SEGMENT REPORTING

12 Months Ended

Dec. 31, 2021

Segment Reporting [Abstract]

SEGMENT REPORTING

16. SEGMENT REPORTING

The Company operates through its distinct operating segments that are summarized below:

Credit Group: The Credit Group manages credit strategies across the liquid and illiquid spectrum, including syndicated loans, high yield bonds, multi-asset credit, alternative credit investments and direct lending.

Private Equity Group: The Private Equity Group manages investment strategies broadly categorized its investment activities into three strategies: Corporate Private Equity, Special Opportunities and Infrastructure and Power.

Real Estate Group: The Real Estate Group manages comprehensive real estate equity and debt strategies, focusing on activities categorized as core, value-add, and opportunistic.

Secondary Solutions Group: The Secondary Solutions Group invests in secondary markets across a range of alternative asset class strategies, including private equity, real estate and infrastructure.

Strategic Initiatives: Strategic Initiatives represents an all-other category that includes operating segments and strategic investments that seek to expand the Company's reach and its scale in new and existing global markets.

The OMG consists of shared resource groups to support the Company’s operating segments by providing infrastructure and administrative support in the areas of accounting/finance, operations, information technology, legal, compliance, human resources, strategy, relationship management and distribution. The OMG includes Ares Wealth Management Solutions, LLC (“AWMS”) that facilitates the product development, distribution, marketing and client management activities for investment offerings in the global wealth management channel. Additionally, the OMG provides services to certain of the Company’s managed funds and vehicles, which reimburse the OMG for expenses equal to the costs of services provided. The OMG’s revenues and expenses are not allocated to the Company’s reportable segments but the Company does consider the cost structure of the OMG when evaluating its financial performance.

Segment Profit Measures: These measures supplement and should be considered in addition to, and not in lieu of, the Consolidated Statements of Operations prepared in accordance with GAAP.

Fee related earnings (“FRE”) is used to assess core operating performance by determining whether recurring revenue, primarily consisting of management fees and fee related performance revenues, is sufficient to cover operating expenses and to

generate profits. FRE differs from income before taxes computed in accordance with GAAP as it excludes net performance income, investment income from the Consolidated Funds and non-consolidated funds and certain other items that the Company believes are not indicative of its core operating performance. Beginning in the fourth quarter of 2021, fee related performance revenues, together with fee related performance compensation, has been presented within FRE because it represents incentive fees from perpetual capital vehicles that is measured and received on a recurring basis and not dependent on realization events from the underlying investments. Fee related performance revenues and fee related performance compensation were previously presented within realized net performance income. Historical periods have been modified to conform to the current period presentation.

Realized income (“RI”) is an operating metric used by management to evaluate performance of the business based on operating performance and the contribution of each of the business segments to that performance, while removing the fluctuations of unrealized income and expenses, which may or may not be eventually realized at the levels presented and whose realizations depend more on future outcomes than current business operations. RI differs from income before taxes by excluding (i) operating results of the Consolidated Funds, (ii) depreciation and amortization expense, (iii) the effects of changes arising from corporate actions, (iv) unrealized gains and losses related to carried interest, incentive fees and investment performance and (v) certain other items that the Company believes are not indicative of operating performance. Changes arising from corporate actions include equity-based compensation expenses, the amortization of intangible assets, transaction costs associated with mergers, acquisitions and capital activities, underwriting costs and expenses incurred in connection with corporate reorganization. RI also includes deferred placement fees, which represent the portion of placement fees that are deferred and amortized over the expected life of each fund's life for segment purposes but have been expensed under US GAAP. Management believes RI is a more appropriate metric to evaluate the Company's current business operations.

Management makes operating decisions and assesses the performance of each of the Company’s business segments based on financial and operating metrics and other data that is presented before giving effect to the consolidation of any of the Consolidated Funds. Consequently, all segment data excludes the assets, liabilities and operating results related to the Consolidated Funds and non-consolidated funds. Total assets by segments is not disclosed because such information is not used by the Company’s chief operating decision maker in evaluating the segments.

Many of the Ares Funds managed by the Company have mandates that allow for investing across different geographic regions, including North America, Europe and Asia. The primary geographic region in which the Company invests in is North America and the majority of its revenues are generated in North America.

The following tables present the financial results for the Company’s operating segments, as well as the OMG:

	Year ended December 31, 2021
	Credit Group		Private Equity Group		Real Estate Group		Secondary Solutions Group		Strategic Initiatives		Total Segments		OMG		Total
Management fees	$	1,070,608	$	231,282	$	168,838	$	97,945	$	66,604	$	1,635,277	$	—	$	1,635,277
Fee related performance revenues	86,480		—		51,399		—		—		137,879		—		137,879
Other fees	27,103		1,126		12,982		—		82		41,293		8,478		49,771
Compensation and benefits	(410,394)		(92,485)		(113,350)		(25,215)		(26,673)		(668,117)		(226,725)		(894,842)
General, administrative and other expenses	(54,686)		(25,044)		(20,762)		(6,862)		(7,778)		(115,132)		(100,645)		(215,777)
Fee related earnings	719,111		114,879		99,107		65,868		32,235		1,031,200		(318,892)		712,308
Performance income—realized	207,446		171,637		95,270		70		4		474,427		—		474,427
Performance related compensation—realized	(131,900)		(137,576)		(59,056)		(49)		(2)		(328,583)		—		(328,583)
Realized net performance income	75,546		34,061		36,214		21		2		145,844		—		145,844
Investment income—realized	1,989		9,259		4,687		19		13		15,967		—		15,967
Interest and other investment income—realized	20,377		12,819		5,947		2,261		3,948		45,352		226		45,578
Interest expense	(8,038)		(8,811)		(5,508)		(836)		(13,031)		(36,224)		(536)		(36,760)
Realized net investment income (loss)	14,328		13,267		5,126		1,444		(9,070)		25,095		(310)		24,785
Realized income	$	808,985	$	162,207	$	140,447	$	67,333	$	23,167	$	1,202,139	$	(319,202)	$	882,937
	Year ended December 31, 2020
	Credit Group		Private Equity Group		Real Estate Group		Secondary Solutions Group		Strategic Initiatives		Total Segments		OMG		Total
Management fees	$	841,138	$	221,160	$	97,680	$	—	$	26,587	$	1,186,565	$	—	$	1,186,565
Fee related performance revenues	22,160		—		827		—		—		22,987		—		22,987
Other fees	18,644		178		974		—		152		19,948		—		19,948
Compensation and benefits	(320,111)		(90,129)		(53,511)		—		(6,442)		(470,193)		(155,979)		(626,172)
General, administrative and other expenses	(53,997)		(22,145)		(12,251)		—		(2,926)		(91,319)		(80,778)		(172,097)
Fee related earnings	507,834		109,064		33,719		—		17,371		667,988		(236,757)		431,231
Performance income—realized	70,148		392,635		61,446		—		—		524,229		—		524,229
Performance related compensation—realized	(44,582)		(315,905)		(38,975)		—		—		(399,462)		—		(399,462)
Realized net performance income	25,566		76,730		22,471		—		—		124,767		—		124,767
Investment income (loss)—realized	(2,309)		29,100		3,146		—		13		29,950		(5,698)		24,252
Interest and other investment income (expense)—realized	16,314		5,987		4,056		—		996		27,353		(739)		26,614
Interest expense	(8,722)		(8,186)		(5,200)		—		(1,465)		(23,573)		(1,335)		(24,908)
Realized net investment income (loss)	5,283		26,901		2,002		—		(456)		33,730		(7,772)		25,958
Realized income	$	538,683	$	212,695	$	58,192	$	—	$	16,915	$	826,485	$	(244,529)	$	581,956

	Year Ended December 31, 2019
	Credit Group		Private Equity Group		Real Estate Group		Secondary Solutions Group		Strategic Initiatives		Total Segments		OMG		Total
Management fees	$	713,853	$	211,614	$	87,063	$	—	$	—	$	1,012,530	$	—	$	1,012,530
Fee related performance revenues	52,715		—		1,592		—		—		54,307		—		54,307
Other fees	17,124		162		792		—		—		18,078		—		18,078
Compensation and benefits	(292,733)		(78,259)		(50,080)		—		—		(421,072)		(139,162)		(560,234)
General, administrative and other expenses	(55,103)		(19,098)		(13,249)		—		—		(87,450)		(91,292)		(178,742)
Fee related earnings	435,856		114,419		26,118		—		—		576,393		(230,454)		345,939
Performance income—realized	51,727		264,439		32,045		—		—		348,211		—		348,211
Performance related compensation—realized	(30,570)		(211,550)		(16,235)		—		—		(258,355)		—		(258,355)
Realized net performance income	21,157		52,889		15,810		—		—		89,856		—		89,856
Investment income—realized	2,457		47,696		8,020		—		—		58,173		—		58,173
Interest and other investment income (expense) —realized	18,670		5,046		5,633		—		—		29,349		(160)		29,189
Interest expense	(6,497)		(7,486)		(3,824)		—		—		(17,807)		(1,864)		(19,671)
Realized net investment income (loss)	14,630		45,256		9,829		—		—		69,715		(2,024)		67,691
Realized income	$	471,643	$	212,564	$	51,757	$	—	$	—	$	735,964	$	(232,478)	$	503,486

The following table presents the components of the Company’s operating segments’ revenue, expenses and realized net investment income:

	Year ended December 31,
	2021		2020		2019
Segment revenues
Management fees	$	1,635,277	$	1,186,565	$	1,012,530
Fee related performance revenues	137,879		22,987		54,307
Other fees	41,293		19,948		18,078
Performance income—realized	474,427		524,229		348,211
Total segment revenues	$	2,288,876	$	1,753,729	$	1,433,126
Segment expenses
Compensation and benefits	$	668,117	$	470,193	$	421,072
General, administrative and other expenses	115,132		91,319		87,450
Performance related compensation—realized	328,583		399,462		258,355
Total segment expenses	$	1,111,832	$	960,974	$	766,877
Segment realized net investment income
Investment income—realized	$	15,967	$	29,950	$	58,173
Interest and other investment income —realized	45,352		27,353		29,349
Interest expense	(36,224)		(23,573)		(17,807)
Total segment realized net investment income	$	25,095	$	33,730	$	69,715

The following table reconciles the Company's consolidated revenues to segment revenue:

	Year ended December 31,
	2021		2020		2019
Total consolidated revenue	$	4,212,091	$	1,764,046	$	1,765,438
Performance (income) loss—unrealized	(1,744,056)		7,554		(303,142)
Management fees of Consolidated Funds eliminated in consolidation	44,896		45,268		34,920
Incentive fees of Consolidated Funds eliminated in consolidation	5,458		141		13,851
Administrative, transaction and other fees of Consolidated Funds eliminated in consolidation	4,483		15,824		12,641
Administrative fees(1)	(49,223)		(36,512)		(31,629)
OMG revenue	(8,478)		—		—
Performance income (loss) reclass(2)	1,434		(3,726)		740
Acquisition-related incentive fees(3)	(47,873)		—		—
Principal investment income, net of eliminations	(99,433)		(28,552)		(56,555)
Net income of non-controlling interests in consolidated subsidiaries	(30,423)		(10,314)		(3,138)
Total consolidation adjustments and reconciling items	(1,923,215)		(10,317)		(332,312)
Total segment revenue	$	2,288,876	$	1,753,729	$	1,433,126

(1)Represents administrative fees that are presented in administrative, transaction and other fees in the Company’s Consolidated Statements of Operations and are netted against the respective expenses for segment reporting.

(2)Related to performance income for AREA Sponsor Holdings LLC, an investment pool. Changes in value of this investment are reflected within net realized and unrealized gains (losses) on investments in the Company’s Consolidated Statements of Operations.

(3)Represents a component of the purchase price from incentive fees associated with one-time contingent consideration recorded in connection with the Black Creek Acquisition. 100% of the fees recognized in 2021 is presented within incentive fees in the Company’s Consolidated Statements of Operations of which 50% is included on an unconsolidated basis.

The following table reconciles the Company's consolidated expenses to segment expenses:

	Year ended December 31,
	2021		2020		2019
Total consolidated expenses	$	3,410,083	$	1,450,486	$	1,462,797
Performance related compensation-unrealized	(1,316,205)		11,552		(206,799)
Expenses of Consolidated Funds added in consolidation	(113,024)		(65,527)		(90,816)
Expenses of Consolidated Funds eliminated in consolidation	50,538		45,408		48,771
Administrative fees(1)	(49,223)		(36,512)		(31,629)
OMG expenses	(327,370)		(236,757)		(230,454)
Acquisition and merger-related expense	(21,162)		(11,124)		(16,266)
Equity compensation expense	(237,191)		(122,986)		(97,691)
Acquisition-related compensation expense(2)	(66,893)		—		—
Deferred placement fees	(78,883)		(19,329)		(24,306)
Depreciation and amortization expense	(106,705)		(40,662)		(40,602)
Expense of non-controlling interests in consolidated subsidiaries	(32,133)		(13,575)		(6,128)
Total consolidation adjustments and reconciling items	(2,298,251)		(489,512)		(695,920)
Total segment expenses	$	1,111,832	$	960,974	$	766,877

(1)Represents administrative fees that are presented in administrative, transaction and other fees in the Company’s Consolidated Statements of Operations and are netted against the respective expenses for segment reporting.

(2)Represents components of the purchase agreements associated with contingent obligations resulting from the Landmark Acquisition and the Black Creek Acquisition that are recorded as compensation expense and are presented within compensation and benefits in the Company’s Consolidated Statements of Operations.

The following table reconciles the Company's consolidated other income to segment realized net investment income:

	Year ended December 31,
	2021		2020		2019
Total consolidated other income	$	263,682	$	65,918	$	122,539
Investment (income) loss—unrealized	(58,694)		47,317		26,620
Interest and other investment (income) loss—unrealized	6,249		(12,134)		9,061
Other income from Consolidated Funds added in consolidation, net	(256,375)		(70,994)		(117,405)
Other expense from Consolidated Funds eliminated in consolidation, net	(2,868)		(14,053)		(12,991)
OMG other income	(1,368)		(927)		(1,190)
Performance (income) loss reclass(1)	(1,434)		3,726		(740)
Principal investment income	120,896		4,044		44,320
Other (income) expense, net	(19,886)		10,277		(460)
Other (income) loss of non-controlling interests in consolidated subsidiaries	(25,107)		556		(39)
Total consolidation adjustments and reconciling items	(238,587)		(32,188)		(52,824)
Total segment realized net investment income	$	25,095	$	33,730	$	69,715

(1)Related to performance income for AREA Sponsor Holdings LLC. Changes in value of this investment are reflected within net realized and unrealized gains (losses) on investments in the Company’s Consolidated Statements of Operations.

The following table presents the reconciliation of income before taxes as reported in the Consolidated Statements of Operations to segment results of RI and FRE:

	Year ended December 31,
	2021		2020		2019
Income before taxes	$	1,065,690	$	379,478	$	425,180
Adjustments:
Depreciation and amortization expense	106,705		40,662		40,602
Equity compensation expense	237,191		122,986		97,691
Acquisition-related compensation expense(1)	66,893		—		—
Acquisition-related incentive fees(2)	(47,873)		—		—
Acquisition and merger-related expense	21,162		11,194		16,266
Deferred placement fees	78,883		19,329		24,306
OMG expense, net	317,524		235,830		229,264
Other (income) expense, net	(19,886)		10,207		(460)
Net (income) expense of non-controlling interests in consolidated subsidiaries	(23,397)		3,817		2,951
Income before taxes of non-controlling interests in Consolidated Funds, net of eliminations	(120,457)		(28,203)		(39,174)
Total performance (income) loss—unrealized	(1,744,056)		7,554		(303,142)
Total performance related compensation—unrealized	1,316,205		(11,552)		206,799
Total investment (income) loss—unrealized	(52,445)		35,183		35,681
Realized income	1,202,139		826,485		735,964
Total performance income—realized	(474,427)		(524,229)		(348,211)
Total performance related compensation—realized	328,583		399,462		258,355
Total investment income—realized	(25,095)		(33,730)		(69,715)
Fee related earnings	$	1,031,200	$	667,988	$	576,393

(1)Represents components of the purchase agreements associated with contingent obligations resulting from the Landmark Acquisition and the Black Creek Acquisition that are recorded as compensation expense and are presented within compensation and benefits in the Company’s Consolidated Statements of Operations.

(2)Represents a component of the purchase price from incentive fees associated with one-time contingent consideration recorded in connection with the Black Creek Acquisition. 100% of the fees recognized in 2021 is presented within incentive fees in the Company’s Consolidated Statements of Operations of which 50% is included on an unconsolidated basis.