SEGMENT REPORTING

12 Months Ended

Dec. 31, 2023

Segment Reporting [Abstract]

SEGMENT REPORTING

14. SEGMENT REPORTING

The Company operates through its distinct operating segments. On March 31, 2023, the Company executed the SSG Buyout. The Company rebranded Ares SSG as Ares Asia and the Ares SSG credit business, including the Asian special situations, Asian secured lending and APAC direct lending strategies, as APAC credit. APAC credit has been reclassified effective January 1, 2023 and is now presented within the Credit Group. In connection with this reclassification, the Company will no longer use Strategic Initiatives to describe all other operating segments, instead reporting the collective results as Other. The Company reclassified activities of APAC credit to the Credit Group to better align the segment presentation with the global asset classes and investment strategies. Separately, the Private Equity Group includes APAC private equity following the Crescent Point Acquisition. The Company has modified historical results to conform with its current presentation. The Company operating segments are summarized below:

Credit Group: The Credit Group manages credit strategies across the liquid and illiquid spectrum, including liquid credit, alternative credit, direct lending and APAC credit.

Private Equity Group: The Private Equity Group broadly categorizes its investment strategies as corporate private equity, special opportunities and APAC private equity.

Real Assets Group: The Real Assets Group manages comprehensive equity and debt strategies across real estate and infrastructure investments.

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

Other: Other represents a compilation of operating segments and strategic investments that seek to expand the Company’s reach and its scale in new and existing global markets but individually do not meet reporting thresholds. These results include activities from: (i) Ares Insurance Solutions (“AIS”), the Company’s insurance platform that provides solutions to insurance clients including asset management, capital solutions and corporate development; and (ii) the SPACs sponsored by the Company, among others.

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 either equal to the costs of services provided or as a percentage of invested capital. The OMG’s revenues and expenses are not allocated to the Company’s operating segments but the Company does consider the financial results of the OMG when evaluating its financial performance.

In February 2024, the Company announced that the special opportunities strategy, historically reported as a component of the Private Equity Group, will be integrated into the Credit Group to align management of this strategy and will form the foundation for a new opportunistic credit strategy. For segment reporting purposes, the change will require the reclassification of the special opportunities strategy from the Private Equity Group to the Credit Group and will be presented in the Company’s consolidated financial statements beginning in 2024.

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 our funds and adjusts for certain other items that the Company believes are not indicative of its core operating performance. Fee related performance revenues, together with fee related performance compensation, is presented within FRE because it represents incentive fees from perpetual capital vehicles that is measured and eligible to be received on a recurring basis and not dependent on realization events from the underlying investments.

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 adjusts for 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. Placement fee adjustment represents the net portion of either expense deferral or amortization of upfront fees to placement agents that is presented to match the timing of expense recognition with the period over which management fees are expected to be earned from the associated fund for segment purposes but have been expensed in advance in accordance with GAAP. For periods in which the amortization of upfront fees for segment purposes is higher than the GAAP expense, the placement fee adjustment is presented as a reduction to RI. 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, Asia-Pacific and the Middle East. 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, 2023
	Credit Group		Private Equity Group		Real Assets Group		Secondaries Group		Other		Total Segments		OMG		Total
Management fees	$	1,749,796	$	230,251	$	389,437	$	174,942	$	27,087	$	2,571,513	$	—	$	2,571,513
Fee related performance revenues	167,333		—		334		12,782		—		180,449		—		180,449
Other fees	35,257		3,076		29,695		22		374		68,424		23,685		92,109
Compensation and benefits	(598,125)		(85,024)		(153,870)		(62,160)		(15,812)		(914,991)		(361,124)		(1,276,115)
General, administrative and other expenses	(96,733)		(35,762)		(46,789)		(21,199)		(3,119)		(203,602)		(200,613)		(404,215)
Fee related earnings	1,257,528		112,541		218,807		104,387		8,530		1,701,793		(538,052)		1,163,741
Performance income—realized	271,550		117,899		20,990		5,460		—		415,899		—		415,899
Performance related compensation—realized	(175,193)		(89,767)		(12,768)		(4,678)		—		(282,406)		—		(282,406)
Realized net performance income	96,357		28,132		8,222		782		—		133,493		—		133,493
Investment income (loss)—realized	20,111		(1,434)		(4,498)		—		170		14,349		—		14,349
Interest and other investment income—realized	21,975		4,952		11,055		4,867		16,623		59,472		748		60,220
Interest expense	(27,300)		(21,422)		(16,391)		(8,980)		(32,026)		(106,119)		(156)		(106,275)
Realized net investment income (loss)	14,786		(17,904)		(9,834)		(4,113)		(15,233)		(32,298)		592		(31,706)
Realized income	$	1,368,671	$	122,769	$	217,195	$	101,056	$	(6,703)	$	1,802,988	$	(537,460)	$	1,265,528
	Year ended December 31, 2022
	Credit Group		Private Equity Group		Real Assets Group		Secondaries Group		Other		Total Segments		OMG		Total
Management fees	$	1,416,518	$	199,837	$	347,808	$	176,694	$	11,671	$	2,152,528	$	—	$	2,152,528
Fee related performance revenues	71,497		—		167,693		235		—		239,425		—		239,425
Other fees	31,992		1,888		35,879		—		274		70,033		24,529		94,562
Compensation and benefits	(462,681)		(86,561)		(240,015)		(53,743)		(12,108)		(855,108)		(317,396)		(1,172,504)
General, administrative and other expenses	(79,434)		(30,697)		(39,739)		(12,685)		(2,089)		(164,644)		(155,017)		(319,661)
Fee related earnings	977,892		84,467		271,626		110,501		(2,252)		1,442,234		(447,884)		994,350
Performance income—realized	156,929		123,806		133,130		4,156		—		418,021		—		418,021
Performance related compensation—realized	(97,621)		(90,300)		(83,105)		(3,515)		—		(274,541)		—		(274,541)
Realized net performance income	59,308		33,506		50,025		641		—		143,480		—		143,480
Investment income (loss)—realized	7,078		3,432		3,115		—		861		14,486		(37)		14,449
Interest and other investment income (expense)—realized	27,288		2,546		9,045		3,683		9,130		51,692		(1,588)		50,104
Interest expense	(15,932)		(15,953)		(11,346)		(5,660)		(21,781)		(70,672)		(684)		(71,356)
Realized net investment income (loss)	18,434		(9,975)		814		(1,977)		(11,790)		(4,494)		(2,309)		(6,803)
Realized income	$	1,055,634	$	107,998	$	322,465	$	109,165	$	(14,042)	$	1,581,220	$	(450,193)	$	1,131,027

	Year ended December 31, 2021
	Credit Group		Private Equity Group		Real Assets Group		Secondaries Group		Other		Total Segments		OMG		Total
Management fees	$	1,128,887	$	181,918	$	218,202	$	97,945	$	8,325	$	1,635,277	$	—	$	1,635,277
Fee related performance revenues	86,480		—		51,399		—		—		137,879		—		137,879
Other fees	27,152		1,070		13,038		—		33		41,293		8,478		49,771
Compensation and benefits	(429,150)		(78,156)		(127,679)		(25,215)		(7,917)		(668,117)		(226,725)		(894,842)
General, administrative and other expenses	(61,712)		(21,625)		(24,181)		(6,862)		(752)		(115,132)		(100,645)		(215,777)
Fee related earnings	751,657		83,207		130,779		65,868		(311)		1,031,200		(318,892)		712,308
Performance income—realized	207,450		171,637		95,270		70		—		474,427		—		474,427
Performance related compensation—realized	(131,902)		(137,576)		(59,056)		(49)		—		(328,583)		—		(328,583)
Realized net performance income	75,548		34,061		36,214		21		—		145,844		—		145,844
Investment income (loss)—realized	1,985		(3,754)		17,700		19		17		15,967		—		15,967
Interest and other investment income—realized	20,728		11,514		7,252		2,261		3,597		45,352		226		45,578
Interest expense	(8,098)		(7,925)		(6,394)		(836)		(12,971)		(36,224)		(536)		(36,760)
Realized net investment income (loss)	14,615		(165)		18,558		1,444		(9,357)		25,095		(310)		24,785
Realized income	$	841,820	$	117,103	$	185,551	$	67,333	$	(9,668)	$	1,202,139	$	(319,202)	$	882,937

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

	Year ended December 31,
	2023		2022		2021
Segment revenues
Management fees	$	2,571,513	$	2,152,528	$	1,635,277
Fee related performance revenues	180,449		239,425		137,879
Other fees	68,424		70,033		41,293
Performance income—realized	415,899		418,021		474,427
Total segment revenues	$	3,236,285	$	2,880,007	$	2,288,876
Segment expenses
Compensation and benefits	$	914,991	$	855,108	$	668,117
General, administrative and other expenses	203,602		164,644		115,132
Performance related compensation—realized	282,406		274,541		328,583
Total segment expenses	$	1,400,999	$	1,294,293	$	1,111,832
Segment realized net investment income (expense)
Investment income—realized	$	14,349	$	14,486	$	15,967
Interest and other investment income —realized	59,472		51,692		45,352
Interest expense	(106,119)		(70,672)		(36,224)
Total segment realized net investment income (expense)	$	(32,298)	$	(4,494)	$	25,095

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

	Year ended December 31,
	2023		2022		2021
Total consolidated revenue	$	3,631,884	$	3,055,443	$	4,212,091
Performance income—unrealized	(305,370)		(107,153)		(1,744,056)
Management fees of Consolidated Funds eliminated in consolidation	48,201		46,324		44,896
Performance income of Consolidated Funds eliminated in consolidation	13,672		11,529		5,458
Administrative, transaction and other fees of Consolidated Funds eliminated in consolidation	7,166		17,013		4,483
Administrative fees(1)	(63,144)		(69,414)		(49,223)
OMG revenue	(23,685)		(24,354)		(8,478)
Acquisition-related incentive fees(2)	—		—		(47,873)
Principal investment income, net of eliminations	(36,516)		(12,278)		(99,433)
Net revenue of non-controlling interests in consolidated subsidiaries	(35,923)		(37,103)		(28,989)
Total consolidation adjustments and reconciling items	(395,599)		(175,436)		(1,923,215)
Total segment revenue	$	3,236,285	$	2,880,007	$	2,288,876

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

(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.

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

	Year ended December 31,
	2023		2022		2021
Total consolidated expenses	$	2,797,858	$	2,749,085	$	3,410,083
Performance related compensation-unrealized	(206,923)		(88,502)		(1,316,205)
Expenses of Consolidated Funds added in consolidation	(93,167)		(86,988)		(113,024)
Expenses of Consolidated Funds eliminated in consolidation	50,108		50,833		50,538
Administrative fees(1)	(62,773)		(68,255)		(49,223)
OMG expenses	(561,737)		(472,413)		(327,370)
Acquisition and merger-related expense	(12,000)		(15,197)		(21,162)
Equity compensation expense	(255,790)		(200,106)		(237,191)
Acquisition-related compensation expense(2)	(7,334)		(206,252)		(66,893)
Placement fee adjustment	5,819		(2,088)		(78,883)
Depreciation and amortization expense	(233,185)		(335,083)		(106,705)
Expense of non-controlling interests in consolidated subsidiaries	(19,877)		(30,741)		(32,133)
Total consolidation adjustments and reconciling items	(1,396,859)		(1,454,792)		(2,298,251)
Total segment expenses	$	1,400,999	$	1,294,293	$	1,111,832

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

(2)Represents contingent obligations (“earnouts”) resulting from the Landmark Acquisition, the Black Creek Acquisition, the Infrastructure Debt Acquisition and the Crescent Point Acquisition that are recorded as compensation expense and are presented within compensation and benefits within the Company’s Consolidated Statements of Operations.

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

	Year ended December 31,
	2023		2022		2021
Total consolidated other income	$	499,037	$	204,448	$	263,682
Investment (income) loss—unrealized	(184,929)		12,769		(58,694)
Interest and other investment (income) loss—unrealized	6,448		(25,603)		6,249
Other income, net from Consolidated Funds added in consolidation	(492,848)		(250,144)		(256,375)
Other expense, net from Consolidated Funds eliminated in consolidation	(16,485)		(16,484)		(2,868)
OMG other (income) expense	1,074		14,419		(1,368)
Principal investment income	155,632		48,223		120,896
Other (income) expense, net	976		1,873		(19,886)
Other (income) loss of non-controlling interests in consolidated subsidiaries	(1,203)		6,005		(26,541)
Total consolidation adjustments and reconciling items	(531,335)		(208,942)		(238,587)
Total segment realized net investment income (expense)	$	(32,298)	$	(4,494)	$	25,095

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,
	2023		2022		2021
Income before taxes	$	1,333,063	$	510,806	$	1,065,690
Adjustments:
Depreciation and amortization expense	233,185		335,083		106,705
Equity compensation expense	255,419		198,948		237,191
Acquisition-related compensation expense(1)	7,334		206,252		66,893
Acquisition-related incentive fees(2)	—		—		(47,873)
Acquisition and merger-related expense	12,000		15,197		21,162
Placement fee adjustment	(5,819)		2,088		78,883
OMG expense, net	539,126		462,478		317,524
Other (income) expense, net	976		1,874		(19,886)
Income before taxes of non-controlling interests in consolidated subsidiaries	(17,249)		(357)		(23,397)
Income before taxes of non-controlling interests in Consolidated Funds, net of eliminations	(278,119)		(119,664)		(120,457)
Total performance income—unrealized	(305,370)		(107,153)		(1,744,056)
Total performance related compensation—unrealized	206,923		88,502		1,316,205
Total investment income—unrealized	(178,481)		(12,834)		(52,445)
Realized income	1,802,988		1,581,220		1,202,139
Total performance income—realized	(415,899)		(418,021)		(474,427)
Total performance related compensation—realized	282,406		274,541		328,583
Total investment (income) loss—realized	32,298		4,494		(25,095)
Fee related earnings	$	1,701,793	$	1,442,234	$	1,031,200

(1)Represents earnouts resulting from the Landmark Acquisition, the Black Creek Acquisition, the Infrastructure Debt Acquisition and the Crescent Point Acquisition that are recorded as compensation expense and are presented within compensation and benefits within the Company’s 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 within the Company’s Consolidated Statements of Operations of which 50% is included on an unconsolidated basis for segment reporting purposes.