SEGMENT REPORTING

6 Months Ended

Jun. 30, 2024

Segment Reporting [Abstract]

SEGMENT REPORTING

13. SEGMENT REPORTING

The Company operates through its distinct operating segments. On January 1, 2024, the Company changed its segment composition. The special opportunities strategy, historically part of the Private Equity Group, is now referred to as opportunistic credit and is presented within the Credit Group. 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, opportunistic credit, direct lending and Asia-Pacific (“APAC”) credit.

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

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

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 Operations Management Group (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.

Segment Profit Measures: These measures supplement and should be considered in addition to, and not in lieu of, the Condensed 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 Ares 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.

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

	Three months ended June 30, 2024
	Credit Group		Real Assets Group		Private Equity Group		Secondaries Group		Other		Total Segments		OMG		Total
Management fees	$	534,664	$	99,609	$	33,572	$	48,145	$	10,121	$	726,111	$	—	$	726,111
Fee related performance revenues	6,404		—		—		15,163		—		21,567		—		21,567
Other fees	10,481		6,445		447		54		168		17,595		5,480		23,075
Compensation and benefits	(142,658)		(39,125)		(14,075)		(20,825)		(5,100)		(221,783)		(98,370)		(320,153)
General, administrative and other expenses	(40,610)		(15,286)		(5,490)		(8,896)		(1,892)		(72,174)		(53,910)		(126,084)
Fee related earnings	368,281		51,643		14,454		33,641		3,297		471,316		(146,800)		324,516
Performance income—realized	98,256		5,206		5,819		361		—		109,642		—		109,642
Performance related compensation—realized	(60,942)		(3,503)		(4,661)		110		—		(68,996)		—		(68,996)
Realized net performance income	37,314		1,703		1,158		471		—		40,646		—		40,646
Investment income (loss)—realized	(519)		125		188		—		1,650		1,444		—		1,444
Interest and other investment income (expense)—realized	11,596		(4,526)		277		148		25,917		33,412		640		34,052
Interest expense	(8,774)		(6,729)		(5,768)		(2,578)		(13,546)		(37,395)		(105)		(37,500)
Realized net investment income (loss)	2,303		(11,130)		(5,303)		(2,430)		14,021		(2,539)		535		(2,004)
Realized income	$	407,898	$	42,216	$	10,309	$	31,682	$	17,318	$	509,423	$	(146,265)	$	363,158
	Three months ended June 30, 2023
	Credit Group		Real Assets Group		Private Equity Group		Secondaries Group		Other		Total Segments		OMG		Total
Management fees	$	448,358	$	95,239	$	29,822	$	41,785	$	6,548	$	621,752	$	—	$	621,752
Fee related performance revenues	222		334		—		298		—		854		—		854
Other fees	9,459		11,846		421		5		135		21,866		7,848		29,714
Compensation and benefits	(129,857)		(40,638)		(13,413)		(16,623)		(3,386)		(203,917)		(86,011)		(289,928)
General, administrative and other expenses	(27,576)		(10,863)		(3,601)		(4,151)		(588)		(46,779)		(49,467)		(96,246)
Fee related earnings	300,606		55,918		13,229		21,314		2,709		393,776		(127,630)		266,146
Performance income—realized	86,529		2,737		45,909		5,460		—		140,635		—		140,635
Performance related compensation—realized	(55,730)		(1,668)		(37,033)		(4,678)		—		(99,109)		—		(99,109)
Realized net performance income	30,799		1,069		8,876		782		—		41,526		—		41,526
Investment income (loss)—realized	17,565		(1,549)		2,084		—		—		18,100		—		18,100
Interest and other investment income—realized	7,344		2,393		191		182		1,839		11,949		328		12,277
Interest expense	(8,617)		(4,106)		(5,119)		(2,451)		(5,535)		(25,828)		(11)		(25,839)
Realized net investment income (loss)	16,292		(3,262)		(2,844)		(2,269)		(3,696)		4,221		317		4,538
Realized income	$	347,697	$	53,725	$	19,261	$	19,827	$	(987)	$	439,523	$	(127,313)	$	312,210

	Six months ended June 30, 2024
	Credit Group		Real Assets Group		Private Equity Group		Secondaries Group		Other		Total Segments		OMG		Total
Management fees	$	1,045,630	$	193,423	$	68,505	$	92,566	$	19,352	$	1,419,476	$	—	$	1,419,476
Fee related performance revenues	7,159		—		—		18,125		—		25,284		—		25,284
Other fees	20,392		11,520		886		58		282		33,138		9,813		42,951
Compensation and benefits	(277,507)		(77,043)		(28,860)		(33,539)		(10,692)		(427,641)		(192,527)		(620,168)
General, administrative and other expenses	(74,976)		(29,739)		(10,706)		(17,964)		(3,582)		(136,967)		(104,390)		(241,357)
Fee related earnings	720,698		98,161		29,825		59,246		5,360		913,290		(287,104)		626,186
Performance income—realized	115,022		8,883		8,557		361		—		132,823		—		132,823
Performance related compensation—realized	(69,676)		(5,731)		(6,855)		110		—		(82,152)		—		(82,152)
Realized net performance income	45,346		3,152		1,702		471		—		50,671		—		50,671
Investment income (loss)—realized	(917)		(332)		308		—		1,650		709		—		709
Interest and other investment income (expense)—realized	16,526		(691)		461		358		32,326		48,980		1,092		50,072
Interest expense	(17,787)		(12,678)		(11,657)		(5,276)		(27,781)		(75,179)		(145)		(75,324)
Realized net investment income (loss)	(2,178)		(13,701)		(10,888)		(4,918)		6,195		(25,490)		947		(24,543)
Realized income	$	763,866	$	87,612	$	20,639	$	54,799	$	11,555	$	938,471	$	(286,157)	$	652,314
	Six months ended June 30, 2023
	Credit Group		Real Assets Group		Private Equity Group		Secondaries Group		Other		Total Segments		OMG		Total
Management fees	$	878,825	$	192,709	$	59,662	$	81,648	$	11,527	$	1,224,371	$	—	$	1,224,371
Fee related performance revenues	822		334		—		3,569		—		4,725		—		4,725
Other fees	18,608		18,308		815		5		185		37,921		12,488		50,409
Compensation and benefits	(251,757)		(78,624)		(30,039)		(30,035)		(6,526)		(396,981)		(170,978)		(567,959)
General, administrative and other expenses	(54,252)		(23,147)		(8,086)		(8,443)		(1,196)		(95,124)		(95,639)		(190,763)
Fee related earnings	592,246		109,580		22,352		46,744		3,990		774,912		(254,129)		520,783
Performance income—realized	93,939		8,823		63,549		5,460		—		171,771		—		171,771
Performance related compensation—realized	(61,611)		(5,426)		(51,253)		(4,678)		—		(122,968)		—		(122,968)
Realized net performance income	32,328		3,397		12,296		782		—		48,803		—		48,803
Investment income (loss)—realized	18,071		(3,321)		2,963		—		170		17,883		—		17,883
Interest and other investment income—realized	15,457		4,214		357		1,407		8,187		29,622		236		29,858
Interest expense	(17,247)		(8,002)		(9,924)		(4,756)		(10,859)		(50,788)		(37)		(50,825)
Realized net investment income (loss)	16,281		(7,109)		(6,604)		(3,349)		(2,502)		(3,283)		199		(3,084)
Realized income	$	640,855	$	105,868	$	28,044	$	44,177	$	1,488	$	820,432	$	(253,930)	$	566,502

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

	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Segment revenues
Management fees	$	726,111	$	621,752	$	1,419,476	$	1,224,371
Fee related performance revenues	21,567		854		25,284		4,725
Other fees	17,595		21,866		33,138		37,921
Performance income—realized	109,642		140,635		132,823		171,771
Total segment revenues	$	874,915	$	785,107	$	1,610,721	$	1,438,788
Segment expenses
Compensation and benefits	$	221,783	$	203,917	$	427,641	$	396,981
General, administrative and other expenses	72,174		46,779		136,967		95,124
Performance related compensation—realized	68,996		99,109		82,152		122,968
Total segment expenses	$	362,953	$	349,805	$	646,760	$	615,073
Segment realized net investment income (expense)
Investment income—realized	$	1,444	$	18,100	$	709	$	17,883
Interest and other investment income —realized	33,412		11,949		48,980		29,622
Interest expense	(37,395)		(25,828)		(75,179)		(50,788)
Total segment realized net investment income (expense)	$	(2,539)	$	4,221	$	(25,490)	$	(3,283)

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

	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Total consolidated revenue	$	788,682	$	1,093,286	$	1,496,045	$	1,906,648
Performance (income) loss—unrealized	122,318		(288,220)		167,794		(415,933)
Management fees of Consolidated Funds eliminated in consolidation	12,002		12,005		24,455		23,606
Performance income of Consolidated Funds eliminated in consolidation	11,527		3,946		17,452		7,491
Administrative, transaction and other fees of Consolidated Funds eliminated in consolidation	168		2,135		281		6,978
Administrative fees(1)	(17,701)		(16,888)		(34,108)		(30,538)
OMG revenue	(5,481)		(7,848)		(9,814)		(12,488)
Principal investment income, net of eliminations	(29,458)		(6,888)		(36,508)		(29,646)
Net revenue of non-controlling interests in consolidated subsidiaries	(7,142)		(6,421)		(14,876)		(17,330)
Total consolidation adjustments and reconciling items	86,233		(308,179)		114,676		(467,860)
Total segment revenue	$	874,915	$	785,107	$	1,610,721	$	1,438,788

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

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

	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Total consolidated expenses	$	564,544	$	837,738	$	1,103,037	$	1,466,374
Performance related compensation-unrealized	107,182		(215,496)		171,696		(300,646)
Expenses of Consolidated Funds added in consolidation	(16,409)		(25,395)		(34,117)		(45,036)
Expenses of Consolidated Funds eliminated in consolidation	12,170		12,171		25,165		24,303
Administrative fees(1)	(17,701)		(16,890)		(34,108)		(30,167)
OMG expenses	(152,280)		(135,478)		(296,917)		(266,617)
Acquisition and merger-related expense	(3,650)		(2,757)		(14,228)		(7,712)
Equity compensation expense	(88,232)		(62,282)		(180,654)		(131,359)
Acquisition-related compensation expense(2)	(5,435)		(600)		(10,939)		(1,242)
Placement fee adjustment	230		3,744		(5,310)		6,976
Depreciation and amortization expense	(36,251)		(42,991)		(72,895)		(88,650)
Expense of non-controlling interests in consolidated subsidiaries	(1,215)		(1,959)		(3,970)		(11,151)
Total consolidation adjustments and reconciling items	(201,591)		(487,933)		(456,277)		(851,301)
Total segment expenses	$	362,953	$	349,805	$	646,760	$	615,073

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

(2)Represents contingent obligations (“earnouts”) resulting from 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 Condensed Consolidated Statements of Operations.

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

	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Total consolidated other income	$	93,187	$	126,421	$	155,365	$	182,817
Investment (income) loss—unrealized	22,471		(43,939)		18,786		(72,924)
Interest and other investment (income) loss—unrealized	437		4,310		(165)		4,518
Other income, net from Consolidated Funds added in consolidation	(108,326)		(146,934)		(188,303)		(209,851)
Other expense, net from Consolidated Funds eliminated in consolidation	(1,233)		(10,492)		(331)		(14,943)
OMG other (income) expense	(233)		1,153		(782)		1,804
Principal investment income (loss)	603		65,242		(2,063)		100,699
Other (income) expense, net	(11,430)		212		(11,299)		303
Other loss of non-controlling interests in consolidated subsidiaries	1,985		8,248		3,302		4,294
Total consolidation adjustments and reconciling items	(95,726)		(122,200)		(180,855)		(186,100)
Total segment realized net investment income (expense)	$	(2,539)	$	4,221	$	(25,490)	$	(3,283)

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

	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Income before taxes	$	317,325	$	381,969	$	548,373	$	623,091
Adjustments:
Depreciation and amortization expense	36,251		42,991		72,895		88,650
Equity compensation expense	88,234		62,284		180,655		130,988
Acquisition-related compensation expense(1)	5,435		600		10,939		1,242
Acquisition and merger-related expense	3,650		2,757		14,228		7,712
Placement fee adjustment	(230)		(3,744)		5,310		(6,976)
OMG expense, net	146,567		128,783		286,322		255,933
Other (income) expense, net	(11,430)		212		(11,299)		303
(Income) loss before taxes of non-controlling interests in consolidated subsidiaries	(3,942)		3,786		(7,604)		(1,885)
Income before taxes of non-controlling interests in Consolidated Funds, net of eliminations	(110,481)		(67,762)		(176,067)		(94,933)
Total performance (income) loss—unrealized	122,318		(288,220)		167,794		(415,933)
Total performance related compensation—unrealized	(107,182)		215,496		(171,696)		300,646
Total investment (income) loss—unrealized	22,908		(39,629)		18,621		(68,406)
Realized income	509,423		439,523		938,471		820,432
Total performance income—realized	(109,642)		(140,635)		(132,823)		(171,771)
Total performance related compensation—realized	68,996		99,109		82,152		122,968
Total investment (income) loss—realized	2,539		(4,221)		25,490		3,283
Fee related earnings	$	471,316	$	393,776	$	913,290	$	774,912

(1)Represents earnouts resulting from 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 Condensed Consolidated Statements of Operations.