XML 57 R35.htm IDEA: XBRL DOCUMENT v3.6.0.2
FAIR VALUE (Tables)
 12 Months Ended
Dec. 31, 2016
FAIR VALUE  
Summary of changes in the fair value of the Level III investments for the CLO loan obligations
The following table sets forth a summary of changes in the fair value of the Level III liabilities for the CLO loan obligations for the years ended December 31, 2016 and 2015:
 
For the Year Ended December 31,
 
2016
 
2015
Balance, beginning of period
$
2,174,352

 
$
12,049,019

Accounting change due to the adoption of ASU 2014-13(1)
(2,174,352
)
 
—

Deconsolidation of funds
—

 
(10,264,884
)
Borrowings
—

 
602,077

Paydowns
—

 
(61,569
)
Realized and unrealized gains, net
—

 
(150,291
)
Balance, end of period
$
—

 
$
2,174,352

 
(1) Upon adoption of ASU 2014-13, the debt obligations of consolidated CLOs are no longer considered Level III financial liabilities under the GAAP fair value hierarchy. As of January 1, 2016, the debt obligations of consolidated CLOs are measured on the basis of the fair value of the financial assets of the CLO and are classified as Level II financial liabilities.
Summary of fair value by segment along with the remaining unfunded commitment and any redemption restriction of investments valued using NAV per share
For investments valued using net asset value (“NAV”) per share, a summary of fair value by segment along with the remaining unfunded commitment and any redemption restrictions of such investments are presented below:
 
 
As of December 31, 2016
 
As of December 31, 2015
 
 
Segment
 
Fair Value 
 
Unfunded 
Commitments
 
Fair Value
 
Unfunded 
Commitments
 
Redemption 
Restriction(s)
Credit Group
 
$
53,131

 
$
30,896

 
$
98,251

 
$
89,917

 
(1)(2)(3)
Private Equity Group
 
181,096

 
96,687

 
157,234

 
78,700

 
(1)
Real Estate Group
 
71,669

 
35,708

 
56,547

 
99,802

 
(1)
Operations Management Group
 
19,819

 
34,500

 
27,211

 
22,789

 
(1)(2)
Totals
 
$
325,715


$
197,791


$
339,243


$
291,208

 
 
 
(1) Includes certain closed-ended funds that do not permit investors to redeem their interests.
(2) Includes certain open-ended funds that require a redemption notice of zero to sixty days before the redemption date, after which an investor has the right to withdraw its capital.
(3) Includes certain funds that are separately managed investment vehicles, which may be redeemed only upon dissolution or liquidation of the fund at the discretion of a simple majority of investors.
Ares Management L.P  
FAIR VALUE  
Summary of valuation of investments and other financial instruments by fair value hierarchy levels
The tables below summarize the financial assets and financial liabilities measured at fair value for the Company and Consolidated Funds as of December 31, 2016:
Investments of the Company, at fair value
 
Level I 
 
Level II 
 
Level III 
 
Investments
Measured
at NAV
 
Total 
Fixed income-collateralized loan obligations
 
$
—

 
$
—

 
$
89,111

 
$
—

 
$
89,111

Equity securities
 
100

 
—

 
—

 
—

 
100

Partnership interests
 
—

 
—

 
33,410

 
325,715

 
359,125

Total investments, at fair value
 
100


—


122,521


325,715


448,336

Derivative assets of the Company, at fair value
 
 

 
 

 
 

 
 

 
 

Foreign exchange contracts
 
—

 
3,171

 
—

 
—

 
3,171

Total derivative assets, at fair value
 
—


3,171


—


—


3,171

Total
 
$
100


$
3,171


$
122,521


$
325,715


$
451,507

Liabilities of the Company, at fair value
 
 
 
 
 
 
 
 
 
 
Contingent considerations
 
$
—

 
$
—

 
$
(22,156
)
 
$
—

 
$
(22,156
)
Total liabilities, at fair value
 
—


—


(22,156
)

—


(22,156
)
Total
 
$
—


$
—


$
(22,156
)

$
—


$
(22,156
)
Investments of Consolidated Funds, at fair value
 
Level I 
 
Level II 
 
Level III 
 
Total 
Bonds
 
$
—

 
$
104,886

 
$
37,063

 
$
141,949

Loans
 
—

 
2,606,423

 
199,217

 
2,805,640

Collateralized loan obligations
 
—

 
—

 
5,973

 
5,973

Total fixed income
 
—


2,711,309


242,253


2,953,562

Equity securities
 
56,662

 
17,569

 
130,690

 
204,921

Partnership interests
 
—

 
—

 
171,696

 
171,696

Other
 
—

 
24

 
—

 
24

Total investments, at fair value
 
56,662


2,728,902


544,639


3,330,203

Derivative assets of Consolidated Funds, at fair value
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
—

 
529

 
—

 
529

Other
 
—

 
—

 
291

 
291

Total derivative assets, at fair value
 
—


529


291


820

Total
 
$
56,662


$
2,729,431


$
544,930


$
3,331,023

Derivative liabilities of Consolidated Funds, at fair value
 
 
 
 
 
 
 
 
Other
 
$
—

 
$
—

 
$
(2,999
)
 
$
(2,999
)
Total derivative liabilities, at fair value
 
—


—


(2,999
)

(2,999
)
Loan obligations of CLOs
 
—

 
(3,031,112
)
 
—

 
(3,031,112
)
Total
 
$
—


$
(3,031,112
)

$
(2,999
)

$
(3,034,111
)
The tables below summarize the financial assets and financial liabilities measured at fair value for the Company and Consolidated Funds as of December 31, 2015:
Investments of the Company, at fair value
 
Level I 
 
Level II 
 
Level III 
 
Investments
Measured
at NAV
 
Total 
Fixed income-collateralized loan obligations
 
$
—

 
$
—

 
$
55,752

 
$
—

 
$
55,752

Equity securities
 
81

 
—

 
—

 
—

 
81

Partnership interests
 
—

 
—

 
51,703

 
339,243

 
390,946

Total investments, at fair value
 
81


—


107,455


339,243


446,779

Derivative assets of the Company, at fair value
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
—

 
1,339

 
—

 
—

 
1,339

Total derivative assets, at fair value
 
—


1,339


—


—


1,339

Total
 
$
81


$
1,339


$
107,455


$
339,243


$
448,118

Liabilities of the Company, at fair value
 
 

 
 

 
 

 
 

 
 

Contingent considerations
 
$
—

 
$
—

 
$
(40,831
)
 
$
—

 
$
(40,831
)
Total liabilities, at fair value
 
—


—


(40,831
)

—


(40,831
)
Derivative liabilities of the Company, at fair value
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
—

 
(176
)
 
—

 
—

 
(176
)
Interest rate contracts
 
—

 
(214
)
 
—

 
—

 
(214
)
Total derivative liabilities, at fair value
 
—


(390
)

—


—


(390
)
Total
 
$
—


$
(390
)

$
(40,831
)

$
—


$
(41,221
)
Summary of changes in the fair value of the Level III investments
The following tables set forth a summary of changes in the fair value of the Level III measurements for the year ended December 31, 2015:
 
 
Level III Assets
 
Level III Liabilities
Level III Assets and Liabilities of the Company
 
Fixed Income
 
Partnership 
Interests
 
Total
 
Contingent Considerations
Balance, beginning of period
 
$
—

 
$
45,348

 
$
45,348

 
$
2,049

Investment in deconsolidated fund(3)
 
17,815

 
—

 
17,815

 
—

Purchases(1)
 
51,287

 
11,000

 
62,287

 
59,171

Sales/settlements(2)
 
(7,567
)
 
(4,645
)
 
(12,212
)
 
(1,000
)
Realized and unrealized appreciation (depreciation), net
 
(5,783
)
 
—

 
(5,783
)
 
(19,389
)
Balance, end of period
 
$
55,752


$
51,703


$
107,455


$
40,831

Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets and liabilities still held at the reporting date
 
$
(7,076
)
 
$
—

 
$
(7,076
)
 
$
(19,389
)
 
(1)
Purchases include paid‑in‑kind interest and securities received in connection with restructurings.
(2)
Sales/settlements include distributions, principal redemptions and securities disposed of in connection with restructurings
(3)
Balance for the Company was previously eliminated upon consolidation and not reported as Level III investments.
The following tables set forth a summary of changes in the fair value of the Level III measurements for the year ended December 31, 2016:
 
 
Level III Assets
 
Level III Liabilities
Level III Assets and Liabilities of the Company
 
Fixed Income
 
Partnership 
Interests
 
Total
 
Contingent Considerations
Balance, beginning of period
 
$
55,752

 
$
51,703

 
$
107,455

 
$
40,831

Purchases(1)
 
33,053

 
9,000

 
42,053

 
—

Sales/settlements(2)
 
(3,698
)
 
—

 
(3,698
)
 
(1,000
)
Realized and unrealized appreciation (depreciation), net
 
4,004

 
(27,293
)
 
(23,289
)
 
(17,675
)
Balance, end of period
 
$
89,111


$
33,410


$
122,521


$
22,156

Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets and liabilities still held at the reporting date
 
$
3,437

 
$
(7,293
)
 
$
(3,856
)
 
$
(17,675
)
Summary of quantitative inputs and assumptions used for Level III inputs
The following table summarizes the quantitative inputs and assumptions used for the Company’s Level III measurements as of December 31, 2016:
 
Fair Value
 
Valuation Technique(s)
 
Significant Unobservable Input(s)
 
Range
Assets
 
 
 
 
 
 
 
Partnership interests
$
33,410

 
Other
 
N/A
 
N/A
Collateralized loan obligations
89,111

 
Broker quotes and/or 3rd party pricing services
 
N/A
 
N/A
Total
$
122,521

 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Contingent consideration liabilities
 
 
 
 
 
 
 
 
$
20,278

 
Other
 
N/A
 
N/A
 
1,878

 
Discounted cash flow
 
Discount rate
 
6.5%
Total
$
22,156

 
 
 
 
 
 
The following table summarizes the quantitative inputs and assumptions used for the Company’s Level III measurements as of December 31, 2015:
 
Fair Value 
 
Valuation Technique(s) 
 
Significant Unobservable Input(s)
 
Range
Assets
 
 
 
 
 
 
 
Partnership interests
$
40,703

 
Discounted cash flow
 
Discount Rate
 
10%
Partnership interests
11,000

 
Recent transaction price(1)
 
N/A
 
N/A
Collateralized loan obligations
55,752

 
Broker quotes and/or 3rd party pricing services
 
N/A
 
N/A
Total
$
107,455

 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Contingent consideration liabilities
$
40,831

 
Discounted cash flow
 
Discount rate
 
4.4% - 6.8%
 
 
 
 
 
Commitment period revenue
 
$0 - $75,000
Total
$
40,831

 
 
 
 
 
 
 
(1)
Recent transaction price consists of securities recently purchased or restructured. The Company determined that there was no change to the valuation based on the underlying assumptions used at the closing of such transactions.
Consolidated Funds  
FAIR VALUE  
Summary of valuation of investments and other financial instruments by fair value hierarchy levels
Investments of Consolidated Funds, at fair value
 
Level I
 
Level II
 
Level III
 
Total
Bonds
 
$
—

 
$
126,289

 
$
109,023

 
$
235,312

Loans
 
—

 
1,875,341

 
134,346

 
2,009,687

Collateralized loan obligations
 
—

 
—

 
6,121

 
6,121

Total fixed income
 
—


2,001,630


249,490


2,251,120

Equity securities
 
76,033

 
15,760

 
129,809

 
221,602

Partnership interests
 
—

 
—

 
86,902

 
86,902

Other
 
—

 
159

 
—

 
159

Total investments, at fair value
 
$
76,033


$
2,017,549


$
466,201


$
2,559,783

Derivative liabilities of Consolidated Funds, at fair value
 
 
 
 
 
 
 
 
Foreign exchange contracts
 
$
—

 
$
(369
)
 
$
—

 
$
(369
)
Other
 
—

 
—

 
(10,307
)
 
(10,307
)
Total derivative liabilities, at fair value
 
—


(369
)

(10,307
)

(10,676
)
Loan obligations of CLOs
 
—

 
—

 
(2,174,352
)
 
(2,174,352
)
Total
 
$
—


$
(369
)

$
(2,184,659
)

$
(2,185,028
)
Summary of changes in the fair value of the Level III investments
Level III Assets of Consolidated Funds
 
Equity Securities
 
Fixed Income
 
Partnership
Interests
 
Derivatives, Net
 
Total
Balance, beginning of period
 
$
129,809

 
$
249,490

 
$
86,902

 
$
(10,307
)
 
$
455,894

Transfer in
 
—

 
59,790

 
—

 
—

 
59,790

Transfer out
 
(344
)
 
(90,952
)
 
—

 
—

 
(91,296
)
Purchases(1)
 
15,849

 
167,338

 
65,906

 
—

 
249,093

Sales(2)
 
(18,029
)
 
(125,642
)
 
(3,606
)
 
(81
)
 
(147,358
)
Amortized discounts/premiums
 
—

 
2,660

 
—

 
57

 
2,717

Realized and unrealized appreciation (depreciation), net
 
3,405

 
(20,431
)
 
22,494

 
7,623

 
13,091

Balance, end of period
 
$
130,690


$
242,253


$
171,696


$
(2,708
)

$
541,931

Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date
 
$
8,333

 
$
(9,391
)
 
$
22,494

 
$
5,660

 
$
27,096

 
(1)
Purchases include paid‑in‑kind interest and securities received in connection with restructurings.
(2)
Sales/settlements include distributions, principal redemptions and securities disposed of in connection with restructurings
Level III Assets of Consolidated Funds
 
Equity Securities
 
Fixed Income
 
Partnership Interests
 
Derivatives, Net
 
Total
Balance, beginning of period
 
$
3,263,311

 
$
2,192,395

 
$
137,272

 
$
(20,993
)
 
$
5,571,985

Deconsolidation of funds(3)
 
(3,080,402
)
 
(1,897,304
)
 
(137,272
)
 
12,980

 
(5,101,998
)
Transfer in
 
—

 
27,195

 
—

 
—

 
27,195

Transfer out
 
(17,281
)
 
(77,100
)
 
—

 
—

 
(94,381
)
Purchases(1)
 
23,607

 
113,506

 
98,000

 
—

 
235,113

Sales(2)
 
(65,676
)
 
(96,525
)
 
(13,300
)
 
2,384

 
(173,117
)
Amortized discounts/premiums
 
—

 
862

 
—

 
(484
)
 
378

Realized and unrealized appreciation (depreciation), net
 
6,250

 
(13,539
)
 
2,202

 
(4,194
)
 
(9,281
)
Balance, end of period
 
$
129,809


$
249,490


$
86,902


$
(10,307
)

$
455,894

Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date
 
$
1,595

 
$
(12,881
)
 
$
—

 
$
(4,521
)
 
$
(15,807
)
 
(1)
Purchases include paid‑in‑kind interest and securities received in connection with restructurings.
(2)
Sales/settlements include distributions, principal redemptions and securities disposed of in connection with restructurings
(3)
Represents investment in Consolidated Funds that were deconsolidated during the period.
Summary of quantitative inputs and assumptions used for Level III inputs
The following table summarizes the quantitative inputs and assumptions used for the Consolidated Funds’ Level III measurements as of December 31, 2016:
 
Fair Value
 
Valuation Technique(s)
 
Significant Unobservable Input(s)
 
Range
 
Weighted
Average
Assets
 
 
 
 
 
 
 
 
 
Equity securities
 
 
 
 
 
 
 
 
 
 
$
43,011

 
EV market multiple analysis
 
EBITDA multiple(2)
 
2.0x - 11.2x
 
2.3x
 
32,598

 
Market approach (comparable companies)
 
Net income multiple
Illiquidity discount
 
30.0x - 40.0x
25.0%
 
35.0x
25.0%
 
421

 
Broker quotes and/or 3rd party pricing services
 
N/A
 
N/A
 
N/A
 
171,696

 
Discounted cash flow
 
Discount rate
 
20.0%
 
20.0%
 
54,660

 
Recent transaction price(1)
 
N/A
 
N/A
 
N/A
Fixed income securities
 
 
 
 
 
 
 
 
 
 
170,231

 
Broker quotes and/or 3rd party pricing services
 
N/A
 
N/A
 
N/A
 
6,693

 
EV market multiple analysis
 
EBITDA multiple(2)
 
7.1x
 
7.1x
 
5,473

 
Income approach
 
Collection rates
 
1.2x
 
1.2x
 
28,595

 
Income approach
 
Yield
 
6.0% - 13.6%
 
10.9%
 
24,052

 
Discounted cash flow
 
Discount rate
 
7.8% - 15.3%
 
11.1%
 
1,776

 
Market approach (comparable companies)
 
EBITDA multiple(2)
 
6.5x
 
6.5x
 
4,887

 
Recent transaction price(1)
 
N/A
 
N/A
 
N/A
 
546

 
Market approach
 
EBITDA Multiple
 
6.1x
 
6.1x
Derivative instruments of Consolidated Funds
291

 
Broker quotes and/or 3rd party pricing services
 
N/A
 
N/A
 
N/A
Total assets
$
544,930

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Derivatives instruments of Consolidated Funds
$
2,999

 
Broker quotes and/or 3rd party pricing services
 
N/A
 
N/A
 
N/A
Total liabilities
$
2,999

 
 
 
 
 
 
 
 
 
(1)
Recent transaction price consists of securities recently purchased or restructured. The Company determined that there was no change to the valuation based on the underlying assumptions used at the closing of such transactions.
(2)
“EBITDA” in the table above is a Non-GAAP financial measure and refers to earnings before interest, tax, depreciation and amortization.
The following table summarizes the quantitative inputs and assumptions used for the Consolidated Funds’ Level III measurements as of December 31, 2015:
 
Fair Value 
 
Valuation Technique(s) 
 
Significant Unobservable Input(s) 
 
Range
 
Weighted
Average
Assets
 
 
 
 
 
 
 
 
 
Equity securities
 
 
 
 
 
 
 
 
 
 
$
42,887

 
EV market multiple analysis
 
EBITDA multiple(2)
 
1.6x - 10.4x
 
4.1x
 
73,686

 
Market approach (comparable companies)
 
Net income multiple
 
10.0x - 40.0x
 
21.7x
 
344

 
Broker quotes and/or 3rd party pricing services
 
N/A
 
N/A
 
N/A
 
12,891

 
Recent transaction price(1)
 
N/A
 
N/A
 
N/A
 
86,902

 
Discounted cash flow
 
Discount rate
 
14.0%
 
14.0%
Fixed income securities
 
 
 
 
 
 
 
 
 
 
22,934

 
EV market multiple analysis
 
EBITDA multiple(2)
 
1.6x - 11.0x
 
7.8x
 
1,626

 
Market approach (comparable companies)
 
EBITDA multiple(2)
 
6.5x
 
6.5x
 
130,131

 
Broker quotes and/or 3rd party pricing services
 
N/A
 
N/A
 
N/A
 
5,516

 
Discounted cash flow
 
Discount rate
 
11.0% - 15.3%
 
12.7%
 
84,464

 
Income approach
 
Yield
 
3.3% - 13.3%
 
9.1%
 
1,133

 
Income approach
 
Collection rates
 
1.2x
 
1.2x
 
3,687

 
Income approach
 
Constant prepayment rate
Constant default rate
Recovery rate
 
5.0% - 10.0%
11.9% - 25.1%
0.0% - 40.0%
 
7.1%
14.6%
16.8%
Total assets
$
466,201

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
Loans payable of Consolidated Funds:
 
 
 
 
 
 
 
 
 
Fixed income
$
2,146,255

 
Broker quotes and/or 3rd party pricing services
 
N/A
 
N/A
 
N/A
 
28,097

 
Discounted cash flow
 
Discount rate
Constant prepayment rate
Constant default rate
Recovery rate
 
8.0% - 10.0%
19.7% - 20.0%
2.0%
70.0% - 71.1%
 
8.7%
19.8%
2.0%
70.8%
Derivatives instruments of Consolidated Funds
10,307

 
Broker quotes and/or 3rd party pricing services
 
N/A
 
N/A
 
N/A
Total liabilities
$
2,184,659

 
 
 
 
 
 
 
 
 
(1)
Recent transaction price consists of securities purchased or restructured. The Company determined that there has been no change to the valuation based on the underlying assumptions used at the closing of such transactions.
(2)
“EBITDA” in the table above is a Non-GAAP financial measure and refers to earnings before interest, tax, depreciation and amortization.