker dealers. To the extent we receive such transaction fees and the Commission takes the position that such activities render us a "broker" under the applicable rules and regulations of the

34


Table of Contents

Exchange Act, we could be subject to additional regulation. If receipt of transaction fees from a portfolio company is determined to require a broker-dealer license, receipt of such transaction fees in the past or in the future during any time when we did not or do not have a broker-dealer license could subject us to liability for fines, penalties or damages.

        Since 2010, states and other regulatory authorities have begun to require investment managers to register as lobbyists. We have registered as such in a number of jurisdictions, including California, Illinois and New York. Other states or municipalities may consider similar legislation or adopt regulations or procedures with similar effect. These registration requirements impose significant compliance obligations on registered lobbyists and their employers, which may include annual registration fees, periodic disclosure reports and internal recordkeeping, and may also prohibit the payment of contingent fees.

        Each of the regulatory bodies with jurisdiction over us has regulatory powers dealing with many aspects of financial services, including the authority to grant, and in specific circumstances to cancel, permissions to carry on particular activities. A failure to comply with the obligations imposed by the Investment Advisers Act, including recordkeeping, advertising and operating requirements, disclosure obligations and prohibitions on fraudulent activities, could result in investigations, sanctions and reputational damage. We are involved regularly in trading activities that implicate a broad number of U.S. securities law regimes, including laws governing trading on inside information, market manipulation and a broad number of technical trading requirements that implicate fundamental market regulation policies. Violation of these laws could result in severe restrictions on our activities and damage to our reputation.

        Our failure to comply with applicable laws or regulations could result in fines, censure, suspensions of personnel or other sanctions, including revocation of the registration of our relevant subsidiaries as investment advisers or registered broker-dealers. The regulations to which our businesses are subject are designed primarily to protect investors in our funds and to ensure the integrity of the financial markets. They are not designed to protect our common unitholders. Even if a sanction imposed against us, one of our subsidiaries or our personnel by a regulator is for a small monetary amount, the adverse publicity related to the sanction could harm our reputation, which in turn could have a material adverse effect on our businesses in a number of ways, making it harder for us to raise new funds and discouraging others from doing business with us.

Our publicly traded investment vehicles are subject to regulatory complexities that limit the way in which they do business and may subject them to a higher level of regulatory scrutiny.

        Our publicly traded investment vehicles operate under a complex regulatory environment. Such companies require the application of complex tax and securities regulations and may entail a higher level of regulatory scrutiny. In addition, regulations affecting our publicly traded investment vehicles generally affect their ability to take certain actions. For example, each of our publicly traded vehicles has elected to be treated as a REIT or RIC for U.S. federal income tax purposes. To maintain their status as a RIC or a REIT, such vehicles must meet, among other things, certain source of income, asset diversification and annual distribution requirements. ARCC and our publicly traded closed-end funds are subject to complex rules under the Investment Company Act of 1940, including rules that restrict certain of our funds from engaging in transactions with ARCC or the closed-end funds. Under the regulatory and business environment in which it operates, ARCC must periodically access the capital markets to raise cash to fund new investments in excess of its repayments in order to grow. This results from ARCC being required to generally distribute to its stockholders at least 90% of its investment company taxable income to maintain its RIC status, combined with regulations under the Investment Company Act of 1940 that, subject to certain exceptions, generally prohibit ARCC from issuing and selling its common stock at a price below net asset value per share and from incurring indebtedness (including for this purpose, preferred stock), if ARCC's asset coverage, as calculated pursuant to the Investment Company Act of 1940, equals less than 200% after such incurrence.

35


Table of Contents

Failure to comply with "pay to play" regulations implemented by the Commission and certain states, and changes to the "pay to play" regulatory regimes, could adversely affect our businesses.

        In recent years, the Commission and several states have initiated investigations alleging that certain private equity firms and hedge funds or agents acting on their behalf have paid money to current or former government officials or their associates in exchange for improperly soliciting contracts with state pension funds. In June 2010, the Commission approved Rule 206(4)-5 under the Investment Advisers Act regarding "pay to play" practices by investment advisers involving campaign contributions and other payments to government officials able to exert influence on potential government entity clients. Among other restrictions, the rule prohibits investment advisers from providing advisory services for compensation to a government entity for two years, subject to very limited exceptions, after the investment adviser, its senior executives or its personnel involved in soliciting investments from government entities make contributions to certain candidates and officials in a position to influence the hiring of an investment adviser by such government entity. Advisers are required to implement compliance policies designed, among other matters, to track contributions by certain of the adviser's employees and engagements of third parties that solicit government entities and to keep certain records to enable the Commission to determine compliance with the rule. In addition, there have been similar rules on a state level regarding "pay to play" practices by investment advisers.

        Similar rule-making and investigations have also occurred in New York. In March 2007, the Office of the Attorney General of the State of New York (the "N.Y. Attorney General") commenced an industry-wide investigation into pay-to-play allegations and undisclosed conflicts of interest at public pension funds, including the New York State Common Retirement Fund. As a consequence of the N.Y. Attorney General's investigation, the N.Y. Attorney General adopted a Public Pension Fund Reform Code of Conduct (the "Reform Code of Conduct") for U.S. public pension funds. This Reform Code of Conduct, among other things, restricts the use of third-party intermediaries and placement agents with respect to the solicitation of funds from U.S. public pension funds. In 2010, we agreed to adopt the Reform Code of Conduct, acknowledging that the Reform Code of Conduct would enhance transparency in fundraising activities before public pension funds on a national basis. As a signatory to the Reform Code of Conduct, we may be at a disadvantage to other fund sponsors that are not similarly restricted from engaging third-party solicitors, notwithstanding that many states and public pension funds have adopted similar restrictions.

        As we have a significant number of public pension plans that are investors in our funds, these rules could impose significant economic sanctions on our businesses if we or one of the other persons covered by the rules make any such contribution or payment, whether or not material or with an intent to secure an investment from a public pension plan. In addition, such investigations may require the attention of senior management and may result in fines if any of our funds are deemed to have violated any regulations, thereby imposing additional expenses on us. Any failure on our part to comply with these rules could cause us to lose compensation for our advisory services or expose us to significant penalties and reputational damage.

The short-term and long-term impact of the new Basel III capital standards is uncertain.

        In June 2011, the Basel Committee on Banking Supervision, an international trade body comprised of senior representatives of bank supervisory authorities and central banks from 27 countries, including the United States, announced the final framework for a comprehensive set of capital and liquidity standards, commonly referred to as "Basel III," for internationally active banking organizations. These new standards, which will be fully phased in by 2019, will require banks to hold more capital, predominantly in the form of common equity, than under the current capital framework. Implementation of Basel III will require implementing regulations and guidelines by member states. In July 2013, the U.S. federal banking regulators announced the adoption of final regulations to implement Basel III for U.S. banking organizations, subject to various transition periods. Compliance with the Basel III standards may result in

36


Table of Contents

significant costs to banking organizations, which in turn may result in higher borrowing costs for the private sector and reduced access to certain types of credit.

Regulatory changes in the United States and regulatory compliance failures could adversely affect our reputation, businesses and operations.

        In July 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"). The Dodd-Frank Act, among other things, imposes significant new regulations on nearly every aspect of the U.S. financial services industry, including oversight and regulation of systemic market risk (including the power to liquidate certain institutions); authorizing the Federal Reserve to regulate nonbank institutions that are deemed systemically important; generally prohibiting insured depository institutions, insured depository institution holding companies and their subsidiaries and affiliates from conducting proprietary trading and investing in or sponsoring private equity funds and hedge funds; and imposing new registration, recordkeeping and reporting requirements on private fund investment advisers. Importantly, while several key aspects of the Dodd-Frank Act have been defined through final rules, many aspects will be implemented by various regulatory bodies over the next several years. While we already have several subsidiaries registered as investment advisers subject to Commission examinations and another subsidiary registered as a broker-dealer subject to FINRA examinations beginning in the first quarter of 2014, the imposition of any additional legal or regulatory requirements could make compliance more difficult and expensive, affect the manner in which we conduct our businesses and adversely affect our profitability.

        The Dodd-Frank Act established a ten-member Financial Stability Oversight Council (the "Council"), an interagency body chaired by the Secretary of the Treasury, to identify and manage systemic risk in the financial system and improve interagency cooperation. Under the Dodd-Frank Act, the Council has the authority to review the activities of certain nonbank financial firms engaged in financial activities that are designated as "systemically important," meaning, among other things, that the distress of the financial firm would threaten the stability of the U.S. economy. If we were designated as such, it would result in increased regulation of our businesses, including the imposition of capital, leverage, liquidity and risk management standards, credit exposure reporting and concentration limits, restrictions on acquisitions and annual stress tests by the Federal Reserve.

        In October 2011, the Federal Reserve and other federal regulatory agencies issued a proposed rule implementing a section of the Dodd-Frank Act that has become known as the "Volcker Rule." In December 2013, the Federal Reserve and other federal regulatory agencies adopted a final rule implementing the Volcker Rule. The Volcker Rule generally prohibits depository institution holding companies (including foreign banks with U.S. branches and insurance companies with U.S. depository institution subsidiaries), insured depository institutions and subsidiaries and affiliates of such entities from investing in or sponsoring private equity funds or hedge funds and certain other proprietary activities. The effects of the Volcker Rule are uncertain but it is in any event likely to curtail various banking activities that in turn could result in uncertainties in the financial markets as well as our business. The final Volcker Rule becomes effective on April 1, 2014 and is subject to a transition period (ending July 21, 2015). It contains exceptions for certain "permitted activities" that would enable certain institutions subject to the Volcker Rule to continue investing in private equity funds under certain conditions. Although we do not currently anticipate that the Volcker Rule will adversely affect our fundraising to any significant extent, there is uncertainty regarding the implementation of the Volcker Rule and its practical implications, and there could be adverse implications on our ability to raise funds from the types of entities mentioned above as a result of this prohibition.

        In 2013, the Office of the Comptroller of the Currency, the Department of the Treasury, the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation published new guidance regarding expectations for banks' leveraged lending activities. This guidance, in addition to proposed Dodd-Frank risk retention rules circulated in August 2013, could further restrict credit

37


Table of Contents

availability, as well as potentially restrict the activities of our Tradable Credit Group, which supports many of its portfolio investments from banks' lending activities. This could negatively affect the terms and availability of credit to our funds and their portfolio companies. See "—Our use of leverage to finance our businesses exposes us to substantial risks" and "Risks Related to Our Funds—Dependence on significant leverage in investments by our funds subjects us to volatility and contractions in the debt financing markets and could adversely affect our ability to achieve attractive rates of returns on those investments."

        Under the Dodd-Frank Act, the CFTC was given jurisdiction over the regulation of swaps. Under new rules implemented by the CFTC, companies that utilize swaps as part of their business model are deemed to fall within the statutory definition of Commodity Pool Operator ("CPO") and, absent relief from the CFTC, are required to register with the CFTC as a CPO. Registration with the CFTC renders such CPO subject to regulation, including with respect to disclosure, reporting, recordkeeping and business conduct. Certain of our funds may from time to time, directly or indirectly, invest in instruments that meet the definition of "swap" under the new rules which may subject such funds to oversight by the CFTC. The fund may therefore seek and rely on no-action relief from registration with the CFTC or claim an exemption from registration as a CPO with the CFTC, including pursuant to CFTC Rule 4.13(a)(3). CFTC Rule 4.13(a)(3) requires that, among other things, the pool's trading in commodity interest positions (including both hedging and speculative positions, and positions in security futures) is limited so that either (i) no more than 5% of the liquidation value of the pool's portfolio is used as initial margin, premiums and required minimum security deposits to establish such positions, or (ii) the aggregate net notional value of the pool's trading in such positions does not exceed 100% of the pool's liquidation value. Therefore, unlike a registered CPO, the fund would not be required to provide prospective investors with a CFTC compliant disclosure document, nor would it be required to provide investors with periodic account statements or certified annual reports that satisfy the requirements of CFTC rules applicable to registered CPOs, in connection with any offerings of equity securities.

        As an alternative to the exemption from registration, a fund may register as a CPO with the CFTC and avail itself of certain disclosure, reporting and record-keeping relief under CFTC Rule 4.7.

        The Dodd-Frank Act authorizes federal regulatory agencies to review and, in certain cases, prohibit compensation arrangements at financial institutions that give employees incentives to engage in conduct deemed to encourage inappropriate risk-taking by covered financial institutions. Such restrictions could limit our ability to recruit and retain investment professionals and senior management executives.

        The Dodd-Frank Act requires public companies to adopt and disclose policies requiring, in the event the company is required to issue an accounting restatement, the clawback of related incentive compensation from current and former executive officers.

        The Dodd-Frank Act amends the Exchange Act to compensate and protect whistleblowers who voluntarily provide original information to the Commission and establishes a fund to be used to pay whistleblowers who will be entitled to receive a payment equal to between 10% and 30% of certain monetary sanctions imposed in a successful government action resulting from the information provided by the whistleblower.

        The Commission requires investment advisers registered or required to register with the Commission under the Investment Advisers Act that advise one or more private funds and have at least $150 million in private fund assets under management to periodically file reports on Form PF. We have filed, and will continue to file, quarterly reports on Form PF, which has resulted in increased administrative costs and requires a significant amount of attention and time to be spent by our personnel.

        Many of these provisions are subject to further rulemaking and to the discretion of regulatory bodies, such as the Council and the Federal Reserve.

        It is difficult to determine the full extent of the impact on us of the Dodd-Frank Act or any other new laws, regulations or initiatives that may be proposed or whether any of the proposals will become law. Any

38


Table of Contents

changes in the regulatory framework applicable to our businesses, including the changes described above, may impose additional costs on us, require the attention of our senior management or result in limitations on the manner in which we conduct our businesses. Moreover, as calls for additional regulation have increased, there may be a related increase in regulatory investigations of the trading and other investment activities of alternative asset management funds, including our funds. In addition, we may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self-regulatory organizations. Compliance with any new laws or regulations could make compliance more difficult and expensive, affect the manner in which we conduct our businesses and adversely affect our profitability.

Regulatory changes in jurisdictions outside the United States could adversely affect our businesses.

        Certain of our subsidiaries operate outside the United States. In the United Kingdom, Ares Management Limited is subject to regulation by the Financial Conduct Authority (which replaced the U.K. Financial Services Authority in April 2013). In March 2013, the Financial Services Authority published final rules (the "FCA Rules") for the Financial Conduct Authority's regulation and supervision of the London interbank offered rate ("LIBOR"). In particular, the FCA Rules include requirements that (1) an independent LIBOR administrator monitor and survey LIBOR submissions to identify breaches of practice standards and/or potentially manipulative behavior, and (2) firms submitting data to LIBOR establish and maintain a clear conflicts of interest policy and appropriate systems and controls. These requirements may cause LIBOR to be more volatile than it has been in the past, which may adversely affect the value of investments made by our funds. It is uncertain whether corresponding changes will be made to the Euro interbank offered rate ("EURIBOR"). It was recently announced by the British Bankers' Association that it is expected that NYSE Euronext Rates Administration Limited will take over the role of administrator of LIBOR in early 2014. Any new administrator of LIBOR (including, if and when appointed, NYSE Euronext Rates Administration Limited) and/or EURIBOR may make methodological changes that could change the level of LIBOR or EURIBOR, which in turn may adversely affect the value of investments made by our funds. Any new administrator of LIBOR (including, if and when appointed, NYSE Euronext Rates Administration Limited) or EURIBOR may also alter, discontinue or suspend calculation or dissemination of LIBOR or EURIBOR.

        Our other European and Asian operations and our investment activities worldwide are subject to a variety of regulatory regimes that vary by country. In addition, we regularly rely on exemptions from various requirements of the regulations of certain foreign countries in conducting our asset management activities.

        Each of the regulatory bodies with jurisdiction over us has regulatory powers dealing with many aspects of financial services, including the authority to grant, and in specific circumstances to cancel, permissions to carry on particular activities. We are involved regularly in trading activities that implicate a broad number of foreign (as well as U.S.) securities law regimes, including laws governing trading on inside information and market manipulation and a broad number of technical trading requirements that implicate fundamental market regulation policies. Violation of these laws could result in severe restrictions or prohibitions on our activities and damage to our reputation, which in turn could have a material adverse effect on our businesses in a number of ways, making it harder for us to raise new funds and discouraging others from doing business with us. In addition, increasing global regulatory oversight of fundraising activities, including local registration requirements in various jurisdictions and the addition of new compliance regimes, could make it more difficult for us to raise new funds or could increase the cost of raising such funds.

Alternative Investment Fund Managers Directive

        The European Union Alternative Investment Fund Managers Directive (the "Directive") was enacted in July 2011 and took effect in July 2013. The Directive applies to (a) alternative investment fund managers

39


Table of Contents

("AIFMs") established in the European Union (the "EU") that manage EU or non-EU alternative investment funds ("AIFs"), (b) non-EU AIFMs that manage EU AIFs and (c) non-EU AIFMs that market their AIFs to professional investors within the EU. Individual EU member states must now adopt rules and regulations implementing the Directive into domestic law.

        Beginning July 22, 2013, the Directive imposed new operating requirements on EU AIFMs. There is a one-year transitional period after which EU AIFMs must comply with the requirements of the Directive and be appropriately authorized or have submitted an application for authorization. EU AIFMs and non-EU AIFMs seeking to market an AIF within the EU will need to comply with the Directive's disclosure and transparency requirements and (in the case of non-EU AIFMs) jurisdiction specific private placement regimes (which may change as a result of the Directive) from the implementation date.

        The full scope of the Directive may also, from October 2015 at the earliest, be extended to non-EU AIFMs that wish to market an AIF within the EU pursuant to a pan-European marketing passport instead of under national private placement regimes.

        The operating requirements imposed by the Directive include, among other things, rules relating to the remuneration of certain personnel, minimum regulatory capital requirements, restrictions on the use of leverage, restrictions on early distributions relating to portfolio companies (so-called "asset stripping" rules), disclosure and reporting requirements to both investors and home state regulators, the independent valuation of an AIF's assets and the appointment of an independent depository to hold assets. As a result, the Directive could in the future have an adverse effect on our businesses by, among other things, increasing the regulatory burden and costs of doing business in or relating to EU member states, imposing extensive disclosure obligations on, and asset stripping rules with respect to, companies, if any, in which any of our funds invest that are located in EU member states, significantly restricting marketing activities within the EU, potentially requiring certain of our funds to change their compensation structures for key personnel, thereby affecting our ability to recruit and retain these personnel, and potentially disadvantaging our funds as investors in private companies located in EU member states when compared to non-AIF/AIFM competitors that may not be subject to the requirements of the Directive, thereby potentially restricting our funds' ability to make investments in such companies.

        The Directive allows AIFMs to invest in securitizations on behalf of the alternative investment funds they manage only if the originator, sponsor or original lender for the securitization has explicitly disclosed that it will retain, on an ongoing basis, a material net economic interest of not less than 5% of the nominal value of the securitized exposures or of the tranches sold to investors and certain due diligence undertakings are made. AIFMs that discover after the assumption of a securitization exposure that the retained interest does not meet the requirements, or subsequently falls below 5% of the economic risk, are required to take such corrective action as is in the best interests of investors. It remains to be seen how this requirement will be addressed by AIFMs should these circumstances arise. These requirements, along with other changes to the regulation or regulatory treatment of securitizations, may negatively affect the value of investments made by our funds.

        The Directive could also limit our operating flexibility and our investment opportunities, as well as expose us and/or our funds to conflicting regulatory requirements in the United States (and elsewhere) and the EU. The final scope and requirements of the Directive remain uncertain and are subject to change as a result of enactment both of EU secondary legislation and national implementing legislation in EU member states.

Solvency II

        Solvency II is an EU directive that sets out stronger capital adequacy and risk management requirements for European insurers and reinsurers and, in particular, dictates how much capital such firms must hold against their liabilities. Solvency II is currently scheduled to be implemented into domestic law by EU member states as early as January 2014, although continuing delays in the adoption of "Omnibus

40


Table of Contents

II," a related EU directive that will amend Solvency II, is likely to result in a revised timetable for the implementation of, and compliance with, Solvency II. Solvency II will impose, among other things, substantially greater quantitative and qualitative capital requirements for insurers and reinsurers as well as other supervisory and disclosure requirements. We are not subject to Solvency II; however, many of our European insurer or reinsurer fund investors will be subject to this directive, as applied under applicable domestic law. Solvency II may impact insurers' and reinsurers' investment decisions and their asset allocations. In addition, insurers and reinsurers will be subject to more onerous data collation and reporting requirements. As a result, Solvency II could in the future have an adverse indirect effect on our businesses by, among other things, restricting the ability of European insurers and reinsurers to invest in our funds and imposing on us extensive disclosure and reporting obligations for those insurers and reinsurers that do invest in our funds. The final details and requirements of the Solvency II directive remain uncertain and are subject to change as a result of enactment both of related EU legislation and national implementing legislation in EU member states.

Regulations governing ARCC's operation as a business development company affect its ability to raise, and the way in which it raises, additional capital.

        As a business development company, ARCC operates as a highly regulated business within the provisions of the Investment Company Act. Many of the regulations governing business development companies have not been modernized within recent securities laws amendments and restrict, among other things, leverage incurrence, co-investments and other transactions with other entities within the Ares Operating Group. The business development company industry has proposed certain legislation to address some of these issues, but there can be no assurance that such legislation will be enacted. Certain of our funds may be restricted from engaging in transactions with ARCC and its subsidiaries.

        As a business development company registered under the Investment Company Act, ARCC may issue debt securities or preferred stock and borrow money from banks or other financial institutions, which we refer to collectively as "senior securities," up to the maximum amount permitted by the Investment Company Act. Under the provisions of the Investment Company Act, ARCC is permitted to issue senior securities only in amounts such that its asset coverage, as defined in the Investment Company Act, equals at least 200% after each issuance of senior securities. If the value of its assets declines, it may be unable to satisfy this test. If that happens, it may be required to sell a portion of its investments and, depending on the nature of its leverage, repay a portion of its indebtedness at a time when such sales may be disadvantageous. The business development company industry has proposed legislation to lessen the asset coverage test, but there can be no assurance that such legislation will be enacted.

        Business development companies may issue and sell common stock at a price below net asset value per share only in limited circumstances, one of which is during the one-year period after stockholder approval. ARCC's stockholders have, in the past, approved a plan so that during the subsequent 12-month period, ARCC may, in one or more public or private offerings of its common stock, sell or otherwise issue shares of its common stock at a price below the then-current net asset value per share, subject to certain conditions including parameters on the level of permissible dilution, approval of the sale by a majority of its independent directors and a requirement that the sale price be not less than approximately the market price of the shares of its common stock at specified times, less the expenses of the sale. ARCC may ask its stockholders for additional approvals from year to year. There can be no assurance that such approvals will be obtained.

We are subject to risks in using prime brokers, custodians, counterparties, administrators and other agents.

        Many of our funds depend on the services of prime brokers, custodians, counterparties, administrators and other agents to carry out certain securities and derivatives transactions. The terms of these contracts are often customized and complex, and many of these arrangements occur in markets or relate to products that are not subject to regulatory oversight, although the Dodd-Frank Act provides for new regulation of

41


Table of Contents

the derivatives market. In particular, some of our funds utilize prime brokerage arrangements with a relatively limited number of counterparties, which has the effect of concentrating the transaction volume (and related counterparty default risk) of these funds with these counterparties.

        Our funds are subject to the risk that the counterparty to one or more of these contracts defaults, either voluntarily or involuntarily, on its performance under the contract. Any such default may occur suddenly and without notice to us. Moreover, if a counterparty defaults, we may be unable to take action to cover our exposure, either because we lack contractual recourse or because market conditions make it difficult to take effective action. This inability could occur in times of market stress, which is when defaults are most likely to occur.

        In addition, our risk-management models may not accurately anticipate the impact of market stress or counterparty financial condition, and as a result, we may not have taken sufficient action to reduce our risks effectively. Default risk may arise from events or circumstances that are difficult to detect, foresee or evaluate. In addition, concerns about, or a default by, one large participant could lead to significant liquidity problems for other participants, which may in turn expose us to significant losses.

        Although we have risk-management models and processes to ensure that we are not exposed to a single counterparty for significant periods of time, given the large number and size of our funds, we often have large positions with a single counterparty. For example, most of our funds have credit lines. If the lender under one or more of those credit lines were to become insolvent, we may have difficulty replacing the credit line and one or more of our funds may face liquidity problems.

        In the event of a counterparty default, particularly a default by a major investment bank or a default by a counterparty to a significant number of our contracts, one or more of our funds may have outstanding trades that they cannot settle or are delayed in settling. As a result, these funds could incur material losses and the resulting market impact of a major counterparty default could harm our businesses, results of operation and financial condition.

        In the event of the insolvency of a prime broker, custodian, counterparty or any other party that is holding assets of our funds as collateral, our funds might not be able to recover equivalent assets in full as they will rank among the prime broker's, custodian's or counterparty's unsecured creditors in relation to the assets held as collateral. In addition, our funds' cash held with a prime broker, custodian or counterparty generally will not be segregated from the prime broker's, custodian's or counterparty's own cash, and our funds may therefore rank as unsecured creditors in relation thereto. If our derivatives transactions are cleared through a derivatives clearing organization, the CFTC has issued final rules to segregate and protect collateral posted by customers of cleared swaps. The CFTC also issued proposed regulations to implement segregation rules for uncleared swaps.

        The counterparty risks that we face have increased in complexity and magnitude as a result of disruption in the financial markets in recent years. For example, the consolidation and elimination of counterparties has increased our concentration of counterparty risk and decreased the universe of potential counterparties, and our funds are generally not restricted from dealing with any particular counterparty or from concentrating any or all of their transactions with one counterparty. In addition, counterparties have generally reacted to recent market volatility by tightening their underwriting standards and increasing their margin requirements for all categories of financing, which has the result of decreasing the overall amount of leverage available and increasing the costs of borrowing.

42


Table of Contents

A portion of our revenue, net income and cash flow is variable, which may make it difficult for us to achieve steady earnings growth on a quarterly basis and may cause the price of our common units to decline.

        A portion of our revenue, net income and cash flow is nevertheless variable, primarily due to the fact that the performance fees that we receive from our certain of our funds can vary from quarter to quarter and year to year. In addition, the investment returns of most of our funds are volatile. We may also experience fluctuations in our results from quarter to quarter and year to year due to a number of other factors, including changes in the values of our funds' investments, changes in the amount of distributions, dividends or interest paid in respect of investments, changes in our operating expenses, the degree to which we encounter competition and general economic and market conditions. Such variability may lead to volatility in the trading price of our common units and cause our results for a particular period not to be indicative of our performance in a future period. It may be difficult for us to achieve steady growth in net income and cash flow on a quarterly basis, which could in turn lead to large adverse movements in the price of our common units or increased volatility in the price of our common units generally.

        The timing and amount of performance fees generated by our funds is uncertain and will contribute to the volatility of our results. It takes a substantial period of time to identify attractive investment opportunities, to raise all the funds needed to make an investment and then to realize the cash value or other proceeds of an investment through a sale, public offering, recapitalization or other exit. Even if an investment proves to be profitable, it may be several years before any profits can be realized in cash or other proceeds. We cannot predict when, or if, any realization of investments will occur. If we were to have a realization event in a particular quarter or year, it may have a significant impact on our results for that particular quarter or year that may not be replicated in subsequent periods. We recognize revenue on investments in our funds based on our allocable share of realized and unrealized gains (or losses) reported by such funds, and a decline in realized or unrealized gains, or an increase in realized or unrealized losses, would adversely affect our revenue, which could increase the volatility of our results.

        With respect to our funds that generate carried interest, the timing and receipt of such carried interest varies with the life cycle of our funds. During periods in which a relatively large portion of our assets under management is attributable to funds and investments in their "harvesting" period, our funds would make larger distributions than in the fund-raising or investment periods that precede harvesting. During periods in which a significant portion of our assets under management is attributable to funds that are not in their harvesting periods, we may receive substantially lower carried interest distributions. Moreover, we receive carried interest payments only upon realization of investments by the relevant fund, which contributes to the volatility of our cash flow.

        With respect to our funds that pay an incentive fee, the incentive fee is paid annually, semi-annually or quarterly. In many cases, we earn this incentive fee only if the net asset value of a fund has increased or, in the case of certain funds, increased beyond a particular threshold. Some of our funds also have "high water marks" with respect to the investors in these funds. If the high water mark for a particular investor is not surpassed, we would not earn an incentive fee with respect to such investor during a particular period even if such investor had positive returns in such period as a result of losses in prior periods. If such an investor experiences losses, we will not be able to earn an incentive fee from such investor until it surpasses the previous high water mark. The incentive fees we earn are, therefore, dependent on the net asset value of investors' investments in the fund, which could lead to significant volatility in our results. Finally, the timing and amount of incentive fees generated by our closed-end funds are uncertain and will contribute to the volatility of our net income. Incentive fees depend on our closed-end funds' investment performance and opportunities for realizing gains, which may be limited.

        Because a portion of our revenue, net income and cash flow can be variable from quarter to quarter and year to year, we do not plan to provide any guidance regarding our expected quarterly and annual operating results. The lack of guidance may affect the expectations of public market analysts and could cause increased volatility in the price of our common units.

43


Table of Contents

We may be subject to litigation risks and may face liabilities and damage to our professional reputation as a result.

        In recent years, the volume of claims and amount of damages claimed in litigation and regulatory proceedings against investment managers have been increasing. We make investment decisions on behalf of investors in our funds that could result in substantial losses. This may subject us to the risk of legal liabilities or actions alleging negligent misconduct, breach of fiduciary duty or breach of contract. Further, we may be subject to third-party litigation arising from allegations that we improperly exercised control or influence over portfolio investments. In addition, we and our affiliates that are the investment managers and general partners of our funds, our funds themselves and those of our employees who are our, our subsidiaries' or the funds' officers and directors are each exposed to the risks of litigation specific to the funds' investment activities and portfolio companies and, in the case where our funds own controlling interests in public companies, to the risk of shareholder litigation by the public companies' other shareholders. Moreover, we are exposed to risks of litigation or investigation by investors or regulators relating to our having engaged, or our funds having engaged, in transactions that presented conflicts of interest that were not properly addressed.

        Legal liability could have a material adverse effect on our businesses, financial condition or results of operations or cause reputational harm to us, which could harm our businesses. We depend to a large extent on our business relationships and our reputation for integrity and high-caliber professional services to attract and retain investors and to pursue investment opportunities for our funds. As a result, allegations of improper conduct by private litigants or regulators, whether the ultimate outcome is favorable or unfavorable to us, as well as negative publicity and press speculation about us, our investment activities or the investment industry in general, whether or not valid, may harm our reputation, which may be damaging to our businesses.

Employee misconduct could harm us by impairing our ability to attract and retain investors and subjecting us to significant legal liability, regulatory scrutiny and reputational harm. Fraud and other deceptive practices or other misconduct at our portfolio companies could similarly subject us to liability and reputational damage and also harm our businesses.

        Our ability to attract and retain investors and to pursue investment opportunities for our funds depends heavily upon the reputation of our professionals, especially our senior professionals. We are subject to a number of obligations and standards arising from our investment management business and our authority over the assets managed by our investment management business. The violation of these obligations and standards by any of our employees could adversely affect investors in our funds and us. Our businesses often require that we deal with confidential matters of great significance to companies in which our funds may invest. If our employees were to use or disclose confidential information improperly, we could suffer serious harm to our reputation, financial position and current and future business relationships. It is not always possible to detect or deter employee misconduct, and the extensive precautions we take to detect and prevent this activity may not be effective in all cases. If one or more of our employees were to engage in misconduct or were to be accused of such misconduct, our businesses and our reputation could be adversely affected and a loss of investor confidence could result, which would adversely impact our ability to raise future funds.

        In recent years, the U.S. Department of Justice and the Commission have devoted greater resources to enforcement of the FCPA. In addition, the United Kingdom has recently significantly expanded the reach of its anti-bribery law, the U.K. Bribery Act of 2010 (the "UK Bribery Act"). The UK Bribery Act prohibits companies that conduct business in the United Kingdom and their employees and representatives from giving, offering or promising bribes to any person, including non-UK government officials, as well as requesting, agreeing to receive or accepting bribes from any person. Under the UK Bribery Act, companies may be held liable for failing to prevent their employees and associated persons from violating the UK Bribery Act. While we have developed and implemented policies and procedures designed to ensure strict compliance by us and our personnel with the FCPA and UK Bribery Act, such policies and procedures may

44


Table of Contents

not be effective in all instances to prevent violations. Any determination that we have violated the FCPA, the UK Bribery Act or other applicable anti-corruption laws could subject us to, among other things, civil and criminal penalties, material fines, profit disgorgement, injunctions on future conduct, securities litigation and a general loss of investor confidence, any one of which could adversely affect our business prospects, financial position or the market value of our common units.

        In addition, we could be adversely affected as a result of actual or alleged misconduct by personnel of portfolio companies in which our funds invest. For example, failures by personnel at our portfolio companies to comply with anti-bribery, trade sanctions or other legal and regulatory requirements could expose us to litigation or regulatory action and otherwise adversely affect our businesses and reputation. Such misconduct could undermine our due diligence efforts with respect to such companies and could negatively affect the valuation of a fund's investments.

Our use of leverage to finance our businesses exposes us to substantial risks.

        As of February 28, 2014, we had $151.3 million outstanding under our Credit Facility. We may choose to finance our businesses operations through further borrowings. Our existing and future indebtedness exposes us to the typical risks associated with the use of leverage, including those discussed below under "—Risks Related to Our Funds—Dependence on significant leverage in investments by our funds subjects us to volatility and contractions in the debt financing markets and could adversely affect our ability to achieve attractive rates of return on those investments." The occurrence of any of these risks could cause us to suffer a decline in the credit ratings assigned to our debt by rating agencies, which would cause the interest rate applicable to borrowings under our Credit Facility to increase and could result in other material adverse effects on our businesses. We depend on financial institutions extending credit to us on terms that are reasonable to us. There is no guarantee that such institutions will continue to extend credit to us or renew any existing credit agreements we may have with them, or that we will be able to refinance outstanding facilities when they mature.

        Borrowings under our Credit Facility mature in December 2017. As these borrowings and other indebtedness mature (or are otherwise repaid prior to their scheduled maturities), we may be required to either refinance them by entering into new facilities or issuing additional debt, which could result in higher borrowing costs, or issuing equity, which would dilute existing common unitholders. We could also repay these borrowings by using cash on hand, cash provided by our continuing operations or cash from the sale of our assets, which could reduce distributions to our common unitholders. We may be unable to enter into new facilities or issue debt or equity in the future on attractive terms, or at all. Borrowings under our Credit Facility are LIBOR-based obligations. As a result, an increase in short-term interest rates will increase our interest costs if such borrowings have not been hedged into fixed rates.

        The risks related to our use of leverage may be exacerbated by our funds' use of leverage to finance investments. See "Risks Related to Our Funds—Dependence on significant leverage in investments by our funds subjects us to volatility and contractions in the debt financing markets and could adversely affect our ability to achieve attractive rates of returns on those investments."

Operational risks may disrupt our businesses, result in losses or limit our growth.

        We face operational risk from errors made in the execution, confirmation or settlement of transactions. We also face operational risk from transactions not being properly recorded, evaluated or accounted for in our funds. In particular, our Tradable Credit Group is highly dependent on our ability to process and evaluate, on a daily basis, transactions across markets and geographies in a time-sensitive, efficient and accurate manner. Consequently, we rely heavily on our financial, accounting and other data processing systems. New investment products we may introduce could create a significant risk that our existing systems may not be adequate to identify or control the relevant risks in the investment strategies employed by such new investment products. We face various security threats, including cyber security

45


Table of Contents

attacks to our information technology infrastructure and attempts to gain access to our proprietary information, destroy data or disable, degrade or sabotage our systems. These security threats could originate from a wide variety of sources, including unknown third parties outside of Ares. Although we have not yet been subject to cyber-attacks or other cyber incidents and we utilize various procedures and controls to monitor and mitigate these threats, there can be no assurance that these procedures and controls will be sufficient to prevent disruptions to our systems. If any of these systems do not operate properly or are disabled for any reason or if there is any unauthorized disclosure of data, whether as a result of tampering, a breach of our network security systems, a cyber-incident or attack or otherwise, we could suffer financial loss, a disruption of our businesses, liability to our funds, regulatory intervention or reputational damage.

        In addition, we operate in a business that is highly dependent on information systems and technology. Our information systems and technology may not continue to be able to accommodate our growth, particularly our growth internationally, and the cost of maintaining the systems may increase from its current level. Such a failure to accommodate growth, or an increase in costs related to the information systems, could have a material adverse effect on our business and results of operations.

        Furthermore, we depend on our headquarters in Los Angeles, where a substantial portion of our personnel are located, for the continued operation of our businesses. An earthquake or other disaster or a disruption in the infrastructure that supports our businesses, including a disruption involving electronic communications or other services used by us or third parties with whom we conduct business, or directly affecting our headquarters, could have a material adverse effect on our ability to continue to operate our businesses without interruption. Although we have disaster recovery programs in place, these may not be sufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance and other safeguards might only partially reimburse us for our losses, if at all.

        Finally, we rely on third-party service providers for certain aspects of our businesses, including for certain information systems, technology and administration of our funds and compliance matters. Any interruption or deterioration in the performance of these third parties or failures of their information systems and technology could impair the quality of our funds' operations and could impact our reputation, adversely affect our businesses and limit our ability to grow.


Risks Related to Our Funds

The historical returns attributable to our funds should not be considered as indicative of the future results of our funds or of our future results or of any returns expected on an investment in our common units.

        The historical performance of our funds is relevant to us primarily insofar as it is indicative of performance fees we have earned in the past and may earn in the future and our reputation and ability to raise new funds. The historical and potential returns of the funds we advise are not, however, directly linked to returns on our common units. Therefore, you should not conclude that positive performance of the funds we advise will necessarily result in positive returns on an investment in common units. However, poor performance of the funds we advise would cause a decline in our revenues and would therefore have a negative effect on our operating results and returns on our common units. An investment in our common units is not an investment in any of our funds. Also, there is no assurance that projections in respect of our funds or unrealized valuations will be realized.

        Moreover, the historical returns of our funds should not be considered indicative of the future returns of these or from any future funds we may raise, in part because:

    market conditions during previous periods may have been significantly more favorable for generating positive performance than the market conditions we may experience in the future;

    our funds' rates of returns, which are calculated on the basis of net asset value of the funds' investments, reflect unrealized gains, which may never be realized;

46


Table of Contents

    our funds' returns have previously benefited from investment opportunities and general market conditions that may not recur, including the availability of debt capital on attractive terms and the availability of distressed debt opportunities, and we may not be able to achieve the same returns or profitable investment opportunities or deploy capital as quickly;

    the historical returns that we present in this prospectus derive largely from the performance of our earlier funds, whereas future fund returns will depend increasingly on the performance of our newer funds or funds not yet formed, which may have little or no realized investment track record;

    our funds' historical investments were made over a long period of time and over the course of various market and macroeconomic cycles, and the circumstances under which our current or future funds may make future investments may differ significantly from those conditions prevailing in the past;

    the attractive returns of certain of our funds have been driven by the rapid return of invested capital, which has not occurred with respect to all of our funds and we believe is less likely to occur in the future;

    you will not benefit from any value that was created in our funds prior to our becoming a public company if such value was previously realized;

    in recent years, there has been increased competition for private equity investment opportunities resulting from the increased amount of capital invested in alternative funds and high liquidity in debt markets, and the increased competition for investments may reduce our returns in the future;

    our track record with respect to our Real Estate debt funds is relatively short as compared to our other funds; and

    our newly established funds may generate lower returns during the period that they take to deploy their capital.

        The future internal rate of return for any current or future fund may vary considerably from the historical internal rate of return generated by any particular fund, or for our funds as a whole. Future returns will also be affected by the risks described elsewhere in this prospectus, including risks of the industries and businesses in which a particular fund invests. In addition, future returns will be affected by the applicable risks described elsewhere in this prospectus, including risks of the industries and businesses in which a particular fund invests.

Valuation methodologies for certain assets can be subject to significant subjectivity, and the values of assets may never be realized.

        Many of the investments in our funds are illiquid and thus have no readily ascertainable market prices. We value these investments based on our estimate, or an independent third party's estimate, of their fair value as of the date of determination. There is no single standard for determining fair value in good faith and in many cases fair value is best expressed as a range of fair values from which a single estimate may be derived. We estimate the fair value of our investments based on third-party models, or models developed by us, which include discounted cash flow analyses and other techniques and may be based, at least in part, on independently sourced market parameters. The material estimates and assumptions used in these models include the timing and expected amount of cash flows, the appropriateness of discount rates used, and, in some cases, the ability to execute, the timing of and the estimated proceeds from expected financings. The actual results related to any particular investment often vary materially as a result of the inaccuracy of these estimates and assumptions. In addition, because many of the illiquid investments held by our funds are in industries or sectors which are unstable, in distress or undergoing some uncertainty, such investments are subject to rapid changes in value caused by sudden company-specific or industry-wide developments.

47


Table of Contents

        We include the fair value of illiquid assets in the calculations of net asset values, returns of our funds and our assets under management. Furthermore, we recognize performance fees from affiliates based in part on these estimated fair values. Because these valuations are inherently uncertain, they may fluctuate greatly from period to period. Also, they may vary greatly from the prices that would be obtained if the assets were to be liquidated on the date of the valuation and often do vary greatly from the prices we eventually realize; as a result, there can be no assurance that such unrealized valuations will be fully or timely realized.

        In addition, the values of our investments in publicly traded assets are subject to significant volatility, including due to a number of factors beyond our control. These include actual or anticipated fluctuations in the quarterly and annual results of these companies or other companies in their industries, market perceptions concerning the availability of additional securities for sale, general economic, social or political developments, changes in industry conditions or government regulations, changes in management or capital structure and significant acquisitions and dispositions. Because the market prices of these securities can be volatile, the valuation of these assets will change from period to period, and the valuation for any particular period may not be realized at the time of disposition. In addition, because our funds often hold large positions in their portfolio companies, the disposition of these securities often takes place over a long period of time, which can further expose us to volatility risk. Even if we hold a quantity of public securities that may be difficult to sell in a single transaction, we do not discount the market price of the security for purposes of our valuations.

        Although we frequently engage independent third parties to perform the foregoing valuations, the valuation process remains inherently subjective for the reasons described above.

        If we realize value on an investment that is significantly lower than the value at which it was reflected in a fund's net asset values, we would suffer losses in the applicable fund. This could in turn lead to a decline in asset management fees and a loss equal to the portion of the performance fees from affiliates reported in prior periods that was not realized upon disposition. These effects could become applicable to a large number of our investments if our estimates and assumptions used in estimating their fair values differ from future valuations due to market developments. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Segment Analysis" for information related to fund activity that is no longer consolidated. If asset values turn out to be materially different than values reflected in fund net asset values, fund investors could lose confidence which could, in turn, result in difficulties in raising additional investments.

Market values of debt instruments and publicly traded securities that our funds hold as investments may be volatile.

        The market prices of debt instruments and publicly traded securities held by some of our funds may be volatile and are likely to fluctuate due to a number of factors beyond our control, including actual or anticipated changes in the profitability of the issuers of such securities, general economic, social or political developments, changes in industry conditions, changes in government regulation, shortfalls in operating results from levels forecast by securities analysts, inflation and rapid fluctuations in inflation rates, the general state of the securities markets and other material events, such as significant management changes, financings, refinancings, securities issuances, acquisitions and dispositions. The value of publicly traded securities in which our funds invest may be particularly volatile as a result of these factors. In addition, debt instruments that are held by our funds to maturity or for long terms must be "marked-to-market" periodically, and their values are therefore vulnerable to interest rate fluctuations and the changes in the general state of the credit environment, notwithstanding their underlying performance. Changes in the values of these investments may adversely affect our investment performance and our results of operations.

48


Table of Contents

Our funds depend on investment cycles, and any change in such cycles could have an adverse effect on our investment prospects.

        Cyclicality is important to our businesses. Weak economic environments have tended to afford us our best investment opportunities and our best relative investment performance. For example, the relative performance of our high yield bond strategy has typically been strongest in difficult times when default rates are highest, and our distressed debt and control investing funds have historically found their best investment opportunities during downturns in the economy when credit is not as readily available. Conversely, we tend to realize value from our investments in times of economic expansion, when opportunities to sell investments may be greater. Thus, we depend on the cyclicality of the market to sustain our businesses and generate attractive risk-adjusted returns over extended periods. Any prolonged economic expansion or recession could have an adverse impact on certain of our funds and materially affect our ability to deliver attractive investment returns or generate incentive or other income.

Dependence on significant leverage in investments by our funds subjects us to volatility and contractions in the debt financing markets and could adversely affect our ability to achieve attractive rates of return on those investments.

        Some of our funds and their investments rely on the use of leverage, and our ability to achieve attractive rates of return on investments will depend on our ability to access sufficient sources of indebtedness at attractive rates. If our funds or the companies in which our funds invest raise capital in the structured credit, leveraged loan and high yield bond markets, the results of their operations may suffer if such markets experience dislocations, contractions or volatility. Any such events could adversely impact the availability of credit to businesses generally and could lead to an overall weakening of the U.S. and global economies. Any economic downturn could adversely affect the financial resources of our funds and their investments (in particular those investments that depend on credit from third parties or that otherwise participate in the credit markets) and their ability to make principal and interest payments on, or refinance, outstanding debt when due. Moreover, these events could affect the terms of available debt financing with, for example, higher rates, higher equity requirements and/or more restrictive covenants, particularly in the area of acquisition financings for leveraged buyout and real estate assets transactions.

        The absence of available sources of sufficient debt financing for extended periods of time or an increase in either the general levels of interest rates or in the risk spread demanded by sources of indebtedness would make it more expensive to finance those investments. Increases in interest rates could also make it more difficult to locate and consummate investments because other potential buyers, including operating companies acting as strategic buyers, may be able to bid for an asset at a higher price due to a lower overall cost of capital or their ability to benefit from a higher amount of cost savings following the acquisition of the asset. In addition, a portion of the indebtedness used to finance investments often includes high yield debt securities issued in the capital markets. Availability of capital from the high yield debt markets is subject to significant volatility, and there may be times when we are unable to access those markets at attractive rates, or at all, when completing an investment. Certain investments may also be financed through borrowings on fund-level debt facilities, which may or may not be available for a refinancing at the end of their respective terms. Finally, the interest payments on the indebtedness used to finance our funds' investments are generally deductible expenses for income tax purposes, subject to limitations under applicable tax law and policy. Any change in such tax law or policy to eliminate or substantially limit these income tax deductions, as has been discussed from time to time in various jurisdictions, would reduce the after-tax rates of return on the affected investments, which may have an adverse impact on our businesses and financial results. See "—Our funds make investments in companies that are based outside of the United States, which may expose us to additional risks not typically associated with investing in companies that are based in the United States."

        In the event that our funds are unable to obtain committed debt financing for potential acquisitions or can only obtain debt at an increased interest rate or on unfavorable terms, our funds may have difficulty completing otherwise profitable acquisitions or may generate profits that are lower than would otherwise

49


Table of Contents

be the case, either of which could reduce the performance and investment income earned by us. Similarly, our funds' portfolio companies regularly utilize the corporate debt markets to obtain financing for their operations. If the credit markets render such financing difficult to obtain or more expensive, this may negatively impact the operating performance of those portfolio companies and, therefore, the investment returns of our funds. In addition, if the markets make it difficult or impossible to refinance debt that is maturing in the near term, some of our portfolio companies may be unable to repay such debt at maturity and may be forced to sell assets, undergo a recapitalization or seek bankruptcy protection. Any of the foregoing circumstances could have a material adverse effect on our financial condition, results of operations and cash flow.

        When our funds' existing portfolio investments reach the point when debt incurred to finance those investments matures in significant amounts and must be either repaid or refinanced, those investments may materially suffer if they have not generated sufficient cash flow to repay maturing debt and there is insufficient capacity and availability in the financing markets to permit them to refinance maturing debt on satisfactory terms, or at all. A persistence of the limited availability of financing for such purposes for an extended period of time when significant amounts of the debt incurred to finance our funds' existing portfolio investments becomes due could have a material adverse effect on these funds.

        Our direct lending and tradable credit funds may choose to use leverage as part of their respective investment programs and regularly borrow a substantial amount of their capital. The use of leverage poses a significant degree of risk and enhances the possibility of a significant loss in the value of the investment portfolio. A fund may borrow money from time to time to purchase or carry securities or may enter into derivative transactions with counterparties that have embedded leverage. The interest expense and other costs incurred in connection with such borrowing may not be recovered by appreciation in the securities purchased or carried and will be lost, and the timing and magnitude of such losses may be accelerated or exacerbated, in the event of a decline in the market value of such securities. Gains realized with borrowed funds may cause the fund's net asset value to increase at a faster rate than would be the case without borrowings. However, if investment results fail to cover the cost of borrowings, the fund's net asset value could also decrease faster than if there had been no borrowings. In addition, as a business development company registered under the Investment Company Act, ARCC is permitted to issue senior securities in amounts such that its asset coverage ratio equals at least 200% after each issuance of senior securities. ARCC's ability to pay dividends will be restricted if its asset coverage ratio falls below at least 200% and any amounts that it uses to service its indebtedness are not available for dividends to its common stockholders. An increase in interest rates could also decrease the value of fixed-rate debt investments that our funds make. Any of the foregoing circumstances could have a material adverse effect on our financial condition, results of operations and cash flow.

Some of our funds may invest in companies that are highly leveraged, which may increase the risk of loss associated with those investments.

        Some of our funds may invest in companies whose capital structures involve significant leverage. For example, in many non-distressed private equity investments, indebtedness may be as much as 75% or more of a portfolio company's or real estate asset's total debt and equity capitalization, including debt that may be incurred in connection with the investment, whether incurred at or above the investment-level entity. In distressed situations, indebtedness may exceed 100% or more of a portfolio company's capitalization. Additionally, the debt positions acquired by our funds may be the most junior in what could be a complex capital structure, and thus subject us to the greatest risk of loss.

        Investments in highly leveraged entities are also inherently more sensitive to declines in revenues, increases in expenses and interest rates and adverse economic, market and industry developments.

50


Table of Contents

Furthermore, the incurrence of a significant amount of indebtedness by an entity could, among other things:

    subject the entity to a number of restrictive covenants, terms and conditions, any violation of which could be viewed by creditors as an event of default and could materially impact our ability to realize value from the investment;

    allow even moderate reductions in operating cash flow to render the entity unable to service its indebtedness, leading to a bankruptcy or other reorganization of the entity and a loss of part or all of our fund's equity investment in it;

    give rise to an obligation to make mandatory prepayments of debt using excess cash flow, which might limit the entity's ability to respond to changing industry conditions if additional cash is needed for the response, to make unplanned but necessary capital expenditures or to take advantage of growth opportunities;

    limit the entity's ability to adjust to changing market conditions, thereby placing it at a competitive disadvantage compared to its competitors that have relatively less debt;

    limit the entity's ability to engage in strategic acquisitions that might be necessary to generate attractive returns or further growth; and

    limit the entity's ability to obtain additional financing or increase the cost of obtaining such financing, including for capital expenditures, working capital or other general corporate purposes.

        As a result, the risk of loss associated with a leveraged entity is generally greater than for companies with comparatively less debt. For example, a number of investments consummated by private equity sponsors during 2005, 2006 and 2007 that utilized significant amounts of leverage subsequently experienced severe economic stress and, in certain cases, defaulted on their debt obligations due to a decrease in revenues and cash flow precipitated by the subsequent economic downturn during 2008 and 2009. Similarly, the leveraged nature of the investments of our real estate funds increases the risk that a decline in the fair value of the underlying real estate or tangible assets will result in their abandonment or foreclosure.

Many of our funds invest in assets that are high risk, illiquid or subject to restrictions on transfer and we may fail to realize any profits from these activities ever or for a considerable period of time.

        Many of our funds invest in securities that are not publicly traded. In many cases, our funds may be prohibited by contract or by applicable securities laws from selling such securities for a period of time. Our funds generally cannot sell these securities publicly unless either their sale is registered under applicable securities laws or an exemption from such registration is available. Accordingly, our funds may be forced, under certain conditions, to sell securities at a loss. The ability of many of our funds, particularly our private equity funds, to dispose of these investments is heavily dependent on the public equity markets. For example, the ability to realize any value from an investment may depend upon the ability of the portfolio company in which such investment is held to complete an initial public offering. Even if the securities are publicly traded, large holdings of securities can often be disposed of only over a substantial period of time. Moreover, because the investment strategy of many of our funds, particularly our private equity funds, often entails our having representation on our funds' public portfolio company boards, our funds can effect such sales only during limited trading windows, exposing the investment returns to risks of downward movement in market prices during the intended disposition period. As such, we may fail to realize any profits from our investments in the funds that hold these securities for a considerable period of time or at all, and we may lose some or all of the principal amount of our investments.

51


Table of Contents

Certain of our funds utilize special situation and distressed debt investment strategies that involve significant risks.

        Certain of our funds invest in obligors and issuers with weak financial conditions, poor operating results, substantial financing needs, negative net worth and/or special competitive problems. These funds also invest in obligors and issuers that are involved in bankruptcy or reorganization proceedings. In such situations, it may be difficult to obtain full information as to the exact financial and operating conditions of these obligors and issuers. Additionally, the fair values of such investments are subject to abrupt and erratic market movements and significant price volatility if they are publicly traded securities, and are subject to significant uncertainty in general if they are not publicly traded securities. Furthermore, some of our funds' distressed investments may not be widely traded or may have no recognized market. A fund's exposure to such investments may be substantial in relation to the market for those investments, and the assets are likely to be illiquid and difficult to sell or transfer. As a result, it may take a number of years for the market value of such investments to ultimately reflect their intrinsic value as perceived by us.

        A central feature of our distressed investment strategy is our ability to effectively anticipate the occurrence of certain corporate events, such as debt and/or equity offerings, restructurings, reorganizations, mergers, takeover offers and other transactions, that we believe will improve the condition of the business. Similarly, we perform significant analysis of the company's capital structure, operations, industry and ability to generate income, as well as market valuation of the company and its debt, and develop a strategy with respect to a particular distressed investment based on such analysis. In furtherance of that strategy our funds seek to identify the best position in the capital structure in which to invest. If the relevant corporate event that we anticipate is delayed, changed or never completed, or if our analysis or investment strategy is inaccurate, the market price and value of the applicable fund's investment could decline sharply.

        In addition, these investments could subject a fund to certain potential additional liabilities that may exceed the value of its original investment. Under certain circumstances, payments or distributions on certain investments may be reclaimed if any such payment or distribution is later determined to have been a fraudulent conveyance, a preferential payment or similar transaction under applicable bankruptcy and insolvency laws. In addition, under certain circumstances, a lender that has inappropriately exercised control of the management and policies of a debtor may have its claims subordinated or disallowed, or may be found liable for damages suffered by parties as a result of such actions. In the case where the investment in securities of troubled companies is made in connection with an attempt to influence a restructuring proposal or plan of reorganization in bankruptcy, our funds may become involved in substantial litigation.

Certain of the funds or accounts we advise or manage are subject to the fiduciary responsibility and prohibited transaction provisions of ERISA and Section 4975 of the Code, and our businesses could be adversely affected if certain of our other funds or accounts fail to satisfy an exception under the "plan assets" regulation under ERISA.

        Certain of the funds and accounts we advise or manage are subject to the fiduciary responsibility and prohibited transaction provisions of ERISA and Section 4975 of the Code. For example, we currently manage some of our funds or accounts as "plan assets" under ERISA. With respect to these funds or accounts, this results in the application of the fiduciary responsibility standards of ERISA to investments made by such funds or accounts, including the requirement of investment prudence and diversification, and the possibility that certain transactions that we enter into, or may have entered into, on behalf of these funds or accounts, in the normal course of business, might constitute or result in, or have constituted or resulted in, non-exempt prohibited transactions under Section 406 of ERISA or Section 4975 of the Code. A non-exempt prohibited transaction, in addition to imposing potential liability upon fiduciaries of an ERISA plan, may also result in the imposition of an excise tax under the Code upon a "party in interest" (as defined in ERISA) or "disqualified person" (as defined in the Code) with whom we engaged in the transaction. Some of our other funds or accounts currently qualify as venture capital operating companies ("VCOCs") or rely on another exception under the "plan assets" regulation under ERISA and therefore are not subject to the fiduciary requirements of ERISA with respect to their assets. However, if these funds

52


Table of Contents

or accounts fail to satisfy the VCOC requirements for any reason, including as a result of an amendment of the relevant regulations by the U.S. Department of Labor, or another exception under the "plan assets" regulation under ERISA, such failure could materially interfere with our activities in relation to these funds or accounts or expose us to risks related to our failure to comply with the applicable requirements.

Our funds may be liable for the underfunded pension liabilities of their portfolio companies.

        Under ERISA, members of certain "controlled groups" of "trades or businesses" may be jointly and severally liable for contributions required under any member's tax-qualified defined benefit pension plan and under certain other benefit plans. Similarly, if any member's tax-qualified defined benefit pension plan were to terminate, underfunding at termination would be the joint and several responsibility of all controlled group members, including members whose employees did not participate in the terminated plan. Similarly, joint and several liability may be imposed for certain pension plan related obligations in connection with the complete or partial withdrawal by an employer from a multiemployer pension plan. Depending on a number of factors, including the level of ownership held by our funds in a particular portfolio company, a fund may be considered to be a member of a portfolio company's "controlled group" for this purpose, and thus may be liable for the underfunded pension liabilities of such portfolio company.

        In Sun Capital Partners III L.P. v. New England Teamster and Trucking Industry Pension Fund, the First Circuit Court of Appeal held that a fund was engaged in a "trade or business" with a portfolio company for purposes of the ERISA rules and was thus liable for underfunded pension liabilities. If this decision is applied generally to private equity investing, our funds could be exposed to liability for certain benefit plan contributions, a liability that could be significant if the portfolio company's pension plan is significantly underfunded.

Our funds' performance, and our performance, may be adversely affected by the financial performance of our portfolio companies and the industries in which our funds invest.

        Our performance and the performance of our funds are significantly impacted by the value of the companies in which our funds have invested. Our funds invest in companies in many different industries, each of which is subject to volatility based upon economic and market factors. The credit crisis between mid-2007 and the end of 2009 caused significant fluctuations in the value of securities held by our funds and the recent global economic recession had a significant impact in overall performance activity and the demands for many of the goods and services provided by portfolio companies of the funds we advise. Although the U.S. economy has registered four consecutive years of growth in real GDP, there remain many obstacles to continued growth in the economy such as high unemployment, global geopolitical events, risks of inflation or deflation and high debt levels, both public and private. These factors and other general economic trends are likely to affect the performance of portfolio companies in many industries and, in particular, industries that anticipated that the GDP in developed economies would quickly return to pre-crisis trend. The performance of our funds, and our performance, may be adversely affected if our fund portfolio companies in these industries experience adverse performance or additional pressure due to downward trends.

        In respect of real estate, even though the U.S. residential real estate market has recently shown some signs of stabilizing from a lengthy and deep downturn, various factors could halt or limit a recovery in the housing market and have an adverse effect on investment performance, including, but not limited to, continued high unemployment, a low level of consumer confidence in the economy and/or the residential real estate market and rising mortgage interest rates.

53


Table of Contents

Third-party investors in certain of our funds with commitment-based structures may not satisfy their contractual obligation to fund capital calls when requested by us, which could adversely affect a fund's operations and performance.

        Investors certain of our funds make capital commitments to those funds that we are entitled to call from those investors at any time during prescribed periods. We depend on investors fulfilling and honoring their commitments when we call capital from them for those funds to consummate investments and otherwise pay their obligations when due. Any investor that did not fund a capital call would be subject to several possible penalties, including having a meaningful amount of its existing investment forfeited in that fund. However, the impact of the penalty is directly correlated to the amount of capital previously invested by the investor in the fund and if an investor has invested little or no capital, for instance early in the life of the fund, then the forfeiture penalty may not be as meaningful. Investors may also negotiate for lesser or reduced penalties at the outset of the fund, thereby limiting our ability to enforce the funding of a capital call. Third-party investors in private equity, real estate assets and venture capital funds typically use distributions from prior investments to meet future capital calls. In cases where valuations of existing investments fall and the pace of distributions slows, investors may be unable to make new commitments to third-party managed investment funds such as those advised by us. A failure of investors to honor a significant amount of capital calls for any particular fund or funds could have a material adverse effect on the operation and performance of those funds.

Our funds make investments in companies that are based outside of the United States, which may expose us to additional risks not typically associated with investing in companies that are based in the United States.

        Some of our funds invest a portion of their assets in the equity, debt, loans or other securities of issuers located outside the United States, including Europe and Asia, while certain of our funds invest substantially all of their assets in these types of securities, and we expect that international investments will increase as a proportion of certain of our funds' portfolios in the future. Investments in non-U.S. securities involve certain factors not typically associated with investing in U.S. securities, including risks relating to:

    our funds' abilities to exchange local currencies for U.S. dollars and other currency exchange matters, including fluctuations in currency exchange rates and costs associated with conversion of investment principal and income from one currency into another;

    controls on, and changes in controls on, foreign investment and limitations on repatriation of invested capital;

    less developed or less efficient financial markets than exist in the United States, which may lead to price volatility and relative illiquidity;

    the absence of uniform accounting, auditing and financial reporting standards, practices and disclosure requirements and less government supervision and regulation;

    changes in laws or clarifications to existing laws that could impact our tax treaty positions, which could adversely impact the returns on our investments;

    differences in legal and regulatory environments, particularly with respect to bankruptcy and reorganization, less developed corporate laws regarding fiduciary duties and the protection of investors and less reliable judicial systems to enforce contracts and applicable law;

    political hostility to investments by foreign or private equity investors;

    less publicly available information in respect of companies in non-U.S. markets;

    reliance on a more limited number of commodity inputs, service providers and/or distribution mechanisms;

    higher rates of inflation;

54


Table of Contents

    higher transaction costs;

    difficulty in enforcing contractual obligations;

    fewer investor protections;

    certain economic and political risks, including potential exchange control regulations and restrictions on our non-U.S. investments and repatriation of capital, potential political, economic or social instability, the possibility of nationalization or expropriation or confiscatory taxation and adverse economic and political developments; and

    the imposition of non-U.S. taxes or withholding taxes on income and gains recognized with respect to such securities.

        While our funds will take these factors into consideration in making investment decisions, including when hedging positions, there can be no assurance that adverse developments with respect to these risks will not adversely affect our funds that invest in securities of non-U.S. issuers. In addition, certain of these funds are managed outside the United States, which may increase the foregoing risks.

Many of our funds make investments in companies that we do not control.

        Investments by many of our funds will include debt instruments and equity securities of companies that we do not control. Such instruments and securities may be acquired by our funds through trading activities or through purchases of securities from the issuer. In addition, our funds may seek to acquire minority equity interests more frequently and may also dispose of a portion of their majority equity investments in portfolio companies over time in a manner that results in the funds retaining a minority investment. Those investments will be subject to the risk that the company in which the investment is made may make business, financial or management decisions with which we do not agree or that the majority stakeholders or the management of the company may take risks or otherwise act in a manner that does not serve our interests. If any of the foregoing were to occur, the values of the investments held by our funds could decrease and our financial condition, results of operations and cash flow could suffer as a result.

We may need to pay "clawback" obligations if and when they are triggered under the governing agreements with our funds.

        Generally, if at the termination of a fund (and increasingly at interim points in the life of a fund), the fund has not achieved investment returns that (in most cases) exceed the preferred return threshold or (in all cases) the general partner receives net profits over the life of the fund in excess of its allocable share under the applicable partnership agreement, we will be obligated to repay an amount equal to the extent to which carried interest that was previously distributed to us exceeds the amounts to which we are ultimately entitled. These repayment obligations may be related to amounts previously distributed to our senior professionals prior to the completion of this offering, with respect to which our common unitholders did not receive any benefit. This obligation is known as a "clawback" obligation. Due in part to our investment performance and the fact that our carried interest is generally determined on a liquidation basis, as of December 31, 2013, 2012 and 2011, if the funds were liquidated at their fair values at that date, there would have been no clawback obligation or liability. There can be no assurance that we will not incur a clawback obligation in the future. At December 31, 2013, 2012 and 2011, had we assumed all existing investments were worthless, the net amount of carried interest subject to clawback would have been approximately $118.7 million, $108.4 million and $101.4 million, respectively. Although a clawback obligation is several to each person who received a distribution, and not a joint obligation, the governing agreements of our funds generally provide that, if a recipient does not fund his or her respective share, we may have to fund such additional amounts beyond the amount of carried interest we retained, although we generally will retain the right to pursue remedies against those carried interest recipients who fail to fund their obligations. We may need to use or reserve cash to repay such clawback obligations instead of using

55


Table of Contents

the cash for other purposes. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Contingent Obligations" and Notes 2 and 10 to the combined and consolidated financial statements appearing elsewhere in this prospectus.

We derive a substantial portion of our revenues from funds managed pursuant to management agreements that may be terminated or fund partnership agreements that permit fund investors to request liquidation of investments in our funds on short notice.

        The terms of our funds generally give either the general partner of the fund or the fund's advisory board the right to terminate our investment management agreement with the fund. However, insofar as we control the general partner of our funds that are limited partnerships, the risk of termination of investment management agreement for such funds is limited, subject to our fiduciary or contractual duties as general partner. This risk is more significant for certain of our funds that have independent boards of directors.

        With respect to our funds that are subject to the Investment Company Act, each fund's investment management agreement must be approved annually by such fund's board of directors or by the vote of a majority of the shareholders and the majority of the independent members of such fund's board of directors and, in certain cases, by its stockholders, as required by law. The funds' investment management agreement can also be terminated by the majority of the shareholders. Termination of these agreements would reduce the fees we earn from the relevant funds, which could have a material adverse effect on our results of operations. Currently, ARDC and ARMF, registered investment companies under the Investment Company Act, and ARCC, a registered investment company that has elected to be treated as a business development company under the Investment Company Act, are subject to these provisions of the Investment Company Act.

        In addition, with respect to certain of our funds the investment periods may be suspended or the fund agreements may terminate if we were to experience a change of control without obtaining the required investor consent. Such a change of control could be deemed to occur in the event our senior professional owners and affiliates dispose of enough of their interests in the Ares Operating Group Units such that such persons, directly and indirectly, no longer hold a required minimum ownership interest in us. We cannot be certain that any required consents for any such deemed assignments or change of control will be obtained. Termination of these agreements, or suspension of the investment period (or other consequence), would negatively affect the fees we earn from the relevant funds, which could have a material adverse effect on our results of operations.

A downturn in the global credit markets could adversely affect our CLO investments.

        Among the sectors particularly challenged by a downturn in the global credit markets are the CLO and leveraged finance markets. CLOs are subject to credit, liquidity, interest rate and other risks. In 2008 and through early 2009, liquidity in the credit markets was significantly reduced, resulting in an increase in credit spreads and a decline in ratings, performance and market values for leveraged loans. Although the credit markets in general and the leveraged loan market in particular have improved since the second half of 2009, they have not returned to pre-2008 levels. We have significant exposure to these markets through our investments in our CLO funds. These funds invest in deeply subordinated securities, representing highly leveraged investments in the underlying collateral, which increases both the opportunity for higher returns as well as the magnitude of losses when compared to the other investors that rank more senior to our funds in right of payment. As a result of such funds' subordinated position, the fund and its investors are at greater risk of suffering losses. The CLO market in which our CLOs invest has experienced an increase in downgrades, defaults and declines in market value and defaults in respect of leveraged loans in their collateral. Many CLOs are failing or may in the future fail one or more of their "overcollateralization" tests. The failure of one or more of these tests will result in cash flows that may have been otherwise available for distribution to one of our funds. This will reduce the value of such fund's

56


Table of Contents

investment. There can be no assurance that market conditions giving rise to these types of consequences will not occur, subsist or become more acute in the future.

Our funds may face risks relating to undiversified investments.

        While diversification is generally an objective of our funds, there can be no assurance as to the degree of diversification, if any, that will be achieved in any fund investments. Difficult market conditions or slowdowns affecting a particular asset class, geographic region or other category of investment could have a significant adverse impact on a fund if its investments are concentrated in that area, which would result in lower investment returns. This lack of diversification may expose a fund to losses disproportionate to market declines in general if there are disproportionately greater adverse price movements in the particular investments. If a fund holds investments concentrated in a particular issuer, security, asset class or geographic region, such fund may be more susceptible than a more widely diversified investment partnership to the negative consequences of a single corporate, economic, political or regulatory event. Accordingly, a lack of diversification on the part of a fund could adversely affect a fund's performance and, as a result, our financial condition and results of operations.

Third-party investors in many our funds have the right to remove the general partner of the fund and to terminate the investment period under certain circumstances. In addition, the investment management agreements related to our separately managed accounts may permit the investor to terminate our management of such accounts on short notice. These events would lead to a decrease in our revenues, which could be substantial.

        The governing agreements of many of our funds provide that, subject to certain conditions, third-party investors in those funds have the right to remove the general partner of the fund without cause by a simple majority vote, resulting in a reduction in management fees we would earn from such funds and a significant reduction in the expected amounts of performance fees from those funds. Performance fees could be significantly reduced as a result of our inability to maximize the value of investments by an fund during the liquidation process or in the event of the triggering of a "clawback" obligation. Finally, the applicable funds would cease to exist after completion of liquidation and winding-up. In addition, the governing agreements of our funds provide that upon the occurrence of certain events, including in the event that certain "key persons" in our funds do not meet specified time commitments with regard to managing the fund, investors in certain funds have the right to vote to terminate the investment period by a simple majority vote in accordance with specified procedures. In addition to having a significant negative impact on our revenue, net income and cash flow, the occurrence of such an event with respect to any of our funds would likely result in significant reputational damage to us and could negatively impact our future fundraising efforts.

        We currently manage a portion of investor assets through separately managed accounts whereby we earn management fees and performance fees, and we intend to continue to seek additional separately managed account mandates. The investment management agreements we enter into in connection with managing separately managed accounts on behalf of certain clients may be terminated by such clients on as little as 30 days' prior written notice. In addition, the boards of directors of the investment management companies we manage, or the adviser in respect of ARCC, could terminate our advisory engagement of those companies on as little as 30 days' prior written notice. In the case of any such terminations, the management fees and performance fees we earn in connection with managing such account or company would immediately cease, which could result in a significant adverse impact on our revenues.

        In addition, if we were to experience a change of control (as defined under the Investment Advisers Act of 1940, as amended, or as otherwise set forth in the partnership agreements of our funds), continuation of the investment management agreements of our funds would be subject to investor consent. There can be no assurance that required consents will be obtained if a change of control occurs. In addition, with respect to our funds that are subject to the Investment Company Act, each fund's investment management agreement must be approved annually by the independent members of such fund's board of

57


Table of Contents

directors and, in certain cases, by its stockholders, as required by law. Termination of these agreements would cause us to lose the management fees and performance fees we earn from such funds.

The performance of our investments may fall short of our expectations and the expectations of the investors in our funds.

        Before making investments, we conduct due diligence that we deem reasonable and appropriate based on the facts and circumstances applicable to each investment. When conducting due diligence, we may be required to evaluate important and complex business, financial, tax, accounting, environmental and legal issues. The due diligence investigation that we will carry out with respect to an investment opportunity may not reveal or highlight all relevant facts that may be necessary or helpful in evaluating such investment opportunity.

        Once we have made an investment in a portfolio company, our funds generally establish the capital structure on the basis of financial projections prepared by the management of such portfolio company. These projections are only estimates of future results that are based upon assumptions made at the time that the projections are developed. General economic conditions, which are not predictable, along with other factors, may cause actual performance to fall short of the projections.

        Additionally, we may cause our funds to acquire an investment that is subject to contingent liabilities. Such contingent liabilities could be unknown to us at the time of acquisition or, if they are known to us, we may not accurately assess or protect against the risks that they present. Acquired contingent liabilities could thus result in unforeseen losses for our funds. In addition, in connection with the disposition of an investment in a portfolio company, a fund may be required to make representations about the business and financial affairs of such portfolio company typical of those made in connection with the sale of a business. A fund may also be required to indemnify the purchasers of such investment if any such representations are inaccurate. These arrangements may result in the incurrence of contingent liabilities by a fund, even after the disposition of an investment. Accordingly, the inaccuracy of representations and warranties made by a fund could harm such fund's performance.

Our funds may be forced to dispose of investments at a disadvantageous time.

        Our funds may make investments that they do not advantageously dispose of prior to the date the applicable fund is dissolved, either by expiration of such fund's term or otherwise. Although we generally expect that investments will be disposed of prior to dissolution or be suitable for in-kind distribution at dissolution, and the general partners of the funds have only a limited ability to extend the term of the fund with the consent of fund investors or the advisory board of the fund, as applicable, our funds may have to sell, distribute or otherwise dispose of investments at a disadvantageous time as a result of dissolution. This would result in a lower than expected return on the investments and, perhaps, on the fund itself.

Our real estate funds are subject to the risks inherent in the ownership and operation of real estate and the construction and development of real estate.

        Investments in our real estate funds will be subject to the risks inherent in the ownership and operation of real estate and real estate-related businesses and assets. These risks include the following:

    those associated with the burdens of ownership of real property;

    general and local economic conditions;

    changes in supply of and demand for competing properties in an area (as a result, for example, of overbuilding);

    fluctuations in the average occupancy and room rates for hotel properties;

    the financial resources of tenants;

58


Table of Contents

    changes in building, environmental and other laws;

    energy and supply shortages;

    various uninsured or uninsurable risks;

    liability for "slip-and-fall" and other accidents on properties held by our funds;

    natural disasters;

    changes in government regulations (such as rent control and tax laws);

    changes in real property tax and transfer tax rates;

    changes in interest rates;

    the reduced availability of mortgage funds which may render the sale or refinancing of properties difficult or impracticable;

    negative developments in the economy that depress travel activity;

    environmental liabilities;

    contingent liabilities on disposition of assets;

    unexpected cost overruns in connection with development projects;

    terrorist attacks, war and other factors that are beyond our control; and

    dependence on local operating partners.

        Although real estate values have generally rebounded with the rest of the economy, other than certain high profile assets in the best markets, prices in 2013 often remain below peaks reached in late 2007 or early 2008.

        If our real estate funds acquire direct or indirect interests in undeveloped land or underdeveloped real property, which may often be non-income producing, they will be subject to the risks normally associated with such assets and development activities, including risks relating to the availability and timely receipt of zoning and other regulatory or environmental approvals, the cost and timely completion of construction (including risks beyond the control of our fund, such as weather or labor conditions or material shortages) and the availability of both construction and permanent financing on favorable terms. Additionally, our funds' properties may be managed by a third party, which makes us dependent upon such third parties and subjects us to risks associated with the actions of such third parties. Any of these factors may cause the value of the investments in our real estate funds to decline, which may have a material impact on our results of operations.

Hedging strategies may adversely affect the returns on our funds' investments.

        When managing our exposure to market risks, we may (on our own behalf or on behalf of our funds) from time to time use forward contracts, options, swaps, caps, collars, floors, foreign currency forward contracts, currency swap agreements, currency option contracts or other strategies. Currency fluctuations in particular can have a substantial effect on our cash flow and financial condition. The success of any hedging or other derivative transactions generally will depend on our ability to correctly predict market or foreign exchange changes, the degree of correlation between price movements of a derivative instrument and the position being hedged, the creditworthiness of the counterparty and other factors. As a result, while we may enter into a transaction to reduce our exposure to market or foreign exchange risks, the transaction may result in poorer overall investment performance than if it had not been executed. Such transactions may also limit the opportunity for gain if the value of a hedged position increases.

59


Table of Contents

        While such hedging arrangements may reduce certain risks, such arrangements themselves may entail certain other risks. These arrangements may require the posting of cash collateral at a time when a fund has insufficient cash or illiquid assets such that the posting of the cash is either impossible or requires the sale of assets at prices that do not reflect their underlying value. Moreover, these hedging arrangements may generate significant transaction costs, including potential tax costs, that reduce the returns generated by a fund.


Risks Related to Our Organization and Structure

If we were deemed to be an "investment company" under the Investment Company Act, applicable restrictions could make it impractical for us to continue our businesses as contemplated and could have a material adverse effect on our businesses.

        An entity will generally be deemed to be an "investment company" for purposes of the Investment Company Act if:

    it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or

    absent an applicable exemption, it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.

        We believe that we are engaged primarily in the business of providing investment management services and not primarily in the business of investing, reinvesting or trading in securities. We hold ourselves out as an asset management firm and do not propose to engage primarily in the business of investing, reinvesting or trading in securities. Accordingly, we do not believe that we are, or following this offering will be, an "orthodox" investment company as defined in section 3(a)(1)(A) of the Investment Company Act and described in the first bullet point above. Furthermore, following this offering, we will have no material assets other than interests in certain wholly owned subsidiaries (within the meaning of the Investment Company Act), which in turn will have no material assets other than partnership units in the Ares Operating Group entities. These wholly owned subsidiaries will be the general partners of certain of the Ares Operating Group entities and will be vested with all management and control over such Ares Operating Group entities. We do not believe that the equity interests of Ares Management, L.P. in its wholly owned subsidiaries or the partnership units of these wholly owned subsidiaries in the Ares Operating Group entities are investment securities. Moreover, because we believe that the capital interests of the general partners of our funds in their respective funds are neither securities nor investment securities, we believe that less than 40% of Ares Management, L.P.'s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis are, and after this offering will be, composed of assets that could be considered investment securities. Accordingly, we do not believe that Ares Management, L.P. is, or following this offering will be, an inadvertent investment company by virtue of the 40% test in section 3(a)(1)(C) of the Investment Company Act as described in the second bullet point above.

        The Investment Company Act and the rules thereunder contain detailed parameters for the organization and operation of investment companies. Among other things, the Investment Company Act and the rules thereunder limit or prohibit transactions with affiliates, impose limitations on the issuance of debt and equity securities, generally prohibit the issuance of options and impose certain governance requirements. We intend to conduct our operations so that we will not be deemed to be an investment company under the Investment Company Act. If anything were to happen that would cause us to be deemed to be an investment company under the Investment Company Act, requirements imposed by the Investment Company Act, including limitations on capital structure, the ability to transact business with affiliates and the ability to compensate senior employees, could make it impractical for us to continue our businesses as currently conducted, impair the agreements and arrangements between and among the Ares

60


Table of Contents

Operating Group, us, our funds and our senior management, or any combination thereof, and have a material adverse effect on our businesses, financial condition and results of operations. In addition, we may be required to limit the amount of investments that we make as a principal or otherwise conduct our businesses in a manner that does not subject us to the registration and other requirements of the Investment Company Act.

Our common unitholders do not elect our general partner or, except in limited circumstances, vote on our general partner's directors and will have limited ability to influence decisions regarding our businesses.

        Our general partner will manage all of our operations and activities. For so long as, as determined on January 31 of each year, the total voting power held by holders of the special voting units in Ares Management, L.P. (including voting units held by our general partner and its affiliates) in their capacity as such, or otherwise directly or indirectly held by then-current or former Ares personnel (treating voting units deliverable to such persons pursuant to outstanding equity awards as being held by them), collectively, constitutes at least 10% of the voting power of the outstanding voting units of Ares Management, L.P., which we refer to as the "Ares control condition," the board of directors of our general partner will have no authority other than that which its member chooses to delegate to it. In the event that the Ares control condition is not satisfied, the board of directors of our general partner will be responsible for the oversight of our business and operations. See "Management—Limited Powers of Our Board of Directors."

        Unlike the holders of common stock in a corporation, our common unitholders will have limited voting rights and will have no right to remove our general partner or, except in the limited circumstances described below, elect the directors of our general partner. Our common unitholders will have no right to elect the directors of our general partner unless the Ares control condition is not satisfied. For so long as the Ares control condition is satisfied, our general partner's board of directors will be elected in accordance with its limited liability company agreement, which provides that directors may be appointed and removed by the member of our general partner, an entity owned and controlled by our Co-Founders. Immediately following this offering our Co-Founders will collectively have      % of the voting power of Ares Management, L.P. limited partners, or      % if the underwriters exercise in full their option to purchase additional common units. As a result, our common unitholders will have limited ability to influence decisions regarding our businesses. See "Material Provisions of Ares Management, L.P. Partnership Agreement—Election of Directors of General Partner."

Our Co-Founders will be able to determine the outcome of those few matters that may be submitted for a vote of our common unitholders.

        Immediately following this offering, our Co-Founders will beneficially own      % of the equity in our businesses, or       % if the underwriters exercise in full their option to purchase additional common units. Ares Voting LLC, an entity wholly owned by Ares Partners Holdco LLC, which is in turn owned and controlled by our Co-Founders, will hold a special voting unit that provides it with a number of votes, on any matter that may be submitted for a vote of our common unitholders (voting together as a single class on all such matters), that is equal to the aggregate number of vested and unvested Ares Operating Group Units held directly or indirectly by the limited partners of the Ares Operating Group entities that do not directly hold a special voting unit. Accordingly, immediately following this offering, our Co-Founders will have sufficient voting power to determine the outcome of those few matters that may be submitted for a vote of our common unitholders. See "Material Provisions of Ares Management, L.P. Partnership Agreement—Withdrawal or Removal of the General Partner," "—Meetings; Voting" and "—Election of Directors of General Partner."

        Our common unitholders' voting rights will be further restricted by the provision in our partnership agreement that will state that any common units held by a person that beneficially owns 20% or more of any class of our common units then outstanding (other than our general partner, Ares Partners Holdco

61


Table of Contents

LLC and their respective affiliates, or a direct or subsequently approved transferee of our general partner or its affiliates) cannot be voted on any matter. In addition, our partnership agreement will contain provisions limiting the ability of our common unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting the ability of our common unitholders to influence the manner or direction of our management. Our partnership agreement also will not restrict our general partner's ability to take actions that may result in our being treated as an entity taxable as a corporation for U.S. federal (and applicable state) income tax purposes. Furthermore, the common unitholders will not be entitled to dissenters' rights of appraisal under our partnership agreement or applicable Delaware law in the event of a merger or consolidation, a sale of substantially all of our assets or any other transaction or event.

        As a result of these matters and the provisions referred to under "—Our common unitholders do not elect our general partner or, except in limited circumstances, vote on our general partner's directors and will have limited ability to influence decisions regarding our businesses," our common unitholders may be deprived of an opportunity to receive a premium for their common units in the future through a sale of Ares Management, L.P., and the trading prices of our common units may be adversely affected by the absence or reduction of a takeover premium in the trading price.

Potential conflicts of interest may arise among our general partner, its affiliates and us. Our general partner and its affiliates have limited fiduciary duties to us and our common unitholders, which may permit them to favor their own interests to the detriment of us and our common unitholders.

        Conflicts of interest may arise among our general partner and its affiliates, on the one hand, and us and our common unitholders, on the other hand. As a result of these conflicts, our general partner may favor its own interests and the interests of its affiliates over the interests of our common unitholders. These conflicts include, among others, the following:

    our general partner determines the amount and timing of our investments and dispositions, indebtedness, issuances of additional partnership interests and amounts of reserves, each of which can affect the amount of cash that is available for distribution to our common unitholders;

    our general partner is allowed to take into account the interests of parties other than us and our common unitholders in resolving conflicts of interest, which has the effect of limiting its duties (including fiduciary duties) to our common unitholders. For example, our subsidiaries that serve as the general partners of our funds have fiduciary and contractual obligations to the investors in those funds, as a result of which we expect to regularly take actions in a manner consistent with such duties and obligations but that might adversely affect our near-term results of operations or cash flow;

    because our senior professional owners hold their Ares Operating Group Units through an entity that is not subject to corporate income taxation and Ares Management, L.P. holds Ares Operating Group Units directly or through direct subsidiaries, some of which are subject to corporate income taxation, conflicts may arise between our senior professional owners and Ares Management, L.P. relating to the selection, structuring and disposition of investments and other matters.

    other than as set forth in the fair competition, non-solicitation and confidentiality agreements to which our Co-Founders are subject, which may not be enforceable, affiliates of our general partner and existing and former personnel employed by our general partner are not prohibited from engaging in other businesses or activities, including those that might be in direct competition with us;

    our general partner will limit its liability and reduce or eliminate its duties (including fiduciary duties) under our partnership agreement, while also restricting the remedies available to our common unitholders for actions that, without these limitations, might constitute breaches of duty

62


Table of Contents

      (including fiduciary duty). In addition, we will agree to indemnify our general partner and its affiliates to the fullest extent permitted by law, except with respect to conduct involving bad faith or criminal intent. By purchasing our common units, you will have agreed and consented to the provisions set forth in our partnership agreement, including the provisions regarding conflicts of interest situations that, in the absence of such provisions, might constitute a breach of fiduciary or other duties under applicable state law;

    our partnership agreement will not restrict our general partner from causing us to pay it or its affiliates for any services rendered, or from entering into additional contractual arrangements with any of these entities on our behalf, so long as the terms of any such additional contractual arrangements are fair and reasonable to us as determined under our partnership agreement;

    our general partner determines how much we pay for acquisition targets and the structure of such consideration, including whether to incur debt to fund the transaction, whether to issue units as consideration and the number of units to be issued and the amount and timing of any earn-out payments;

    our general partner determines whether to allow senior professionals to exchange their units or waive certain restrictions relating to such units pursuant to the terms of the exchange agreement;

    our general partner determines how much debt we incur and that decision may adversely affect our credit ratings;

    our general partner determines which costs incurred by it and its affiliates are reimbursable by us;

    our general partner controls the enforcement of obligations owed to us by it and its affiliates; and

    our general partner decides whether to retain separate counsel, accountants or others to perform services for us.

        See "Certain Relationships and Related Person Transactions" and "Conflicts of Interest and Fiduciary Responsibilities."

Our partnership agreement will contain provisions that reduce or eliminate duties (including fiduciary duties) of our general partner and limit remedies available to common unitholders for actions that might otherwise constitute a breach of duty. It will be difficult for a common unitholder to successfully challenge a resolution of a conflict of interest by our general partner or by its conflicts committee.

        Our partnership agreement will contain provisions that waive or consent to conduct by our general partner and its affiliates that might otherwise raise issues about compliance with fiduciary duties or applicable law. For example, our partnership agreement will provide that when our general partner is acting in its individual capacity, as opposed to in its capacity as our general partner, it may act without any fiduciary obligations to us or our common unitholders whatsoever. When our general partner, in its capacity as our general partner, is permitted to or required to make a decision in its "sole discretion" or "discretion" or under a grant of similar authority or latitude or that it deems "necessary or appropriate" or "necessary or advisable," then our general partner will be entitled to consider only such interests and factors as it desires, including its own interests, and will have no duty or obligation (fiduciary or otherwise) to give any consideration to any interest of or factors affecting us or any common unitholders and will not be subject to any different standards that will be imposed by the partnership agreement, the Delaware Revised Uniform Limited Partnership Act (the "Delaware Limited Partnership Act") or under any other law, rule or regulation or in equity. These provisions are expressly permitted by Delaware law. Unless our general partner breaches its obligations pursuant to our partnership agreement, we and our common unitholders do not have any recourse against our general partner even if our general partner were to act in a manner that was inconsistent with traditional fiduciary duties. Furthermore, even if there has been a breach of our partnership agreement, our partnership agreement will provide that our general partner and

63


Table of Contents

its officers and directors will not be liable to us or our common unitholders for errors of judgment or for any acts or omissions unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that the general partner or its officers and directors acted in bad faith or with criminal intent. These modifications are detrimental to the common unitholders because they restrict the remedies available to common unitholders for actions that without those limitations might constitute breaches of duty (including fiduciary duty).

        Whenever a potential conflict of interest exists between us, any of our subsidiaries or any of our partners and our general partner or its affiliates, our general partner may resolve such conflict of interest. If our general partner determines that its resolution of the conflict of interest is on terms no less favorable to us than those generally being provided to or available from unrelated third parties or is fair and reasonable to us, taking into account the totality of the relationships between the parties involved, then it will be presumed that in making this determination, our general partner acted in good faith. A common unitholder seeking to challenge this resolution of the conflict of interest would bear the burden of overcoming such presumption. This is different from the situation with Delaware corporations, where a conflict resolution by an interested party would be presumed to be unfair and the interested party would have the burden of demonstrating that the resolution was fair.

        Also, if our general partner obtains the approval of its conflicts committee, the resolution will be conclusively deemed to be fair and reasonable to us and not a breach by our general partner of any duties it may owe to us or our common unitholders. This is different from the situation with Delaware corporations, where a conflict resolution by a committee consisting solely of independent directors may, in certain circumstances, merely shift the burden of demonstrating unfairness to the plaintiff. If you choose to purchase a common unit, you will be treated as having consented to the provisions set forth in our partnership agreement, including provisions regarding conflicts of interest situations that, in the absence of such provisions, might be considered a breach of fiduciary or other duties under applicable state law. As a result, common unitholders will, as a practical matter, not be able to successfully challenge an informed decision by the conflicts committee. See "Certain Relationships and Related Person Transactions" and "Conflicts of Interest and Fiduciary Responsibilities."

The potential requirement to convert our financial statements from being prepared in conformity with accounting principles generally accepted in the United States to International Financial Reporting Standards may strain our resources and increase our annual expenses.

        As a public entity, the Commission may require in the future that we report our financial results under International Financial Reporting Standards ("IFRS") instead of under GAAP. IFRS is a set of accounting principles that has been gaining acceptance on a worldwide basis. These standards are published by the London-based International Accounting Standards Board ("IASB") and are more focused on objectives and principles and less reliant on detailed rules than GAAP. Today, there remain significant and material differences in several key areas between GAAP and IFRS which would affect us. Additionally, GAAP provides specific guidance in classes of accounting transactions for which equivalent guidance in IFRS does not exist. The adoption of IFRS is highly complex and would have an impact on many aspects of us and our operations, including but not limited to financial accounting and reporting systems, internal controls, taxes, borrowing covenants and cash management. It is expected that a significant amount of time, internal and external resources and expenses over a multi-year period would be required for this conversion.

The consolidation of investment funds, holding companies or operating businesses of our portfolio companies could make it more difficult to understand our operating performance and could create operational risks for us.

        Under applicable GAAP standards, we may be required to consolidate certain of our investment funds, holding companies or operating businesses if we determine that we have a direct and indirect controlling financial interest based on either a variable interest model or voting interest model. As such, we consolidate (a) entities in which we hold a majority voting interest or have majority ownership and control

64


Table of Contents

over the operational, financial and investing decisions of that entity, including Ares-affiliates and affiliated funds and co-investment entities, for which we are the general partner and are presumed to have control, and (b) entities that we concluded are VIEs, including limited partnerships in which we have a nominal economic interest and the CLOs, for which we are deemed to be the primary beneficiary. The consolidation of such entities could make it difficult for an investor to differentiate our assets, liabilities, and results of operations apart from the assets, liabilities, and results of operations of the Consolidated Funds. The assets of the Consolidated Funds are not available to meet our liquidity requirements and similarly we generally have not guaranteed or assumed any obligation for repayment of the liabilities of the Consolidated Funds. For example, under current GAAP standards, we generally are required to consolidate onto our financial statements the CLOs that we manage. As of December 31, 2013, we consolidated the financial positions and results of operations of 75 Consolidated Funds, including 35 CLOs, into our combined and consolidated financial statements. The total assets and total liabilities of the 75 Consolidated Funds, including 35 CLOs, included in our combined consolidated financial statements were approximately $23.1 billion and $15.3 billion, respectively, as of December 31, 2013.

        The VIEs that we consolidate will be, subject to certain transition guidelines, included in our annual assessment of the effectiveness of our internal control over financial reporting under the Sarbanes-Oxley Act. As a result, we will need to implement and oversee procedures and processes to integrate such operations into our internal control structure. If we are not able to implement or maintain the necessary procedures and processes, we may be unable to report our financial information on a timely or accurate basis and thereby could subject us to adverse consequences, including sanctions by the Commission or violations of New York Stock Exchange ("NYSE") rules, and could result in a breach of the covenants under the agreements governing any of our financing arrangements. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements.

The requirements of being a public entity and sustaining growth may strain our resources.

        As a public entity, we will be subject to the reporting requirements of the Exchange Act and requirements of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"). These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting, which is discussed below. See "—Our internal controls over financial reporting do not currently meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act ("Section 404"), and failure to achieve and maintain effective internal controls over financial reporting in accordance with Section 404 could have a material adverse effect on our businesses and the price of our common units."

        Section 404 requires our management and independent auditors to report annually on the effectiveness of our internal control over financial reporting. However, we are an emerging growth company and, so for as long as we continue to be an emerging growth company, we intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including, but not limited to, an exemption from the auditor attestation requirements of Section 404. Once we are no longer an emerging growth company or, if prior to such date, we opt to no longer take advantage of the applicable exemption, we will be required to include an opinion from our independent auditors on the effectiveness of our internal control over financial reporting.

        To maintain and improve the effectiveness of our disclosure controls and procedures, significant resources and management oversight will be required. We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. In addition, sustaining our growth also will require us to commit additional management, operational, and financial resources to identify new professionals to join the firm and to maintain appropriate operational

65


Table of Contents

and financial systems to adequately support expansion. These activities may divert management's attention from other business concerns, which could have a material adverse effect on our businesses, financial condition, results of operations and cash flows. We expect to incur significant additional annual expenses related to these steps and, among other things, additional directors' and officers' liability insurance, director fees, reporting requirements of the Commission, transfer agent fees, hiring additional accounting, legal and administrative personnel, increased auditing, tax and legal fees and similar expenses.

Our internal controls over financial reporting may not currently meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain effective internal controls over financial reporting in accordance with Section 404 could have a material adverse effect on our businesses and the price of our common units.

        While we are familiar with the standards contemplated by Section 404 of the Sarbanes-Oxley Act in connection with our support of our publicly traded vehicles, we have not previously been required to comply with all of the requirements of the Sarbanes-Oxley Act, including the internal control evaluation and certification requirements of Section 404 that will be applicable to us, and we will not be required to comply with all of those requirements until we have been subject to the reporting requirements of the Exchange Act for a specified period of time. Accordingly, the documentation of our internal controls over financial reporting has not been completed and the related control design and operating effectiveness have not been assessed for Ares as a whole. We are in the process of addressing our internal controls over financial reporting and are identifying key financial reporting risks, assessing their potential impact and linking those risks to specific areas and activities within our organization.

        Additionally, we have begun the process of documenting and assessing the design of our internal control procedures to satisfy the requirements of Section 404, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments. The aforementioned management assessment requirement is not required until our second annual report as a public entity and the auditor attestation requirements will not apply to us until we are no longer an "emerging growth company." As a public entity, we will be required to complete our initial assessment in a timely manner. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, our operations, financial reporting or financial results could be adversely affected, and, when we are no longer an "emerging growth company," our independent registered public accounting firm may not be able to provide a certification as to the adequacy of our internal controls over financial reporting. Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the Commission or violations of applicable NYSE listing rules, and result in a breach of the covenants under the agreements governing any of our financing arrangements. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. Confidence in the reliability of our financial statements could also suffer if our independent registered public accounting firm were to report a material weakness in our internal controls over financial reporting. This could have a material adverse effect on us and lead to a decline in the price of our common units. In addition, we will incur incremental costs to formalize our internal control over financial reporting and comply with Section 404, including increased auditing and legal fees and costs associated with hiring additional accounting and administrative staff.

66


Table of Contents

We are an emerging growth company and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common units may be less attractive to investors.

        We are an emerging growth company and we are eligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies, including, but not limited to, a provision allowing us to present only two years of audited financial statements, an exemption from the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act, reduced disclosure about executive compensation arrangements pursuant to the rules applicable to smaller reporting companies and no requirement to seek non-binding advisory votes on executive compensation or golden parachute arrangements. We have elected to adopt these reduced disclosure requirements and the exemption from the auditor attestation requirement available to emerging growth companies. We will remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the completion of this offering, although a variety of circumstances could cause us to lose that status earlier. We cannot predict if investors will find our common units less attractive as a result of our taking advantage of these exemptions. If some investors find our common units less attractive as a result of our choices, there may be a less active trading market for our common units and the price of our common units may be more volatile.

        In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised financial accounting standards. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we have determined to opt out of such extended transition period and, as a result, we will comply with new or revised financial accounting standards on the relevant dates on which adoption of such standards is required for companies that are not "emerging growth companies." Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised financial accounting standards is irrevocable.

The control of our general partner may be transferred to a third party without common unitholder consent.

        Our general partner may transfer its general partner interest to a third party in a merger or consolidation or in a transfer of all or substantially all of its assets or otherwise without the consent of our common unitholders. Furthermore, at any time, the member of our general partner may sell or transfer all or part of its interests in our general partner without the approval of the common unitholders, subject to certain restrictions as described elsewhere in this annual report. A new general partner may not be willing or able to form new funds and could form funds that have investment objectives and governing terms that differ materially from those of our current funds. A new owner could also have a different investment philosophy, employ investment professionals who are less experienced, be unsuccessful in identifying investment opportunities or have a track record that is not as successful as our track record. If any of the foregoing were to occur, we could experience difficulty in making new investments, and the value of our existing investments, our businesses, our results of operations and our financial condition could materially suffer.

Our ability to pay regular distributions to our common unitholders may be limited by our holding partnership structure, applicable provisions of Delaware law and contractual restrictions or obligations.

        As a holding partnership, our ability to pay distributions will be subject to the ability of our subsidiaries to provide cash to us. Ares Management, L.P. will have no material assets other than investments in Ares Operating Group entities, either directly or through direct subsidiaries. We have no independent means of generating revenues. Accordingly, we intend to cause the Ares Operating Group entities to make distributions to their members and partners, including Ares Management, L.P.'s direct subsidiaries, to fund any distributions Ares Management, L.P. may declare on the common units. If the Ares Operating Group entities make such distributions, all holders of Ares Operating Group Units will be entitled to receive equivalent distributions pro rata based on their partnership interests in the Ares

67


Table of Contents

Operating Group. Because the direct subsidiaries of Ares Management, L.P. that are taxable as U.S. corporations for U.S. federal income tax purposes are subject to entity-level income taxes and may be obligated to make payments under the tax receivable agreement, the amounts ultimately distributed by Ares Management, L.P. to common unitholders are generally expected to be less, on a per unit basis, than the amounts distributed by the Ares Operating Group to the holders of Ares Operating Group Units in respect of their Ares Operating Group Units.

        The declaration and payment of any future distributions will be at the sole discretion of our general partner, which may change our distribution policy at any time. There can be no assurance that any distributions, whether quarterly or otherwise, can or will be paid. Our ability to make cash distributions to our common unitholders depends on a number of factors, including among other things, general economic and business conditions, our strategic plans and prospects, our businesses and investment opportunities, our financial condition and operating results, working capital requirements and other anticipated cash needs, contractual restrictions and obligations, including fulfilling our current and future capital commitments, legal, tax and regulatory restrictions, restrictions and other implications on the payment of distributions by us to our common unitholders or by our subsidiaries to us, payments required pursuant to the tax receivable agreement and such other factors as our general partner may deem relevant.

        Under the Delaware Limited Partnership Act, we may not make a distribution to a partner if after the distribution all our liabilities, other than liabilities to partners on account of their partnership interests and liabilities for which the recourse of creditors is limited to specific property of the partnership, would exceed the fair value of our assets. If we were to make such an impermissible distribution, any limited partner who received a distribution and knew at the time of the distribution that the distribution was in violation of the Delaware Limited Partnership Act would be liable to us for the amount of the distribution for three years. In addition, the terms of our Credit Facility or other financing arrangements may from time to time include covenants or other restrictions that could constrain our ability to make distributions. In addition, the Ares Operating Group's cash flow may be insufficient to enable them to make required minimum tax distributions to their members and partners, in which case the Ares Operating Group may have to borrow funds or sell assets, which could have a material adverse effect on our liquidity and financial condition. Our partnership agreement will contain provisions authorizing us to issue additional partnership interests that have designations, preferences, rights, powers and duties that are different from, and may be senior to, those applicable to our common units on the terms and conditions established by our general partner at any time without common unitholder approval.

        Furthermore, by making cash distributions rather than investing that cash in our businesses, we risk slowing the pace of our growth, or not having a sufficient amount of cash to fund our operations, new investments or unanticipated capital expenditures, should the need arise.

We will be required to pay the TRA Recipients for most of the benefits relating to any additional tax depreciation or amortization deductions we may claim as a result of the tax basis step-up we receive in subsequent sales or exchanges of Ares Operating Group Units and related transactions. In certain circumstances, payments to the TRA Recipients may be accelerated and/or could significantly exceed the actual tax benefits we realize.

        The holders of Ares Operating Group Units, subject to any applicable transfer restrictions and other provisions, may, on a quarterly basis, from and after the second anniversary of the date of the closing of this offering (subject to the terms of the exchange agreement), exchange their Ares Operating Group Units for our common units on a one-for-one basis. A holder of Ares Operating Group Units must exchange one Ares Operating Group Unit in each of the five Ares Operating Group entities to effect an exchange for a common unit of Ares Management, L.P. Subsequent exchanges are expected to result in increases (for U.S. federal income tax purposes) in the tax basis of the tangible and intangible assets of the relevant Ares Operating Group entity. These increases in tax basis generally will increase (for U.S. federal income tax purposes) depreciation and amortization deductions and potentially reduce gain on sales of assets and, therefore, reduce the amount of tax that Ares Management, L.P.'s direct subsidiaries that are taxable as

68


Table of Contents

corporations for U.S. federal tax purposes, which we refer to as the "corporate taxpayers," would otherwise be required to pay in the future, although the IRS may challenge all or part of these deductions and tax basis increases, and a court could sustain such a challenge.

        We will enter into a tax receivable agreement with the TRA Recipients that will provide for the payment by the corporate taxpayers to the TRA Recipients of 85% of the amount of cash tax savings, if any, in U.S. federal, state, local and foreign income tax or franchise tax that the corporate taxpayers actually realize (or are deemed to realize in the case of an early termination payment by the corporate taxpayers or a change of control, as discussed below) as a result of increases in tax basis and certain other tax benefits related to our entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. The payments our corporate taxpayers may make to the TRA Recipients could be material in amount and we may need to incur debt to finance payments under the tax receivable agreement if our cash resources are insufficient to meet our obligations under the tax receivable agreement as a result of timing discrepancies or otherwise. Based upon certain assumptions described in greater detail below under "Certain Relationships and Related Person Transactions—Tax Receivable Agreement," we estimate that, if the corporate taxpayers were to exercise their termination right immediately following this offering, the aggregate amount of these termination payments would be approximately $             million. The foregoing amount is merely an estimate and the actual payments could differ materially.

        If the IRS were to challenge a tax basis increase, the TRA Recipients will not reimburse us for any payments previously made to them under the tax receivable agreement. The corporate taxpayers' ability to achieve benefits from any tax basis increase, and the payments to be made under the tax receivable agreement, will depend upon a number of factors, as discussed above, including the timing and amount of our future income. As a result, in certain circumstances, payments to the TRA Recipients under the tax receivable agreement could be in excess of the corporate taxpayers' cash tax savings.

        In addition, the tax receivable agreement will provide that, upon a merger, asset sale or other form of business combination or certain other changes of control, or if, at any time, the corporate taxpayers elect an early termination of the tax receivable agreement, the corporate taxpayers' obligations under our tax receivables agreement with respect to exchanged or acquired units (whether exchanged or acquired before or after such change of control) would be calculated by reference to the value of all future payments that the TRA Recipients would have been entitled to receive under the tax receivable agreement using certain valuation assumptions, including that the corporate taxpayers would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement and, in the case of an early termination election, that any Ares Operating Group Units that have not been exchanged are deemed exchanged for the market value of the common units at the time of termination. See "Certain Relationships and Related Person Transactions—Tax Receivable Agreement."

Tax consequences to the direct and indirect holders of Ares Operating Group Units may give rise to conflicts of interests.

        As a result of the tax gain inherent in our assets held by the Ares Operating Group at the time of this offering, upon a realization event, the direct and indirect holders of Ares Operating Group Units may incur different and potentially significantly greater tax liabilities as a result of the disproportionately greater allocations of items of taxable income and gain to such holders. As these direct and indirect holders will not receive a corresponding greater distribution of cash proceeds, they may, subject to applicable fiduciary or contractual duties, have different objectives regarding the appropriate pricing, timing and other material terms of any sale, refinancing, or disposition, or whether to sell such assets at all. Decisions made with respect to an acceleration or deferral of income or the sale or disposition of assets with unrealized built-in tax gains may also influence the timing and amount of payments that are received by a TRA Recipient under the tax receivable agreement. In general, we anticipate that earlier disposition

69


Table of Contents

of assets with unrealized built-in tax gains following such exchange will tend to accelerate such payments and increase the present value of the tax receivable agreement, and disposition of assets with unrealized built-in tax gains before an exchange generally will increase an exchanging holder's tax liability without giving rise to any rights to any payments under the tax receivable agreement. Decisions made regarding a change of control also could have a material influence on the timing and amount of payments received by the TRA Recipients pursuant to the tax receivable agreement.

We are a limited partnership and as a result will qualify for and intend to rely on exceptions from certain corporate governance and other requirements under the rules of the NYSE.

        We are a limited partnership and will qualify for exceptions from certain corporate governance and other requirements of the rules of the NYSE. Pursuant to these exceptions, limited partnerships may elect not to comply with certain corporate governance requirements of the NYSE, including the requirements (i) that a majority of the board of directors of our general partner consist of independent directors, (ii) that we have a nominating/corporate governance committee that is composed entirely of independent directors, (iii) that we have a compensation committee that is composed entirely of independent directors, and (iv) that the compensation committee consider certain independence factors when engaging compensation consultants, legal counsel and other committee advisers. In addition, we are not required to hold annual meetings of our common unitholders. Following this offering, we intend to avail ourselves of these exceptions. Accordingly, you will not have the same protections afforded to equityholders of entities that are subject to all of the corporate governance requirements of the NYSE.

We are a Delaware limited partnership, and there will be certain provisions in our partnership agreement regarding exculpation and indemnification of our officers and directors that differ from the Delaware General Corporation Law in a manner that may be less protective of the interests of our common unitholders.

        Our partnership agreement will provide that to the fullest extent permitted by applicable law the directors and officers of our general partner will not be liable to us. However, under the Delaware General Corporation Law, a director or officer would be liable to us for (i) breach of duty of loyalty to us or our equityholders, (ii) intentional misconduct or knowing violations of the law that are not done in good faith, (iii) improper redemption of units or declaration of dividend, or (iv) a transaction from which the director derived an improper personal benefit. In addition, our partnership agreement will provide that we indemnify the directors and officers of our general partner for acts or omissions to the fullest extent provided by law. However, under the Delaware General Corporation Law, a corporation can only indemnify directors and officers for acts or omissions if the director or officer acted in good faith, in a manner he reasonably believed to be in the best interests of the corporation, and, in criminal action, if the officer or director had no reasonable cause to believe his conduct was unlawful. Accordingly, our partnership agreement may be less protective of the interests of our common unitholders, when compared to the Delaware General Corporation Law, insofar as it relates to the exculpation and indemnification of officers and directors.

Ownership limitations may restrict change of control or business combination opportunities in which our common unitholders might receive a premium for their common units.

        For Ares Real Estate Holdings LLC to qualify as a REIT commencing with its taxable year ending December 31, 2014, among other requirements, no more than 50% in value of its outstanding limited liability company interests may be owned, directly or indirectly, by five or fewer individuals during the last half of any calendar year. "Individuals" for this purpose includes natural persons, private foundations, some employee benefit plans and trusts and some charitable trusts. To preserve Ares Real Estate Holdings LLC's REIT qualification, which we believe confers certain tax benefits to us and our common unitholders, including reducing the state income tax filing requirements of our common unitholders while minimizing to the extent possible the imposition of corporate-level taxes, our partnership agreement

70


Table of Contents

generally prohibits any person (except for existing owners who would otherwise exceed the ownership limit who we expect to be subject to an excepted holder limit) from beneficially or constructively owning, applying certain attribution rules under the Code, more than the lesser of      % of the number of all outstanding common units and the value of all outstanding units. This ownership limitation could have the effect of discouraging a takeover or other transaction in which holders of our common units might receive a premium for their common units over the then prevailing market price or which unitholders might believe to be otherwise in their best interests.


Risks Related to Our Common Units and this Offering

There may not be an active trading market for our common units, which may cause our common units to trade at a discount from the initial offering price and make it difficult to sell the common units you purchase.

        Prior to this offering, there has been no public trading market for our common units. We cannot predict the extent to which this offering will lead to the development of an active trading market on            or otherwise how liquid that market might become. It is possible that after this offering an active trading market will not develop or continue, or, if developed, that any market will be sustained which would make it difficult for you to sell your common units at an attractive price or at all. The initial public offering price per common unit will be determined by agreement among us and the representatives of the underwriters, and may not be indicative of the price at which our common units will trade in the public market after this offering. See "Underwriting." Consequently, our common unitholders may not be able to sell our common units at prices equal to or greater than the price they paid in this offering.

The market price and trading volume of our common units may be volatile, which could result in rapid and substantial losses for our common unitholders.

        Even if an active trading market for our common units develops, the market price of our common units may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume in our common units may fluctuate and cause significant price variations to occur. If the market price of our common units declines significantly, you may be unable to resell your common units at or above your purchase price, if at all. The market price of our common units may fluctuate or decline significantly in the future. Some of the factors that could negatively affect the price of our common units or result in fluctuations in the price or trading volume of our common units include:

    variations in our quarterly operating results or distributions, which variations we expect will be substantial;

    our policy of taking a long-term perspective on making investment, operational and strategic decisions, which is expected to result in significant and unpredictable variations in our quarterly returns;

    failure to meet analysts' earnings estimates;

    publication of research reports about us or the investment management industry or the failure of securities analysts to cover our common units after this offering;

    additions or departures of our senior professionals and other key management personnel;

    adverse market reaction to any indebtedness we may incur or securities we may issue in the future;

    changes in market valuations of similar companies;

    speculation in the press or investment community;

    changes or proposed changes in laws or regulations or differing interpretations thereof affecting our businesses or enforcement of these laws and regulations, or announcements relating to these matters;

71


Table of Contents

    a lack of liquidity in the trading of our common units;

    announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments;

    adverse publicity about the asset management industry generally or individual scandals, specifically; and

    general market and economic conditions.

        In the past few years, stock markets have experienced extreme price and volume fluctuations. In the past, following periods of volatility in the overall market and the market price of a company's securities, securities class action litigation has often been instituted against public companies. This type of litigation, if instituted against us, could result in substantial costs and a diversion of our management's attention and resources.

The tax attributes of our common units may cause mutual funds to limit or reduce their holdings of common units.

        U.S. mutual funds that are treated as regulated investment companies ("RICs") for U.S. federal income tax purposes generally are required, among other things, to distribute at least 90% of their investment company taxable income to their shareholders to maintain their favorable U.S. income tax status. RICs generally are required to meet this distribution requirement regardless of whether their investments generate cash distributions equal to their taxable income. Accordingly, these investors have a strong incentive to invest in securities in which the amount of cash generated is at least equal to the amount of taxable income recognized. Our common unitholders, however, may be allocated an amount of income and gain for U.S. federal income tax purposes that exceeds the amount of cash we distribute to them. Additionally, for non-U.S. investors in RICs, certain complex rules may limit the benefits of investing in a RIC to the extent that such RIC's holdings include our common units. This may make it difficult for RICs to maintain a meaningful portion of their portfolio in our common units and may force those RICs that do hold our common units to sell all or a portion of their holdings of our common units. These actions could increase the supply of, and reduce the demand for, our common units, which could cause the price of our common units to decline.

An investment in our common units is not an investment in any of our funds, and the assets and revenues of our funds are not directly available to us.

        This prospectus solely relates to our common units, and is not an offer directly or indirectly of any securities of any of our funds. As such holders of our common units will not directly participate in the performance of our underlying funds, and any benefits from such performance will directly inure to investors in those funds. Our common units are securities of Ares Management, L.P. only. While our historical consolidated and combined financial information includes financial information, including assets and revenues, of our funds on a consolidated basis, and our future financial information will continue to consolidate certain of these funds, such assets and revenues are available to the fund and not to us except to a limited extent through management fees, performance fees, distributions and other proceeds arising from agreements with funds, as discussed in more detail in this prospectus.

The market price of our common units may decline due to the large number of common units eligible for exchange and future sale.

        The market price of our common units could decline as a result of sales of a large number of common units in the market after this offering or the perception that such sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell common units in the future at a time and at a price that we deem appropriate. Upon completion of this offering we will have a total of                of our common units outstanding, or                common units assuming the underwriters

72


Table of Contents

exercise in full their option to purchase additional common units. All of the                common units sold in this offering, or                common units assuming the underwriters exercise in full their option to purchase additional common units, will be freely tradable without restriction or further registration under the Securities Act by persons other than our "affiliates." See "Common Units Eligible for Future Sale." Subject to the lock-up restrictions described below, we may issue and sell in the future additional common units.

        In connection with the Reorganization and immediately following this offering and the Offering Transactions, our senior professional owners will own an aggregate of                Ares Operating Group Units, or                Ares Operating Group Units assuming the underwriters exercise in full their option to purchase additional common units. We expect to enter into an exchange agreement with the holders of Ares Operating Group Units so that such holders, subject to any applicable transfer and other restrictions, may up to four times each year from and after the second anniversary of the date of the closing of this offering (subject to the terms of the exchange agreement) exchange their Ares Operating Group Units for our common units on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications. A holder of Ares Operating Group Units must exchange one Ares Operating Group Unit in each of the five Ares Operating Group entities to effect an exchange for a common unit of Ares Management, L.P. The common units we issue upon such exchanges would be "restricted securities," as defined in Rule 144 under the Securities Act, unless we register such issuances.

        Ares Owners Holdings L.P., the Strategic Investors and certain of their respective affiliates have the right, under certain circumstances and subject to certain restrictions, to require us to register under the Securities Act common units delivered in exchange for Ares Operating Group Units or common units of Ares Management, L.P. otherwise held by them. In addition, we may be required to make available shelf registration statements permitting sales of common units into the market from time to time over an extended period. Lastly, Ares Owners Holdings L.P., the Strategic Investors and certain of their respective affiliates will have the ability to exercise certain piggyback registration rights in respect of common units held by them in connection with registered offerings requested by other registration rights holders or initiated by us. See "Common Units Eligible for Future Sale—Registration Rights" and "Certain Relationships and Related Person Transactions—Registration Rights Agreement." In addition, approximately        % of the Ares Operating Group Units received by our award recipients will not be vested and are subject to transfer restrictions. See "Compensation of Our Directors and Executive Officers—Vesting; Transfer Restrictions for Senior Professional Owners." However, transfers may occur notwithstanding such restrictions pursuant to transactions or programs approved by our general partner.

        Under our 2014 Equity Incentive Plan, we intend to grant                    , which are subject to specified vesting requirements, to our non-senior professionals at the time of this offering (of which            will be vested at the time of this offering). An aggregate of            additional common units and Ares Operating Group Units have been covered by our 2014 Equity Incentive Plan. See "Compensation of Our Directors and Executive Officers—Equity Incentive Plan" and "Compensation of Our Directors and Executive Officers—IPO Awards Under the 2014 Equity Incentive Plan." We expect to file with the Commission a registration statement on Form S-8 covering the common units issuable under our 2014 Equity Incentive Plan. Subject to vesting and contractual lock-up arrangements, upon effectiveness of the registration statement on Form S-8, such common units will be freely tradable.

        In addition, our partnership agreement will authorize us to issue an unlimited number of additional partnership securities and options, rights, warrants and appreciation rights relating to partnership securities for the consideration and on the terms and conditions established by our general partner in its sole discretion without the approval of any limited partners. In accordance with the Delaware Limited Partnership Act and the provisions of our partnership agreement, we may also issue additional partnership interests that have certain designations, preferences, rights, powers and duties that are different from, and may be senior to, those applicable to common units. Similarly, the governing agreements of the Ares Operating Group entities will authorize the direct subsidiaries of Ares Management, L.P. which are the

73


Table of Contents

general partners of those entities to issue an unlimited number of additional units of the Ares Operating Group entity with such designations, preferences, rights, powers and duties that are different from, and may be senior to, those applicable to the Ares Operating Group Units, and which may be exchangeable for our common units.

We cannot assure you that our intended distributions will be paid each quarter or at all.

        Our intention is to distribute to our common unitholders on a quarterly basis substantially all of Ares Management, L.P.'s share of distributable earnings in excess of amounts determined by our general partner to be necessary or appropriate to provide for the conduct of our businesses, to make appropriate investments in our businesses and our funds, to comply with applicable law, any of our debt instruments or other agreements or to provide for future distributions to our common unitholders for any ensuing quarter, subject to a base quarterly distribution in a target range of 75% to 85% of distributable earnings. The declaration, payment and determination of the amount of quarterly distributions, if any, will be at the sole discretion of our general partner, which may change our distribution policy at any time. We cannot assure you that any distributions, whether quarterly or otherwise, can or will be paid. In making decisions regarding our quarterly dividend, our general partner considers general economic and business conditions, our strategic plans and prospects, our businesses and investment opportunities, our financial condition and operating results, working capital requirements and other anticipated cash needs, contractual restrictions and obligations, legal, tax, regulatory and other restrictions that may have implications on the payment of distributions by us to our common unitholders or by our subsidiaries to us, and such other factors as our general partner may deem relevant.

You will suffer dilution in the net tangible book value of the common units you purchase.

        The initial public offering price per common unit is substantially higher than our pro forma net tangible book value per common unit immediately after this offering. As a result, you will pay a price per common unit that substantially exceeds the book value of our total tangible assets after subtracting our total liabilities. At the initial public offering price of $            per common unit, you will incur immediate dilution in an amount of $            per common unit, assuming that the underwriters do not exercise their option to purchase additional common units. See "Certain Relationships and Related Person Transactions—Exchange Agreement" and "Dilution."

Affiliates of the certain of underwriters may receive benefits in connection with this offering.

        Affiliates of J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC (underwriters in this offering) are lenders under the Credit Facility. As described above, we intend to use a portion of the proceeds from this offering to partially repay outstanding borrowings under the Credit Facility. As a result, these affiliates will receive their proportionate share of any amount of the Credit Facility that is repaid with the proceeds of this offering. These transactions create potential conflicts of interest because the underwriters have an interest in the successful completion of this offering beyond the underwriting discounts they will receive. These interests may influence the decision regarding the terms and circumstances under which the offering is completed.

74


Table of Contents


Risks Related to U.S. Taxation

Legislation has been proposed that, if enacted, would subject us to U.S. federal income tax as a corporation on our net income which would materially increase our U.S. federal income tax liability, could materially reduce the amount available for distribution to common unitholders and would materially alter the tax considerations in connection with an investment in, the ownership of and the disposition of our common units.

        Legislation has recently been proposed by the Chairman of the House Ways and Means Committee that, if enacted, would repeal, effective for taxable years beginning after December 31, 2016, the exception from taxation as a corporation currently available to certain publicly traded partnerships. Based on our expected sources of income and investments, if this legislation were enacted in the form proposed, we would be treated as a corporation for U.S. federal income tax purposes. As a result, commencing with our taxable year beginning January 1, 2017, we would become subject to U.S. corporate income tax on our net corporate taxable income. Our liability for U.S. corporate income tax likely would materially increase our entity-level tax liability, and therefore reduce amounts otherwise available for us to distribute to common unitholders. In addition, if we were treated as a corporation for U.S. federal income tax purposes, ownership of our common units would have the same U.S. federal income tax considerations as ownership of common stock of a corporation. As a result, such legislation, if enacted, would materially alter the U.S. federal income tax considerations in connection with an investment in, the ownership of and the disposition of our common units. As of the date of this prospectus, it is not possible to predict if, whether or when this legislation might be enacted, in what form or with what effective date. It is also very possible that the proposed legislation could be materially altered in the course of the legislative process in ways that are not possible to predict, and which could materially change our U.S. federal income tax treatment or the tax considerations in connection with an investment in, the ownership of and the disposition of our common units. Investors should discuss with their own tax advisors the possibility that we might cease to be treated as a partnership for U.S. federal income tax purposes and other possible changes in tax law. See "Material U.S. Federal Tax Considerations."

Legislation has been proposed that, if enacted, would tax U.S. and some non-U.S. individual common unitholders with respect to certain of our income and gains at increased rates. If such legislation, or similar legislation, were to be enacted, we could incur a material increase in our income tax liability and a substantial portion of our income and gain could be taxed at a higher rate to U.S. and some non-U.S. individual common unitholders.

        Legislation has been proposed by the Chairman of the Ways and Means Committee of the U.S. House of Representatives that would, in general, treat income and gains, including gain on sale, attributable to an interest in an "investment services partnership interest" (an "ISPI") as income subject to ordinary income tax rates that are higher than the long-term capital gains rates applicable to such income under current law, except if such ISPI would be considered under the legislation to be a "qualified capital interest." A substantially similar proposal was included in the President's General Explanations of the Administration's Fiscal Year 2015 Revenue Proposals. Common units that an investor would hold and the interests that we hold in entities that are entitled to receive carried interest would likely be classified as ISPIs for purposes of these proposals. It is unclear whether or when the U.S. Congress will consider these proposals or what provisions will be included in any final legislation, if enacted, or when such legislation would be effective. If similar legislation were to be enacted, our effective tax rate could increase significantly. In addition, we could be subject to increased state and local taxes.

        A number of similar legislative and administrative proposals have been introduced in recent years and, in certain cases, have been passed by the U.S. House of Representatives. The Obama administration's published revenue proposals for 2010, 2011, 2012, 2013 and 2014 contained similar proposals, as well.

        States and other jurisdictions have also considered legislation to increase taxes with respect to carried interest. For example, New York considered legislation under which a common unitholder, even if a non-resident, could be subject to New York state income tax on income in respect of our common units as

75


Table of Contents

a result of certain activities of our affiliates in New York. This legislation would have been retroactive to January 1, 2010. It is unclear when or whether similar legislation will be enacted. In addition, states and other jurisdictions have considered legislation to increase taxes involving other aspects of our structure and have considered and enacted legislation which could increase taxes imposed on our income and gain.

Our structure involves complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. Our structure also is subject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis.

        The U.S. federal income tax treatment of our common unitholders depends in some instances on determinations of fact and interpretations of complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. Additionally, changes to the U.S. federal income tax laws and interpretations thereof could make it more difficult or impossible to satisfy the requirements for us to be treated as a partnership for U.S. federal income tax purposes that is not taxable as a corporation, affect or cause us to change our investments and commitments, affect the tax considerations of an investment in us, change the character or treatment of portions of our income and adversely affect an investment in our common units. Additionally, our organizational documents and governing agreements will permit our general partner to modify our limited partnership agreement from time to time, without the consent of our common unitholders, to address certain changes in U.S. federal income tax regulations, legislation or interpretation. In some circumstances, such revisions could have a material adverse impact on some or all of our common unitholders.

If we were treated as a corporation for U.S. federal income tax or state tax purposes, then the amount available for distribution to you would be substantially reduced and the value of our common units would be adversely affected.

        An entity that would otherwise be classified as a partnership for U.S. federal income tax purposes may nonetheless be treated as, and taxable as, a corporation if it is a "publicly traded partnership" unless an exception to such treatment applies. An entity that would otherwise be classified as a partnership is a publicly traded partnership if interests in the entity are traded on an established securities market or interests in the entity are readily tradable on a secondary market or the substantial equivalent thereof, and we expect to be publicly traded for this purpose. However, a publicly traded partnership can avoid being treated as a corporation by satisfying the "Qualifying Income Exception," which requires at least 90% of such entity's gross income (determined under specific tax rules) for every taxable year that it is a publicly traded partnership consist of qualifying income (which generally includes certain interest income, dividends, real property rents, gains from the sale or other disposition of real property, and gain from the sale or disposition of a capital asset or other property held for the production of income that otherwise constitutes qualifying income), and the entity must not be required to register under the Investment Advisers Act. We intend to manage our affairs so that we will meet the Qualifying Income Exception in 2014 and each succeeding taxable year, in order to be treated as a partnership and not as a corporation for U.S. federal income tax purposes.

        We have received an opinion of Proskauer Rose LLP that we will be treated as a partnership and not as a corporation for U.S. federal income tax purposes. This opinion is based on certain assumptions and factual statements and representations made by us, including statements and representations as to the manner in which we intend to manage our affairs, the composition of our income, and that our general partner will ensure that we comply with the investment policies and procedures put in place to ensure that we meet the Qualifying Income Exception in each taxable year. However, this opinion is based solely on current law and does not take into account any proposed or potential changes in law, including those described above under "—Legislation has been proposed that, if enacted, would subject us to U.S. federal income tax as a corporation on our net income which would materially increase our U.S. federal income tax liability, could materially reduce the amount available for distribution to common unitholders and would materially alter the tax considerations in connection with an investment, the ownership of and the

76


Table of Contents

disposition of our common units," or any other law which may be enacted with retroactive effect. We have not requested, and do not plan to request a ruling from the IRS on this matter and opinions of counsel are not binding upon the IRS or any court. The IRS may challenge the conclusion stated in any opinion, and the courts ultimately may sustain such challenge.

        If we failed to meet the requirements described above and as a result, were treated as a corporation for U.S. federal income tax purposes in any taxable year, we would be subject to U.S. corporate income tax on our U.S. taxable income at regular corporate rates and our cash available for distribution would be reduced. Accordingly, our being treated as a corporation for U.S. federal income tax purposes could materially reduce your after-tax return and thus could substantially reduce the value of the common units. See "Material U.S. Federal Tax Considerations—Taxation of the Issuer and the Ares Operating Group."

You will be required to take into account your allocable share of our taxable income and gain, regardless of whether you receive any cash distributions from us.

        As long as we are treated for U.S. federal income tax purposes as a partnership, and not as a publicly traded partnership taxable as a corporation, you will be required to take into account your allocable share of our items of income, gain, loss, deduction and credit on an annual basis in calculating your U.S. federal income taxable income.

        Distributions to you generally will be taxable for U.S. federal income tax purposes only to the extent the amount distributed exceeds your tax basis in your common units. As a result, you may be subject to U.S. federal income tax on your allocable share of our items of income, gain, loss, deduction and credit (including our allocable share of those items of any entity in which we invest that is treated as a partnership or is otherwise subject to tax on a flow through basis) for each of our taxable years ending with or within your taxable years, regardless of whether or not you receive cash distributions from us. Additionally, you may not receive cash distributions equal to your allocable share of our net taxable income or gain, or even the amount of your U.S. federal, state and local income tax liability that results from that income or gain. Also, certain of our holdings, such as stock in a controlled foreign corporation or a passive foreign investment company or an entity that is fiscally transparent or a financial conduit for U.S. federal income tax purposes, may produce taxable income prior to the receipt of cash relating to such income, and common unitholders that are U.S. taxpayers generally will be required to take such income into account in determining their U.S. federal taxable income. In the event of an inadvertent termination of our partnership status for which the IRS has granted us limited relief, each holder of our common units may be obligated to make adjustments as required by IRS to maintain our status as a partnership. Such adjustments may require persons holding our common units to recognize additional amounts of taxable income in respect of the years to which such allocations apply. See "Material U.S. Federal Tax Considerations."

Common unitholders will be subject to state and local taxes and return filing requirements as a result of investing in our common units.

        In addition to U.S. federal income taxes, our common unitholders may be subject to other taxes, including state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes, that are imposed by the various jurisdictions in which we do business or own property now or in the future, even if our common unitholders do not reside in any of those jurisdictions. Our common unitholders may be required to file state and local income tax returns in some or all of these jurisdictions and may be required to pay state and local income taxes in some or all of these jurisdictions. Further, common unitholders may be subject to penalties for failure to comply with those requirements. It is the responsibility of each unitholder to file all U.S. federal, state and local tax returns that may be required of such common unitholder. "Material U.S. Federal Tax Considerations—Consequences to U.S. Holders of Common Units—State, Local and Foreign Tax Considerations."

77


Table of Contents

Certain of our businesses will be held through entities treated as corporations for U.S. federal income tax purposes, which will reduce the amount available for distributions to holders of our common units in respect of such investments and could adversely affect the value of your investment.

        To comply with the publicly traded partnership rules under U.S. federal income tax law and other requirements, we will hold our interest in certain of our businesses through AHI, Ares Domestic Holdings, Inc., Ares Offshore Holdings Ltd. and Ares Real Estate Holdings LLC, which will be treated as corporations for U.S. federal income tax purposes, and may hold additional interests in other businesses through other entities treated as corporations. Such corporations could be liable for significant U.S. federal income taxes and applicable state and local taxes that would not otherwise be incurred, which could reduce the amount of cash available for distributions to holders of our common units and adversely affect the value of your investment. However, we intend for Ares Real Estate Holdings LLC to elect and qualify to be taxed as a REIT for U.S. federal income tax purposes. See "—Ares Real Estate Holdings LLC's failure to qualify or remain qualified as a REIT would subject it to U.S. federal income tax and potentially state and local taxes, and would adversely affect the amount of cash available for distribution to our common unitholders."

Ares Real Estate Holdings LLC's failure to qualify or remain qualified as a REIT would subject it to U.S. federal income tax and potentially state and local taxes, and would adversely affect the amount of cash available for distribution to our common unitholders.

        We intend for one of our direct subsidiaries, Ares Real Estate Holdings LLC, to elect and qualify to be taxed as a REIT for U.S. federal income tax purposes commencing with its taxable year ending December 31, 2014. Ares Real Estate Holdings LLC's qualification as a REIT depends upon its satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. We intend to structure the activities of Ares Real Estate Holdings LLC in a manner designed to satisfy all the requirements for qualification as a REIT.

        However, the REIT qualification requirements are extremely complex and administrative and judicial interpretations of the U.S. federal income tax laws governing qualification as a REIT are limited. Accordingly, we cannot be certain that Ares Real Estate Holdings LLC will be successful in operating so it can qualify or remain qualified as a REIT. Ares Real Estate Holdings LLC's ability to satisfy the asset tests depends on an analysis of the characterization and fair market values of Ares Real Estate Holdings LLC's assets, some of which are not susceptible to a precise determination, and for which it will not obtain independent appraisals. Ares Real Estate Holdings LLC's compliance with the REIT income or quarterly asset requirements also depends on its ability to successfully manage the composition of its income and assets on an ongoing basis. Accordingly, if certain of its operations were to be recharacterized by the IRS, such recharacterization could jeopardize its ability to satisfy all the requirements for qualification as a REIT. Furthermore, future legislative, judicial or administrative changes to the U.S. federal income tax laws could be applied retroactively, which could result in its disqualification as a REIT. We have not requested and do not plan to request a ruling from the IRS that Ares Real Estate Holdings LLC qualifies as a REIT. Ares Real Estate Holdings LLC may terminate its REIT status if the general partner of Ares Management, L.P. determines that not qualifying as a REIT is in the best interests of Ares Real Estate Holdings LLC and Ares Management, L.P., or as a result of failure to comply with the REIT qualification requirements that is not cured.

        If Ares Real Estate Holdings LLC fails to qualify as a REIT for any taxable year, and it does not qualify for certain statutory relief provisions, Ares Real Estate Holdings LLC will be subject to U.S. federal and state income tax on its taxable income at corporate rates. In addition, Ares Real Estate Holdings LLC would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing its REIT qualification. Losing Ares Real Estate Holdings LLC's REIT qualification could reduce our net earnings available for investment or distribution to common unitholders.

78


Table of Contents

Tax gain or loss on disposition of our common units could be more or less than expected.

        If you sell your common units, you will generally recognize a taxable gain or loss equal to the difference between the amount realized and your adjusted tax basis in those common units. Prior distributions to you in excess of the total net taxable income allocated to you, which decreased the tax basis in your common units, will in effect become taxable income or gain to you if the common units are sold at a price greater than your tax basis in those common units, even if the price is less than the original cost. A portion of the amount realized, whether or not representing gain, may be ordinary income to you.

Our common units may not be uniform, which could result in IRS examination of our tax returns and the tax returns of our common unitholders, and could have a negative impact on the value of your investment.

        We cannot match transferors and transferees of our common units, and as a result we will adopt depreciation, amortization and other tax accounting positions that may not conform to all aspects of existing Treasury regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to our common unitholders, and could affect the timing of these tax benefits or the amount of gain on the sale of our common units. This could have a negative impact on the value of our common units or result in audits of and adjustments to our U.S. federal tax returns and the tax returns of our common unitholders. See "Material U.S. Federal Tax Considerations—Consequences to U.S. Holders of Common Units—Uniformity of Common Units."

        In addition, our taxable income and losses will be determined and apportioned among investors using conventions we regard as consistent with applicable law. As a result, if you transfer your common units, you may be allocated income, gain, loss and deduction realized by us after the date of transfer. Similarly, a transferee may be allocated income, gain, loss and deduction realized by us prior to the date of the transferee's acquisition of our common units. A transferee may also bear the cost of withholding tax imposed with respect to income allocated to a transferor through a reduction in the cash distributed to the transferee.

The sale or exchange of 50% or more of our capital and profit interests will result in the termination of our partnership for U.S. federal income tax purposes.

        The sale or exchange of 50% or more of our capital and profit interests within a 12-month period will result in the termination of our partnership for U.S. federal income tax purposes. Our termination would, among other things, result in the closing of our taxable year for all common unitholders and may result in more than 12 months of our taxable income or loss being includable in the holder's taxable income for the year of termination. A termination could also result in penalties if we were unable to determine that the termination had occurred. See "Material U.S. Federal Tax Considerations—Administrative Matters—Constructive Termination" for a description of the consequences of our termination for U.S. federal income tax purposes.

Non-U.S. persons could face different U.S. tax issues from owning common units than U.S. persons, and such differences may result in adverse tax consequences to them.

        Some of our investment activities may cause us to be engaged in a U.S. trade or business for U.S. federal income tax purposes, in which case some portion of our income would be treated as effectively connected income ("ECI") with respect to non-U.S. Holders (as defined below). Moreover, dividends received from an investment that we make in a REIT that are attributable to gains from the sale of U.S. real property interests and sales of certain investments in interests in U.S. real property, including stock of certain U.S. corporations owning significant U.S. real property, may be treated as ECI with respect to non-U.S. Holders. In addition, certain income of non-U.S. Holders from U.S. sources not connected to any such U.S. trade or business conducted by us could be treated as ECI. To the extent our income is treated as ECI, non-U.S. Holders generally would be subject to withholding tax on their allocable shares of such

79


Table of Contents

income, would be required to file a U.S. federal income tax return for such year reporting their allocable shares of income effectively connected with such trade or business and any other income treated as ECI, and would be subject to U.S. federal income tax at regular U.S. tax rates on any such income. Non-U.S. Holders that are treated as corporations for U.S. federal income tax purposes may also be subject to a 30% branch profits tax on their allocable share of such income. In addition, certain income from U.S. sources that is not ECI allocable to non-U.S. Holders will be reduced by withholding taxes imposed at the highest effective applicable tax rate. See "Material U.S. Federal Tax Considerations—Consequences to Non-U.S. Holders of Common Units."

Non-U.S. persons may face adverse tax consequences in their countries of residence from owning common units.

        Ares Management, L.P. will own interests in one or more entities in which no member has unlimited liability and which is treated as a fiscally transparent pass-through entity for U.S. federal income tax purposes, or a "hybrid entity," such as a limited liability company. It is possible that a non-U.S. jurisdiction will treat such a hybrid entity as fiscally opaque. In that case, a non-U.S. Holder could be subject to different results in respect of timing and character of income and gain recognition, as well as the availability of losses, credits or deductions, including in respect of any taxes paid or deemed paid by or on behalf of the non-U.S. Holder, in such non-U.S. jurisdiction.

Tax-exempt entities face special U.S. federal income tax issues from owning common units that may result in adverse tax consequences to them.

        A tax-exempt partner of a partnership generally must include in computing its "unrelated business taxable income" ("UBTI"), its pro rata share (whether or not distributed) of such partnership's gross income derived from a trade or business conducted by such partnership which is unrelated to the exempt function of the tax-exempt partner. Moreover, a tax-exempt partner of a partnership could be treated as earning UBTI to the extent that such partnership derives income from "debt-financed property," or if the partnership interest itself is debt financed. Debt-financed property means property held to produce income with respect to which there is "acquisition indebtedness" (i.e., indebtedness incurred in acquiring or holding property). We are under no obligation to minimize UBTI, and a U.S. Holder of our common units that is a tax-exempt organization for U.S. federal income tax purposes and, therefore, generally exempt from U.S. federal income taxation, may be subject to "unrelated business income tax" to the extent, if any, that its allocable share of our income consists of UBTI. See "Material U.S. Federal Tax Considerations—Consequences to U.S. Holders of Common Units—Special Considerations for U.S. Tax-Exempt Entities."

We do not expect to be able to furnish to each common unitholder specific tax information within 90 days after the close of each calendar year, which means that our common unitholders who are U.S. taxpayers should anticipate the need to file annually a request for an extension of the due date of their income tax return. In addition, it is possible that common unitholders who are otherwise required to file US. federal income tax returns may be required to file amended income tax returns.

        We have agreed to furnish to each common unitholder, as soon as reasonably practicable after the close of each taxable year, tax information (including Schedule K-1), which describes on a U.S. dollar basis such holder's share of our taxable income, gain, loss, deduction and credit for our preceding taxable year. It will most likely require longer than 90 days after the end of our fiscal year to obtain the requisite information from all lower-tier entities. Consequently, holders of our common units who are U.S. taxpayers or otherwise required to file U.S. tax returns should anticipate the need to file annually with the IRS (and, if applicable, certain states) a request for an extension past April 15 or the otherwise applicable due date of their income tax return for the taxable year. In addition, each common unitholder generally is required to file U.S. federal and state tax returns consistently with the information provided by us for the taxable year for all relevant tax purposes. In preparing this information, we will use various accounting and reporting conventions, some of which have been mentioned in the previous discussion, to determine such

80


Table of Contents

holder's share of income, gain, loss, deduction and credit. The IRS or state tax authorities may successfully contend that certain of these reporting conventions are impermissible, which could result in an adjustment to such holder's income or loss and could result in an increase in overall tax due. Additionally, we may be audited by taxing authorities from time to time. Adjustments resulting from a tax audit may require a holder to adjust a prior year's tax liability and possibly may result in an audit of such holder's own tax return. Any audit of such holder's tax return could result in adjustments not related to our tax returns as well as those related to our tax returns, and could result in an increase in overall tax due. See "Material U.S. Federal Tax Considerations—Administrative Matters—Information Returns."

We may hold or acquire certain investments through entities classified as PFICs or CFCs for U.S. federal income tax purposes.

        Certain of our investments may be in foreign corporations or may be acquired through a foreign subsidiary that would be classified as a corporation for U.S. federal income tax purposes. Such an entity may be a PFIC (as defined below) or a CFC (as defined below) for U.S. federal income tax purposes. U.S. holders of common units considered to own an interest in a PFIC or a CFC may experience adverse U.S. federal and state income tax consequences. See "Material U.S. Federal Tax Considerations—Consequences to U.S. Holders of Common Units—Passive Foreign Investment Companies" and "—Consequences to U.S. Holders of Common Units—Controlled Foreign Corporations" for additional information regarding such consequences.

Applicable U.S. tax law could adversely affect our ability to raise funds from certain foreign investors.

        Under Sections 1471 to 1474 of the Code (such Sections, along with the Treasury Regulations promulgated thereunder, commonly referred to as "FATCA"), a broadly defined class of foreign financial institutions are required to comply with a U.S. tax reporting regime or be subject to certain U.S. withholding taxes. The reporting obligations imposed under FATCA require foreign financial institutions to enter into agreements with the IRS to obtain and disclose information about certain account holders and investors to the IRS (or in the case of certain foreign financial institutions that are resident in a jurisdiction that has entered into an intergovernmental agreement ("IGA") to implement this legislation, to comply with comparable non-U.S. laws implementing the IGA). Additionally, certain non-U.S. entities that are not foreign financial institutions are required to provide certain certifications or other information regarding their U.S. beneficial ownership or be subject to certain U.S. withholding taxes under FATCA. There are uncertainties regarding the implementation of FATCA and it is difficult to determine at this time what impact any future administrative guidance may have. The administrative and economic costs of compliance with FATCA may discourage some foreign investors from investing in U.S. funds, which could adversely affect our ability to raise funds from these investors or reduce the demand for our common units. Moreover, we expect to incur additional expenses related to our compliance with FATCA, which could increase our tax compliance costs generally.

81


Table of Contents


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements that reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of those words or other comparable words. The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity. Some of these factors are described in this prospectus under the headings "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." These factors should not be construed as exhaustive and should be read in conjunction with the risk factors and other cautionary statements that are included in this prospectus. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from those indicated in these forward-looking statements. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Therefore, you should not place undue reliance on these forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. We do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.


MARKET AND INDUSTRY DATA AND FORECASTS

        This prospectus includes market and industry data and forecasts from independent consultant reports, publicly available information, various industry publications, other published industry sources and our internal data, estimates and forecasts. Independent consultant reports, industry publications and other published industry sources generally indicate that the information contained therein was obtained from sources believed to be reliable.

        Our internal data, estimates and forecasts are based upon information obtained from our investors, partners, trade and business organizations and other contacts in the markets in which we operate and our management's understanding of industry conditions. While we are not aware of any misstatements regarding any market, industry or similar data presented herein, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed under the heading "Risk Factors" in this prospectus.

82


Table of Contents


ORGANIZATIONAL STRUCTURE

Reorganization

        We currently conduct our businesses through operating subsidiaries held directly or indirectly by Ares Holdings LLC and Ares Investments LLC. These two entities are principally owned by APMC and affiliates of the Strategic Investors that own minority interests with limited voting rights in our business.

        Historically, Ares Holdings LLC has operated and controlled our U.S. fee-generating and many of our non-U.S. fee-generating businesses, while Ares Investments LLC has held a variety of assets, including our carried interests and co-investments in many of the proprietary investments made by our funds.

        We intend to conduct all of our material business activities through the Ares Operating Group. In connection with this offering, we will convert Ares Holdings LLC into Ares Holdings and convert Ares Investments LLC into Ares Investments. In addition, we will form Ares Domestic, Ares Offshore and Ares Real Estate. Ares Holdings, Ares Domestic, Ares Offshore, Ares Investments and Ares Real Estate are collectively referred to as the "Ares Operating Group."

        Following this offering, the Ares Operating Group will hold:

    in the case of Ares Holdings, interests in the general partners, managing members and other management interests of our U.S. fee-generating and most of our non-U.S. fee generating businesses as well as certain investments;

    in the case of Ares Domestic, interests in certain U.S. investments that are fiscally transparent for U.S. federal income tax purposes;

    in the case of Ares Offshore, interests in the general partners of certain non-U.S direct lending and tradable credit funds and certain other private equity and real estate funds;

    in the case of Ares Investments, interests in the general partners of certain U.S. and non-U.S. tradable credit funds, certain U.S. and non-U.S. private equity funds, certain real estate funds and other investment assets, in each case that are expected to produce primarily interest, dividend income, capital gains and non-U.S. rental income; and

    in the case of Ares Real Estate, interests in the general partners of certain of our real estate funds and certain other real estate investments.

        In exchange for its interest in Ares Management, L.P., APMC will transfer to Ares Management, L.P., prior to this offering, its interests in each of AHI, Ares Domestic Holdings, Inc., Ares Offshore Holdings, Ltd., Ares Real Estate Holdings LLC and a portion of its interest in Ares Investments. Similarly, in exchange for its interest in Ares Management, L.P., an affiliate of ADIA will transfer to Ares Management, L.P., prior to this offering, its interests in each of AHI, Ares Domestic Holdings, Inc., Ares Offshore Holdings, Ltd., Ares Investments and Ares Real Estate Holdings LLC. APMC will retain a      % interest in each of the Ares Operating Group entities. In addition, APMC will be converted into a limited partnership and renamed Ares Owners Holdings L.P.

        As a result of such transactions:

    AHI will become a wholly owned subsidiary of Ares Management, L.P. and will serve as the general partner of Ares Holdings;

    Ares Domestic Holdings, Inc. will become a wholly owned subsidiary of Ares Management, L.P. and will serve as the general partner of Ares Domestic;

    Ares Offshore Holdings, Ltd. will become a wholly owned subsidiary of Ares Management, L.P. and will serve as the general partner of Ares Offshore;

83


Table of Contents

    Ares Investments will become a wholly owned subsidiary of Ares Management, L.P., and Ares Management, L.P. will serve as its general partner; and

    Ares Real Estate Holdings LLC will become a direct subsidiary of Ares Management, L.P. and will serve as the general partner of Ares Real Estate.

We refer to AHI, Ares Domestic Holdings, Inc., Ares Offshore Holdings, Ltd., Ares Management, L.P. (solely in its role as general partner of Ares Investments) and Ares Real Estate Holdings LLC, collectively, as the "Ares Operating Group Managing Entities."

        In connection with the foregoing transactions, existing interests in Ares Investments LLC and Ares Holdings LLC held by an affiliate of Alleghany will be recapitalized into Ares Operating Group Units.

        In addition, certain existing interests held by Ares Owners Holdings L.P. (on behalf of certain of our Co-Founders and senior professionals) that represent less than a full common interest (for example, "profits interests") in Ares Investments LLC and Ares Holdings LLC will be recapitalized into Ares Operating Group Units. We refer to this recapitalization as the "unitization." The common interests held (whether directly or indirectly) in the Ares Operating Group entities by individuals will be exchangeable for common units in Ares Management, L.P. as described below under "Exchange Agreement."

        We refer to the transactions described above as the "Reorganization."

        In addition, prior to this offering, we expect to make a cash distribution to our existing owners which we currently estimate will be approximately $150 million, a portion of which will relate to our previously undistributed earnings. The distribution will be made from available liquidity.


Exchange Agreement

        Prior to this offering, we will enter into an exchange agreement with the holders of Ares Operating Group Units so that such holders, subject to any applicable transfer restrictions and other provisions, may up to four times each year from and after the second anniversary of the date of the closing of this offering (subject to the terms of the exchange agreement) exchange their Ares Operating Group Units for our common units on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications, or, at our option, for cash. A holder of Ares Operating Group Units must exchange one Ares Operating Group Unit in each of the five Ares Operating Group entities to effect an exchange for a common unit of Ares Management, L.P. If and when a holder exchanges Ares Operating Group Units for common units of Ares Management, L.P., the relative equity percentage ownership of such holder and of the other equity owners of Ares (whether held at Ares Management, L.P. or at the Ares Operating Group) will not be altered. We have not yet determined how any such future exchanges will be accounted for in our combined and consolidated financial statements.


Offering Transactions

        Upon the consummation of this offering, Ares Management, L.P. will (i) loan a portion of the proceeds from this offering to its wholly owned subsidiary, AHI, which will then contribute such amount to Ares Holdings in exchange for            limited partnership units of Ares Holdings, (ii) contribute a portion of the proceeds from this offering to Ares Domestic Holdings, Inc., which will then contribute such amount to Ares Domestic in exchange for            limited partnership units of Ares Domestic, (iii) contribute a portion of the proceeds from this offering to Ares Offshore Holdings, Ltd., which will then contribute such amount to Ares Offshore in exchange for             limited partnership units of Ares Offshore, (iv) contribute a portion of the proceeds from this offering to Ares Investments in exchange for            limited partnership units of Ares Investments and (v) contribute a portion of the proceeds from this offering to Ares Real Estate Holdings LLC, which will then contribute such amount to Ares Real Estate in exchange for            limited partnership units of Ares Real Estate. See "Material U.S. Federal Tax Considerations—United States Taxes—Taxation of Ares Management, L.P. and the Ares Operating

84


Table of Contents

Group" for more information about the tax treatment of Ares Management, L.P. and the Ares Operating Group. We refer to these transactions as the "Offering Transactions." The direct subsidiaries of Ares Management, L.P. may from time to time enter into intercompany lending arrangements with one another and with Ares Management, L.P.


Our Organizational Structure Following this Offering and the Offering Transactions

        Following the Reorganization, this offering and the Offering Transactions, Ares Management, L.P. will be a holding partnership and, either directly or through direct subsidiaries, will control and hold equity interests in each of the Ares Operating Group entities, which in turn will own the operating entities included in our historical combined and consolidated financial statements. Ares Management, L.P. was formed as a Delaware limited partnership on November 15, 2013. Ares Management, L.P. has not engaged in any other business or other activities except in connection with the Reorganization and the Offering Transactions described above.

        Ares Management, L.P., either directly or through direct subsidiaries, will be the general partner of each of the Ares Operating Group entities, and will operate and control all of the business and affairs of the Ares Operating Group. In addition, Ares Management, L.P. will consolidate the financial results of the Ares Operating Group entities, their consolidated subsidiaries and certain consolidated funds. The ownership interest of the limited partners of the Ares Operating Group entities will be reflected as a non-controlling interest in Ares Management, L.P.'s combined and consolidated financial statements. Following this offering, our senior professional owners will hold their interests in us and in the Ares Operating Group either directly or indirectly through Ares Owners Holdings L.P. or a similar entity.

        The diagram below (which omits certain wholly owned intermediate holding companies) depicts our organizational structure immediately following this offering. All entities are organized in the state of Delaware unless otherwise indicated.

85


Table of Contents

GRAPHIC


(1)
Ares Management, L.P. common unitholders will have limited voting rights and will have no right to remove our general partner or, except in the limited circumstances described below, elect the directors of our general partner. On those few matters that may be submitted for a vote of our common unitholders, Ares Voting LLC, an entity owned and controlled by Ares Partners Holdco LLC, which is in turn owned and controlled by our Co-Founders, will hold a special voting unit that provides it with a number of votes, on any matter that may be submitted for a vote of our common unitholders, that is equal to the aggregate number of vested and unvested Ares Operating Group Units held directly or indirectly by the limited partners of the Ares Operating Group that do not directly hold a special voting unit. See "Material Provisions of Ares Management, L.P. Partnership Agreement—Withdrawal or Removal of the General Partner," "—Meetings; Voting" and "—Election of Directors of General Partner."

(2)
Ares Real Estate Holdings LLC will make an election to be treated as a REIT for U.S. federal income tax purposes. Ares Real Estate Holdings LLC will have at least 100 holders of preferred interests representing nominal economic interests.

(3)
Immediately following this offering, Ares Management, L.P. will hold Ares Operating Group Units representing          % of the total number of Ares Operating Group Units, or          % if the underwriters exercise in full their option to purchase additional common units, and Ares senior professional owners will hold Ares Operating Group Units representing          % of the total number of Ares Operating Group Units, or          % if the underwriters exercise in full their option to purchase additional common units. See "Pricing Sensitivity Analysis."

(4)
See "Pricing Sensitivity Analysis" for information regarding the impact on percentage ownership of the initial public offering price per common unit is at the low-, mid- or high-points of the price range indicated on the front cover of this prospectus or if the underwriters' option to purchase additional common units is exercised in full.

(5)
Ares senior professional owners will hold indirectly through Ares Owners Holdings L.P.

86


Table of Contents

        Following the Reorganization, this offering and the Offering Transactions, subsidiaries of the Ares Operating Group will generally be entitled to:

    all management fees payable in respect of all of our funds, as well as transaction and other fees that may be payable by or in connection with portfolio investments of these funds;

    all performance fees payable in respect of all of our funds, other than the percentage we have determined or may in the future determine to allocate to our professionals as described in this prospectus; and

    all returns on investments of our own capital in the funds we sponsor and manage.

See "Business—Incentive Arrangements / Fee Structure."

        Each of the Ares Operating Group entities will have an identical number of limited partnership units outstanding. Ares Management, L.P. will hold, directly or through direct subsidiaries, a number of Ares Operating Group Units equal to the number of common units that Ares Management, L.P. has issued. The Ares Operating Group Units that will be held by Ares Management, L.P. and its direct subsidiaries will be economically identical in all respects to the Ares Operating Group Units that will be held initially by our existing owners following the Reorganization, this offering and the Offering Transactions. Accordingly, the income of the Ares Operating Group will benefit Ares Management, L.P. to the extent of its equity interest in the Ares Operating Group.

        Ares Management, L.P. is managed and operated by our general partner, Ares Management GP LLC, an entity indirectly owned and controlled by our Co-Founders. Our general partner will not engage in any business activities other than the management and operation of our businesses. We will reimburse our general partner and its affiliates for all costs incurred in managing and operating us, and our partnership agreement will provide that our general partner will determine the expenses that are allocable to us. Although there will be no ceilings on the expenses for which we will reimburse our general partner and its affiliates, the expenses to which they may be entitled to reimbursement from us, such as director fees, are not expected to be material.

        Unlike the holders of common stock in a corporation, our common unitholders will have limited voting rights and will have no right to remove our general partner or, except in the limited circumstances described below, elect the directors of our general partner. On those few matters that may be submitted for a vote of our common unitholders, Ares Voting LLC, an entity wholly owned by Ares Partners Holdco LLC, which is in turn owned and controlled by our Co-Founders, will hold a special voting unit that provides it with a number of votes, on any matter that may be submitted for a vote of our common unitholders, that is equal to the aggregate number of vested and unvested Ares Operating Group Units held directly or indirectly by the limited partners of the Ares Operating Group entities that do not directly hold a special voting unit. We refer to our common units (other than those held by any person whom our general partner may from time to time with such person's consent designate as a non-voting common unitholder) and our special voting units as "voting units." Our common unitholders' voting rights will be further restricted by the provision in our partnership agreement stating that any common units held by a person that beneficially owns 20% or more of any class of our common units then outstanding (other than our general partner, Ares Partners Holdco LLC and their respective affiliates, or a direct or subsequently approved transferee of our general partner or its affiliates) cannot be voted on any matter.

        In general, our common unitholders will have no right to elect the directors of our general partner. However, when our Co-Founders and other then-current or former Ares personnel directly or indirectly hold less than 10% of the limited partner voting power, our common unitholders will have the right to vote in the election of the directors of our general partner. This voting power condition will be measured on January 31 of each year, and will be triggered if the total voting power held by holders of the special voting units in Ares Management, L.P. (including voting units held by our general partner and its affiliates) in their capacity as such, or otherwise directly or indirectly held by then-current or former Ares personnel

87


Table of Contents

(treating voting units deliverable to such persons pursuant to outstanding equity awards as being held by them), collectively, constitutes less than 10% of the voting power of the outstanding voting units of Ares Management, L.P. See "Material Provisions of Ares Management, L.P. Partnership Agreement—Election of Directors of General Partner." Unless and until the foregoing voting power condition is satisfied, our general partner's board of directors will be elected in accordance with its limited liability company agreement, which provides that directors generally may be appointed and removed by the member of our general partner, an entity owned and controlled by our Co-Founders. See "Material Provisions of Ares Management, L.P. Partnership Agreement—Election of Directors of General Partner." Unless and until the foregoing voting power condition is satisfied, the board of directors of our general partner will have no authority other than that which its member chooses to delegate to it. In the event that the voting power condition is satisfied, the board of directors of our general partner will be responsible for the oversight of our business and operations. See "Management—Limited Powers of Our Board of Directors."


Holding Partnership Structure

        As discussed in "Material U.S. Federal Tax Considerations," Ares Management, L.P. will be treated as a partnership and not as a corporation for U.S. federal income tax purposes, although our partnership agreement will not restrict our ability to take actions that may result in our being treated as an entity taxable as a corporation for U.S. federal (and applicable state) income tax purposes. An entity that is treated as a partnership for U.S. federal income tax purposes generally incurs no U.S. federal income tax liability. Instead, each partner is required to take into account its allocable share of items of income, gain, loss, deduction and credit of the partnership in computing its U.S. federal, state and local income tax liability, whether or not cash distributions are made. Investors who acquire common units in this offering will become limited partners of Ares Management, L.P. Distributions of cash by a partnership to a partner are generally not taxable unless the amount of cash distributed to a partner is in excess of the partner's adjusted basis in its partnership interest. See "Material U.S. Federal Tax Considerations" for more information about the tax treatment of Ares Management, L.P. and the Ares Operating Group.

        The Ares Operating Group entities will also be treated as partnerships and not as corporations for U.S. federal income tax purposes. Accordingly, direct subsidiaries of Ares Management, L.P. that are treated as corporations for U.S. federal income tax purposes and that are holders of Ares Operating Group Units will incur U.S. federal, state and local income taxes in respect of their interests in the Ares Operating Group entities. Net profits and net losses of the Ares Operating Group entities will generally be allocated to each entity's partners (including Ares Management, L.P. and its direct subsidiaries) pro rata in accordance with the percentages of their respective limited partnership units. Because immediately following this offering Ares Management, L.P. will hold Ares Operating Group Units representing        % of the total number of Ares Operating Group Units, or        % if the underwriters exercise in full their option to purchase additional common units, Ares Management, L.P. will indirectly be allocated        % of the net profits and net losses of the Ares Operating Group, or         % if the underwriters exercise in full their option to purchase additional common units. The remaining net profits and net losses will be allocated to the limited partners of the Ares Operating Group entities. These percentages are subject to change, including upon an exchange of Ares Operating Group Units for our common units and upon the issuance of additional Ares Management, L.P. common units to the public. Ares Management, L.P. will hold, through direct subsidiaries, in the case of Ares Holdings, Ares Domestic, Ares Offshore and Ares Real Estate, and directly in the case of Ares Investments, a number of Ares Operating Group Units equal to the number of common units that Ares Management, L.P. has issued.

        After this offering, we intend to cause the Ares Operating Group entities to make distributions to their partners, including Ares Management, L.P. and its direct subsidiaries, to fund any distributions Ares Management, L.P. may declare on the common units. If the Ares Operating Group makes such distributions, the limited partners of the Ares Operating Group entities will be entitled to receive equivalent distributions pro rata based on their limited partnership units in the Ares Operating Group.

88


Table of Contents

Because certain direct subsidiaries of Ares Management, L.P. must pay taxes and make payments under the tax receivable agreement, the amounts ultimately distributed by Ares Management, L.P. to common unitholders are expected to be less, on a per unit basis, than the amounts distributed by the Ares Operating Group to the limited partners of the Ares Operating Group entities in respect of their Ares Operating Group Units.

        The governing agreements of the Ares Operating Group entities provide for cash distributions, which we refer to as "tax distributions," to the partners of such entities if the general partners of the Ares Operating Group entities determine that the taxable income of the relevant Ares Operating Group entity gives rise to taxable income for its partners. Generally, these tax distributions will be computed based on our estimate of the net taxable income of the relevant entity multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for an individual or corporate resident in Los Angeles, California or New York, New York, whichever is greater (taking into account the non-deductibility of certain expenses and the character of our income). If we had effected the Reorganization on January 1, 2013, the assumed effective tax rate for 2013 would have been approximately 53%. The Ares Operating Group will make tax distributions only to the extent distributions from such entities for the relevant year were otherwise insufficient to cover such tax liabilities.

89


Table of Contents


USE OF PROCEEDS

        We estimate that the net proceeds from this offering, at an assumed initial public offering price of $        per common unit, the midpoint of the estimated offering price range set forth on the front cover of this prospectus, and after deducting estimated underwriting discounts and estimated offering costs, will be approximately $         million. If the underwriters exercise in full their option to purchase additional common units, the net proceeds to us will be approximately $         million.

        We intend to use the net proceeds from this offering to purchase newly issued Ares Operating Group Units substantially currently with the consummation of this offering, as described under "Organizational Structure—Offering Transactions," to partially repay outstanding borrowings under the Credit Facility and for general corporate purposes and to fund growth initiatives. The Ares Operating Group will also bear or reimburse Ares Management, L.P. for all of the expenses of this offering, which we estimate will be approximately $         million.

        The Credit Facility consists of a $735 million facility that matures on December 17, 2017. As of February 28, 2013, we had outstanding borrowings of $151.3 million bearing interest at a rate of LIBOR plus 1.75%. Proceeds from these borrowings have been used for working capital purposes.

        Affiliates of J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC (underwriters in this offering) are lenders under the Credit Facility. As described above, we intend to use a portion of the proceeds from this offering to partially repay outstanding borrowings under the Credit Facility. As a result, these affiliates will receive their proportionate share of any amount of the Credit Facility that is repaid with the proceeds of this offering.

90


Table of Contents


CASH DISTRIBUTION POLICY

Distribution Policy for Common Units

        We expect to distribute to our common unitholders on a quarterly basis substantially all of Ares Management, L.P.'s share of distributable earnings in excess of amounts determined by our general partner to be necessary or appropriate to provide for the conduct of our businesses, to make appropriate investments in our businesses and our funds, to comply with applicable law, any of our debt instruments or other agreements or to provide for future distributions to our common unitholders for any ensuing quarter, subject to a base quarterly distribution target range of 75% to 85% of distributable earnings. We expect that our first quarterly distribution will be paid in the            quarter of            in respect of the prior quarter. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Segment Analysis—Reconciliation of Certain Non-GAAP Measures to Consolidated GAAP Financial Measures" for a reconciliation of our distributable earnings to our income before provision for income taxes presented in accordance with GAAP.

        In most years, the aggregate amounts of distributions to our common unitholders will not equal our distributable earnings for that year. Our distributable earnings will only be a starting point for the determination of the amount to be distributed to our common unitholders because, as noted above, in determining the amount to be distributed, we will subtract from our distributable earnings any amounts determined by our general partner to be necessary or appropriate to provide for the conduct of our businesses, to make appropriate investments in our businesses and our funds, to comply with applicable law, any of our debt instruments or other agreements or to provide for future distributions to our common unitholders for any ensuing quarter.

        Because Ares Management, L.P. will be a holding partnership and will have no material assets other than its ownership of Ares Operating Group Units (held through wholly owned subsidiaries in the case of Ares Holdings, Ares Domestic, Ares Offshore and Ares Real Estate), we will fund distributions by Ares Management, L.P., if any, in three steps:

    first, we will cause the Ares Operating Group entities to make distributions to their partners, including Ares Management, L.P. and its direct subsidiaries. If the Ares Operating Group entities make such distributions, the limited partners of the Ares Operating Group entities will be entitled to receive equivalent distributions pro rata based on their limited partnership units in the Ares Operating Group (except as set forth in the following paragraph);

    second, we will cause Ares Management, L.P.'s direct subsidiaries to distribute to Ares Management, L.P. their share of such distributions, net of the taxes and amounts payable under the tax receivable agreement by such direct subsidiaries; and

    third, Ares Management, L.P. will distribute its net share of such distributions to our common unitholders on a pro rata basis.

        Because our direct subsidiaries that are corporations for U.S. federal income tax purposes must pay corporate income and franchise taxes and make payments under the tax receivable agreement, the amounts ultimately distributed by us to our common unitholders are expected to be less, on a per unit basis, than the amounts distributed by the Ares Operating Group entities to their respective limited partners in respect of their Ares Operating Group Units.

        In addition, governing agreements of the Ares Operating Group entities will provide for cash distributions, which we refer to as "tax distributions," to the partners of such entities if the general partners of the Ares Operating Group entities determine that the taxable income of the relevant Ares Operating Group entity gives rise to taxable income for its partners. Generally, these tax distributions will be computed based on our estimate of the net taxable income of the relevant entity multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate

91


Table of Contents

prescribed for an individual or corporate resident in Los Angeles, California or New York, New York, whichever is greater (taking into account the non-deductibility of certain expenses and the character of our income). If we had effected the Reorganization on January 1, 2013, the assumed effective tax rate for 2013 would have been approximately 53%. The Ares Operating Group will make tax distributions only to the extent distributions from such entities for the relevant year were otherwise insufficient to cover such tax liabilities.

        The declaration, payment and determination of the amount of any distributions will be at the sole discretion of our general partner, who may change our distribution policy at any time. We cannot assure you that any distributions, whether quarterly or otherwise, can or will be paid. In making decisions regarding our quarterly distribution, our general partner will take into account:

    general economic and business conditions;

    our strategic plans and prospects;

    our businesses and investment opportunities;

    our financial condition and operating results, including our cash position, our net income and our realizations on investments made by our funds;

    working capital requirements and other anticipated cash needs;

    contractual restrictions and obligations, including payment obligations pursuant to the tax receivable agreement and restrictions pursuant to the Credit Facility;

    legal, tax and regulatory restrictions;

    restrictions and other implications on the payment of distributions by us to our common unitholders or by our subsidiaries to us; and

    such other factors as our general partner may deem relevant.

        Under the Delaware Limited Partnership Act, Ares Management, L.P. may not make a distribution to a partner if after the distribution all of our liabilities, other than liabilities to partners on account of their partnership interests and liabilities for which the recourse of creditors is limited to specific property of the partnership, would exceed the fair value of our assets. If we were to make such an impermissible distribution, any limited partner who received a distribution and knew at the time of the distribution that the distribution was in violation of the Delaware Limited Partnership Act would be liable to us for the amount of the distribution for three years. In addition, under the Credit Facility, certain subsidiaries of the Ares Operating Group would be prohibited from making distributions in certain circumstances, including if an Event of Default (as defined in the Credit Facility) has occurred and is continuing.

        In addition, the cash flow from operations of the Ares Operating Group entities may be insufficient to enable them to make required minimum tax distributions to their partners, in which case the Ares Operating Group may have to borrow funds or sell assets, which could have a material adverse effect on our liquidity and financial condition. Furthermore, by paying cash distributions rather than investing that cash in our businesses, we might risk slowing the pace of our growth, or not having a sufficient amount of cash to fund our operations, new investments or unanticipated capital expenditures, should the need arise.

        Although a portion of any distributions by us to our common unitholders may include carried interest received by us, we do not intend to seek fulfillment of any clawback obligation by seeking to have our common unitholders return any portion of such distributions attributable to carried interest associated with any clawback obligation.

92


Table of Contents


Distributions to Our Existing Owners

        Cash distributions and distributions in kind to our existing owners in respect of the fiscal years ended December 31, 2013, 2012 and 2011 were approximately $347.0 million, $279.3 million and $214.4 million, respectively, net of $62.8 million in taxes, in the aggregate.

        Prior to this offering, we expect to make a cash distribution to our existing owners, which we currently estimate will be approximately $150 million, a portion of which will relate to our previously undistributed earnings. The distribution will be made from available liquidity.

93


Table of Contents


CAPITALIZATION

        The following table sets forth our capitalization and cash and cash equivalents as of December 31, 2013:

    on an actual basis; and

    on a pro forma basis after giving effect to:

    (i) the Reorganization,

    (ii) the sale of                  common units by us in this offering at an assumed offering price of $        per unit (the midpoint of the estimated offering price range set forth on the front cover of this prospectus) after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, and the use of the proceeds thereof as described in "Use of Proceeds"; and

    (iii) the Offering Transactions.

        This table should be read in conjunction with "Organizational Structure," "Unaudited Pro Forma Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our combined and consolidated financial statements and related notes included in this prospectus.

 
  December 31, 2013  
 
  Actual   Pro Forma  
 
  (Dollars in thousands)
 

Cash and cash equivalents(1)

  $ 89,802   $           
           

Cash and cash equivalents held of Consolidated Funds

  $ 1,638,003   $           
           

Debt obligations(2)

  $ 153,119   $           

CLO loan obligations of Consolidated Funds

    11,774,157               

Consolidated Funds' borrowings

    2,070,598               

Mezzanine debt of Consolidated Funds

    323,164               

Commitments and contingencies

                  

Redeemable non-controlling interest in Consolidated Funds

    1,093,770               

Redeemable interest in AHI, AI and consolidated subsidiaries

    40,751               

Non-controlling interest in Consolidated Funds

    5,847,135               

Non-controlling interest in equity of AHI, AI and consolidated subsidiaries

    167,731               

Total controlling interest in equity of AHI, AI and consolidated subsidiaries

    525,678               

Non-controlling interest in Ares Operating Group

                  
           

Total capitalization

  $ 21,996,103   $           
           

(1)
Prior to this offering, we expect to make a cash distribution to our existing owners, which we currently estimate will be approximately $150 million, a portion of which will relate to our previously undistributed earnings. The distribution will be made from available liquidity.

(2)
Consists of outstanding borrowings under the Credit Facility and other debt obligations of the Ares Operating Group. A portion of the proceeds from this offering will be used to repay outstanding borrowings under the Credit Facility. As of February 28, 2014, there were $151.3 million of outstanding borrowings under the Credit Facility.

94


Table of Contents


DILUTION

        Dilution is the amount by which the offering price paid by the purchasers of the common units to be sold in this offering exceeds the net tangible book value per common unit of the common units after this offering. Net tangible book value per common unit is determined at any date by subtracting our total liabilities from the total book value of our tangible assets and dividing the difference by the number of common units deemed to be outstanding at that date.

        Our pro forma net tangible book value as of December 31, 2013 was approximately $         million, or $        per common unit based on                    common units outstanding, assuming that all of the holders of Ares Operating Group Units (other than Ares Management, L.P. and its direct subsidiaries) exchange all of their Ares Operating Group Units for our common units. Our pro forma net tangible book value represents the amount of total tangible assets less total liabilities, after giving effect to the Reorganization and Offering Transactions, and our pro forma net tangible book value per common unit represents pro forma net tangible book value divided by the number of common units outstanding, after giving effect to the Reorganization and the Offering Transactions and assuming that all of the holders of Ares Operating Group Units (other than Ares Management, L.P. and its direct subsidiaries) exchanged their Ares Operating Group Units for newly issued common units on a one-for-one basis.

        After giving effect to the Reorganization and Offering Transactions and the receipt and our intended use of approximately $         million of estimated net proceeds from our sale of                    common units in this offering at an assumed offering price of $        per common unit (the midpoint of the estimated offering price range set forth on the front cover of this prospectus), our pro forma as adjusted net tangible book value as of December 31, 2013 would have been approximately $         million, or $        per common unit. This represents an immediate increase in the pro forma net tangible book value of $        per common unit to existing common unitholders and an immediate dilution of $        per common unit to investors purchasing common units in this offering. The following table illustrates this substantial and immediate per common unit dilution to new investors:

 
  Per Common
Unit
 

Assumed initial public offering price per common unit

  $               

Pro forma net tangible book value per common unit as of December 31, 2013

                  

Increase in pro forma net tangible book value per common unit attributable to this offering

                  

Pro forma as adjusted net tangible book value per common unit after giving effect to this offering

  $               
       

Dilution of net tangible book value per common unit to investors in this offering

  $               
       

        If the underwriters exercise their option to purchase additional common units in full, our pro forma as adjusted net tangible book value per common unit after this offering would be $        per common unit, and the dilution in our pro forma as adjusted net tangible book value per common unit to new investors in this offering would be $        per common unit.

        The following table summarizes on a pro forma basis as of December 31, 2013, giving effect to:

    the total number of common units sold in this offering;

    the total consideration paid to us, assuming an initial public offering price of $        per common unit (before deducting the estimated underwriting discount and commissions and offering expenses payable by us in connection with this offering);

95


Table of Contents

    the average price per common unit paid by existing common unitholders and by new investors purchasing common units in this offering; and

    the assumption that all of the holders of Ares Operating Group Units (other than Ares Management, L.P. and its direct subsidiaries) exchange all of their Ares Operating Group Units for common units on a one-for-one basis.

 
   
   
  Total Consideration    
 
 
  Common Units   Average
Price Per
Common
Unit
 
 
  Amount
(in millions)
   
 
 
  Number   Percentage   Percentage  

Existing common unitholders

                          % $                       % $           

Investors in this offering

                          %                         %             
                       

Total

                          % $                       % $           
                       

        A $1.00 increase (decrease) in the assumed initial public offering price of $        per common unit (the midpoint of the estimate offering price range set forth on the front cover of this prospectus) would increase (decrease) total consideration paid by existing common unitholders, total consideration paid by new investors and the average price per common unit by $         million, $         million and $        , respectively, assuming the number of common units offered by us, as set forth on the front cover of this prospectus, remains the same, and without deducting underwriting discounts and commissions and estimated expenses payable by us.

96


Table of Contents


UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

        The unaudited pro forma consolidated financial data contained in this prospectus is subject to completion due to the fact that information related to our Reorganization and this offering is not currently determinable. We intend to complete this pro forma consolidated financial data, including amounts related to the pro forma adjustments set forth in the accompanying unaudited condensed combined and consolidated pro forma statements of operations and unaudited condensed combined and consolidated pro forma statements of financial condition, at such time that we update this prospectus and such information is available.

        The following unaudited condensed combined and consolidated pro forma statements of operations for the year ended December 31, 2013 and the unaudited condensed combined and consolidated pro forma statements of financial condition as of December 31, 2013 are based upon the historical combined and consolidated financial statements of Pre-IPO Ares included elsewhere in this prospectus. These pro forma financial statements present our consolidated results of operations and financial position giving pro forma effect to all of the transactions described under "Organizational Structure" as if such transactions had been completed as of January 1, 2013 with respect to the unaudited combined and consolidated pro forma statements of operations and as of December 31, 2013 with respect to the unaudited pro forma statements of financial condition. The pro forma adjustments are based on available information and upon assumptions that our management believes are reasonable to reflect, on a pro forma basis, the impact of these transactions on the historical financial information of Pre-IPO Ares. The adjustments are described in the notes to the unaudited combined and consolidated pro forma statements of operations and the unaudited combined and consolidated pro forma statements of financial condition.

        AHI and Ares Investments LLC are our predecessors for financial accounting purposes under GAAP, and their combined and consolidated financial statements will be our historical combined and consolidated financial statements following the completion of the Reorganization, this offering and the Offering Transactions. Because our senior professional owners control the entities that comprise Ares before and after the Reorganization, we will account for the transactions among these owners' interests in our business as part of the Reorganization as a transfer of interests under common control. Accordingly, we will carry forward unchanged the value of these owners' interests in the assets and liabilities recognized in Pre-IPO Ares' combined and consolidated financial statements into our combined and consolidated financial statements.

        The pro forma adjustments in the Reorganization and Other Adjustments column principally give effect to certain transactions in connection with the Reorganization and Offering Transactions described under "Organizational Structure," including:

    the reclassification from non-controlling interests in AHI and consolidated subsidiaries to controlling interest in equity of AHI and consolidated subsidiaries of approximately $             million relating to the ADIA affiliate's exchange of Ares Operating Group Units for Ares Management, L.P. common units in connection with the Reorganization;

    the reclassification from redeemable interests in AHI and consolidated subsidiaries and from controlling interest in equity of AHI and consolidated subsidiaries of approximately $             million and $             million, respectively, to non-controlling interests in Ares Operating Group relating to the Ares Operating Group Units to be held directly by Ares Owners Holdings L.P. and certain limited partners following the Reorganization; such units represent        % of all Ares Operating Group Units outstanding immediately following this offering;

    a cash distribution to our existing owners, which we expect to make prior to this offering and currently estimate to be approximately $150 million, a portion of which will relate to our previously undistributed earnings;

    an adjustment to reflect compensation expense associated with the recapitalization of Ares Investments LLC and Ares Holdings LLC into Ares Operating Group Units;

97


Table of Contents

    an adjustment to reflect compensation expense associated with the conversion and vesting of Ares Operating Group Units;

    the reclassification from net income attributable to controlling interests in AHI and consolidated subsidiaries to net income attributable to non-controlling interest of AHI and consolidated subsidiaries of approximately $ million for the year ended December 31, 2013, relating to the Ares Operating Group Units held directly by Ares Owners Holdings L.P. after this offering; such units represent        % of all Ares Operating Group Units outstanding after this offering; and

    the reclassification from net income attributable to non-controlling interests in AHI and consolidated subsidiaries to net income attributable to Ares Management, L.P. of approximately $             million for the year ended December 31, 2013, relating to the ADIA affiliate's exchange of Ares Operating Group Units for Ares Management, L.P. common units in connection with the Reorganization.

        The pro forma adjustments in the Offering Adjustments column principally give effect to certain transactions in connection with the Reorganization and Offering Transactions described under "Organizational Structure," including:

    the issuance of common units in this offering at the assumed initial public offering price of $            per common unit (the midpoint of the estimated offering price range set forth on the front cover of this prospectus), less estimated underwriting discounts and the payment of offering expenses of approximately $             million;

    an adjustment to reflect compensation expense associated with the grant and vesting of                restricted common units,                phantom restricted common units and                options to acquire common units, which will be granted to our professionals at the time of this offering; and

    the use of a portion of the proceeds from this offering to repay $                million of outstanding indebtedness under the Credit Facility.

        The pro forma adjustments in the Adjustments for Non-Controlling Interests column principally give effect to certain transactions in connection with the Reorganization and Offering Transactions described under "Organizational Structure," including:

    the reclassification from non-controlling interests in AHI and consolidated subsidiaries to controlling interest in equity of AHI and consolidated subsidiaries of approximately $             million relating to the ADIA affiliate's exchange of Ares Operating Group Units for Ares Management, L.P. common units in connection with the Reorganization;

    the reclassification from redeemable interests in AHI and consolidated subsidiaries and from controlling interest in equity of AHI and consolidated subsidiaries of approximately $             million and $             million, respectively, to non-controlling interests in Ares Operating Group relating to the Ares Operating Group Units to be held directly by Ares Owners Holdings L.P. and certain limited partners following the Reorganization; such units represent        % of all Ares Operating Group Units outstanding immediately following this offering; and

    the unitization of certain existing interests held by APMC (on behalf of certain of our senior partners and senior professionals) that represent less than a full common interest (for example, "profits interests") in Ares Investments LLC and Ares Holdings LLC into Ares Operating Group Units;

    the reclassification from net income attributable to controlling interests in AHI and consolidated subsidiaries to net income attributable to non-controlling interest of AHI and consolidated subsidiaries of approximately $ million for the year ended December 31, 2013, relating to the Ares Operating Group Units held directly by Ares Owners Holdings L.P. after this offering; such units represent        % of all Ares Operating Group Units outstanding after this offering; and

98


Table of Contents

    the reclassification from net income attributable to non-controlling interests in AHI and consolidated subsidiaries to net income attributable to Ares Management, L.P. of approximately $             million for the year ended December 31, 2013, relating to the ADIA affiliate's exchange of Ares Operating Group Units for Ares Management, L.P. common units in connection with the Reorganization.

        As described in greater detail under "Certain Relationships and Related Person Transactions—Tax Receivable Agreement," we will enter into a tax receivable agreement with the TRA Recipients that will provide for the payment by the corporate taxpayers to the TRA Recipients of 85% of the amount of cash tax savings, if any, in U.S. federal, state, local and foreign income tax or franchise tax that the corporate taxpayers actually realize (or are deemed to realize in the case of an early termination payment by the corporate taxpayers or a change of control) as a result of increases in tax basis and certain other tax benefits related to our entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. No such tax benefits have been assumed in the unaudited pro forma consolidated financial data and therefore no pro forma adjustment related to the tax receivable agreement is necessary.

        As a public company, we will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. We expect to incur significant additional annual expenses related to these steps and, among other things, additional directors' and officers' liability insurance, director fees, reporting requirements of the Commission, transfer agent fees, hiring additional accounting, legal and administrative personnel, increased auditing, tax and legal fees and similar expenses. We have not included any pro forma adjustments relating to these costs.

        The unaudited pro forma consolidated financial data should be read together with "Organizational Structure," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical combined and consolidated financial statements and related notes included elsewhere in this prospectus.

        The unaudited pro forma consolidated financial data is included for informational purposes only and does not purport to reflect the results of operations or financial position of Ares Management, L.P. that would have occurred had the transactions described above occurred on the dates indicated or had we operated as a public entity during the periods presented or for any future period or date. The unaudited pro forma consolidated financial data should not be relied upon as being indicative of our future or actual results of operations or financial condition had the Reorganization or Offering Transactions described under "Organizational Structure" and the other transactions described above occurred on the dates assumed. The unaudited pro forma consolidated financial data also does not project our results of operations or financial position for any future period or date.

99


Table of Contents


Unaudited Condensed Combined and Consolidated Pro Forma Statement of Financial Condition
As of December 31, 2013

 
  Pre-IPO
Ares
Combined
Historical
  Reorganization
and Other
Adjustments(1)
  Ares
Management
L.P. Pro
Forma
  Offering
Adjustments(2)
  Ares
Management
L.P. Pro
Forma As
Adjusted for
the Offering
  Adjustments
for Non-
Controlling
Interests(3)
  Ares
Management, L.P.
Consolidated
Pro Forma
 
 
  (Dollars in thousands)
 

Assets:

                                           

Cash and cash equivalents

  $ 89,802                          (e)                                

                        (f)                  

Restricted cash and cash equivalents

    13,344                                                           

Investments, at fair value

    89,438                                                           

Performance fees receivable

    137,682                                                           

Derivative assets, at fair value

    1,164                                                           

Due from affiliates

    108,920                                                           

Intangible assets, net

    68,742                                                           

Goodwill

    58,159                                                           

Other assets

    73,600                                                           

Assets of Consolidated Funds:

                                           

Cash and cash equivalents

    1,638,003                                                           

Restricted cash and cash equivalents

                                                              

Investments, at fair value

    20,823,338                                                           

Due from affiliates

    2,010                                                           

Dividends and interest receivable

    133,158                                                           

Receivable for securities sold

    427,871                                                           

Derivative assets, at fair value

    14,625                                                           

Other assets

    25,528                                                           
                               

Total assets

  $ 23,705,384                                                           
                               

Liabilities

                                           

Debt obligations

  $ 153,119                          (f)                                

Accounts payable, accrued expenses and other liabilities

    67,486                                                           

Deferred tax liability, net

    21,002                                                           

Performance fee compensation payable

    295,978                                                           

Derivative liabilities, at fair value

    2,907                                                           

Accrued compensation

    132,917                                                           

Due to affiliate

    32,690                                                           

Liabilities of Consolidated Funds:

                                           

Accounts payable, accrued expenses and other liabilities

    95,839                                                           

Payable for securities purchased

    945,115                                                           

Derivative liabilities, at fair value

    75,115                                                           

Due to affiliates

    2,695                                                           

Securities sold short, at fair value

    1,633                                                           

Deferred tax liability, net

    35,904                                                           

100


Table of Contents

 
  Pre-IPO
Ares
Combined
Historical
  Reorganization
and Other
Adjustments(1)
  Ares
Management
L.P. Pro
Forma
  Offering
Adjustments(2)
  Ares
Management
L.P. Pro
Forma As
Adjusted for
the Offering
  Adjustments
for Non-
Controlling
Interests(3)
  Ares
Management, L.P.
Consolidated
Pro Forma
 
 
  (Dollars in thousands)
 

CLO loan obligations

    11,774,157                                                           

Fund borrowings

    2,070,598                                                           

Mezzanine debt

    323,164                                                           
                               

Total liabilities

  $ 16,030,319                                                           
                               

Commitments and contingencies

                                                                

Redeemable interest in Consolidated Funds

  $ 1,093,770                                                           

Redeemable interest in AHI, AI and consolidated subsidiaries

    40,751                                                           

Redeemable non-controlling interest in Ares Operating Group

                                                (g)      

Non-controlling interest in Consolidated Funds

                                           

Non-redeemable non-controlling interest in Consolidated Funds

    691,874                                                           

Equity appropriated for Consolidated Funds

    155,261                                                           
                               

Non-controlling interest in Consolidated Funds

    5,847,135                                                           

Non-controlling interest in equity of AHI, AI and consolidated subsidiaries

    167,731       (a)(d)                                     (h)(i)             
                               

Controlling interest in equity of AHI, AI and consolidated subsidiaries

                                           

Members' equity

    321,891       (a)(b)(c)(d)                  (e)                  (g)             

Common stock (common A shares, 5,000 shares authorized, 5,010 shares issued and outstanding, $0.001 par value)

   
0
   
(a)
 
        
         
        
         
        
 

Additional paid in capital

    338,375       (a)                                     (g)             

Retained earnings

    (135,573 )     (a)(b)(c)(d)                                     (g)             

Accumulated other comprehensive (loss)

    985       (a)                                     (g)             
                               

Total controlling interest in equity of AHI, AI and consolidated subsidiaries

    526,678                                                           

Non-controlling interests in Ares Operating Group

                                                (g)(h)(i)             
                               

Total equity

    6,540,544                                                           
                               

Total liabilities, redeemable interest, non-controlling interests and equity              

  $ 23,705,384                                                           
                               

101


Table of Contents


Notes to Unaudited Condensed Combined and Consolidated Pro Forma Statement of Financial Condition

1.     Reorganization and Other Adjustments

    Prior to this offering, in exchange for its interest in Ares Management, L.P., APMC will transfer to Ares Management, L.P. its interests in each of AHI, Ares Domestic Holdings, Inc., Ares Offshore Holdings, Ltd., Ares Real Estate Holdings LLC and a portion of its interest in Ares Investments. APMC's interests are reflected as controlling interests in AHI and consolidated subsidiaries within Pre-IPO Ares' financial statements. Similarly, prior to this offering, in exchange for their interest in Ares Management, L.P., an affiliate of ADIA will transfer to Ares Management, L.P. its interests in each of AHI, Ares Domestic Holdings, Inc., Ares Offshore Holdings, Ltd., Ares Investments and Ares Real Estate Holdings LLC. The ADIA affiliate's interests are reflected as non-controlling interests in AHI and consolidated subsidiaries within Pre-IPO Ares' financial statements. For more detailed information regarding the Reorganization, please see "Organizational Structure—Reorganization."

    Following the Reorganization, Ares Owners Holdings L.P.'s and the ADIA affiliate's interests in Ares Management, L.P. will be reflected as members' equity in the combined and consolidated statement of financial condition of Ares Management, L.P. In addition, Ares Owners Holdings L.P.'s and the ADIA affiliate's interests in Ares Management, L.P. will be reflected as net income attributable to Ares Management, L.P. in the combined and consolidated statements of operations of Ares Management, L.P.

    Further, prior to this offering and in connection with the Reorganization, certain existing interests held by APMC (on behalf of certain of our Co-Founders and senior professionals) that represent less than a full common interest (for example, "profits interests") in Ares Investments LLC and Ares Holdings LLC will be recapitalized into Ares Operating Group Units. We refer to this recapitalization as the "unitization." These interests are currently reflected as controlling interests in AHI and consolidated subsidiaries within Pre-IPO Ares' financial statements; following this offering, these interests will be reflected as non-controlling interests in the Ares Operating Group in Ares Management, L.P.'s financial statements.

    (a)
    Reflects a reclassification from non-controlling interests in AHI and consolidated subsidiaries to controlling interest in equity of AHI and consolidated subsidiaries of approximately $       million relating to the ADIA affiliates' exchange of Ares Operating Group Units for Ares Management, L.P. common units in connection with the Reorganization.

    (b)
    Reflects the unitization of        % of APMC's existing interests in Ares Investments LLC and Ares Holdings LLC for            Ares Management, L.P. common units in connection with the Reorganization.

    (c)
    As part of the Reorganization, certain existing interests held by APMC (on behalf of certain of our senior partners and senior professionals) that represent less than a full common interest (for example, "profits interests") in Ares Investments LLC and Ares Holdings LLC will be recapitalized into Ares Operating Group Units. The total impact on retained earnings as a result of the accelerated vesting for the unvested portion is $       million.

    (d)
    Reflects a cash distribution to our existing owners, which we expect to make prior to this offering and currently estimate to be approximately $150 million, a portion of which will relate to our previously undistributed earnings. The distribution will be made from available liquidity.

2.     Offering Adjustments

    (e)
    Reflects net proceeds of $       million from this offering based on the issuance of            common units the assumed initial public offering price of $        per common unit (the midpoint of the estimated offering price range set forth on the front cover of this prospectus), with a corresponding increase to controlling interest in equity of AHI and consolidated subsidiaries.

102


Table of Contents


Notes to Unaudited Condensed Combined and Consolidated Pro Forma Statement of Financial Condition (Continued)

    (f)
    Reflects the use of a portion of the proceeds from this offering to repay $         million of outstanding indebtedness under the Credit Facility, which matures on December 17, 2017 and currently bears a variable interest rate based on LIBOR plus 1.75%. As of February 28, 2014, our revolving credit facility bore interest at a rate of 1.94%.

    (g)
    Reflects the reclassification from redeemable interests in AHI and consolidated subsidiaries and from controlling interest in equity of AHI and consolidated subsidiaries of approximately $       million and $       million, respectively, to non-controlling interests in Ares Operating Group relating to the            Ares Operating Group Units to be held directly by Ares Owners Holdings L.P. and certain limited partners following the Reorganization; such units represent        % of all Ares Operating Group Units outstanding immediately following this offering. Residual interests in equity and net income will be reflected as attributable to Ares Management, L.P. common unitholders, and any other interests, including holders of Ares Operating Group Units and third party limited partner interests in the consolidated funds will be reflected as non-controlling interests in equity and income in Ares Management, L.P.

103


Table of Contents


Unaudited Condensed Combined and Consolidated Pro Forma Statements of Operations
For the Year Ended December 31, 2013

 
  Pre-IPO
Ares
Combined
Historical
  Reorganization
and Other
Adjustments(1)
  Ares
Management
L.P. Pro
Forma
  Offering
Adjustments(2)
  Ares
Management
L.P. Pro
Forma
As Adjusted
for the
Offering
  Adjustments
for Non-
Controlling
Interests(3)
  Ares
Management, L.P.
Consolidated
Pro Forma
 
 
  (Dollars in thousands, except per unit data)
 

Revenues

                                           

Management fees

  $ 375,572   $                             $    

Performance fees

    79,800                                      

Other fees

    23,283                                      
                               

Total revenues

    478,655                                      
                               

Expenses

                                           

Compensation and benefits

    333,902                   (k)                  

Performance fee compensation

    194,294                                      

Consolidated Funds expenses

    135,237                                      

General, administrative and other expense

    138,464                                      
                               

Total expenses

    801,897                                      
                               

Other income (expense)

                                           

Interest and other income

    5,996                                      

Interest expense

    (9,475 )                 (l)                  

Debt extinguishment expense

    (1,862 )                                    

Net realized gain (loss) on investments

    (6,373 )                                    

Net change in unrealized (depreciation) appreciation on investments

    15,095                                      

Interest and other income of Consolidated Funds

    1,236,037                                      

Interest expense of Consolidated Funds

    (534,431 )                                    

Debt extinguishment gain of Consolidated Funds

    11,800                                      

Net realized gain on investments of Consolidated Funds

    64,382                                      

Net change in unrealized (depreciation) appreciation on investments of Consolidated Funds

    414,714                                      
                               

Total other income

    1,195,883                                      
                               

Income before taxes

    872,641                                      

Income tax expense

    59,263                                      
                               

Net income

    813,378                                      
                               

Less: Net income attributable to non-controlling interests and redeemable non-controlling interests in Consolidated Funds

    586,771                                      
                               

Less: Net income attributable to non-controlling interests in consolidated subsidiaries

    46,125       (j)                       (m)      
                               

Net income attributable to controlling interests in AHI, AI and consolidated subsidiaries

  $ 180,482   $   (j)                       (m) $    
                               

Net income attributable to Ares Management, L.P

                                    (n) $    
                                   

Net income per common unit(4)

                                           

Basic

                                    (n) $    
                                   

Diluted

                                    (n) $    
                                   

Weighted average common units outstanding(4)

                                           

Basic

                                    (n) $    
                                   

Diluted

                                    (n) $    
                                   

104


Table of Contents


Notes to Unaudited Condensed Combined and Consolidated Pro Forma Statements of Operations

1.     Reorganization and Other Adjustments

    (j)<