SEGMENT REPORTING

9 Months Ended

Sep. 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 September 30, 2024
	Credit Group		Real Assets Group		Private Equity Group		Secondaries Group		Other		Total Segments		OMG		Total
Management fees	$	557,450	$	105,733	$	34,621	$	48,084	$	11,374	$	757,262	$	—	$	757,262
Fee related performance revenues	41,761		—		—		2,508		—		44,269		—		44,269
Other fees	10,520		7,263		372		58		114		18,327		5,253		23,580
Compensation and benefits	(179,987)		(42,360)		(13,877)		(14,432)		(7,245)		(257,901)		(102,112)		(360,013)
General, administrative and other expenses	(41,046)		(14,118)		(4,576)		(8,464)		(1,459)		(69,663)		(56,124)		(125,787)
Fee related earnings	388,698		56,518		16,540		27,754		2,784		492,294		(152,983)		339,311
Performance income—realized	6,192		15,441		475		—		—		22,108		—		22,108
Performance related compensation—realized	(3,451)		(9,403)		(380)		—		—		(13,234)		—		(13,234)
Realized net performance income	2,741		6,038		95		—		—		8,874		—		8,874
Investment income—realized	916		2,003		197		—		732		3,848		—		3,848
Interest and other investment income—realized	7,083		1,971		333		96		6,477		15,960		496		16,456
Interest expense	(7,625)		(4,511)		(4,862)		(2,191)		(10,409)		(29,598)		(135)		(29,733)
Realized net investment income (loss)	374		(537)		(4,332)		(2,095)		(3,200)		(9,790)		361		(9,429)
Realized income	$	391,813	$	62,019	$	12,303	$	25,659	$	(416)	$	491,378	$	(152,622)	$	338,756
	Three months ended September 30, 2023
	Credit Group		Real Assets Group		Private Equity Group		Secondaries Group		Other		Total Segments		OMG		Total
Management fees	$	470,609	$	92,754	$	29,799	$	42,949	$	7,538	$	643,649	$	—	$	643,649
Fee related performance revenues	44		—		—		2,168		—		2,212		—		2,212
Other fees	7,202		6,308		430		8		83		14,031		5,717		19,748
Compensation and benefits	(131,172)		(37,608)		(13,145)		(16,066)		(3,233)		(201,224)		(90,347)		(291,571)
General, administrative and other expenses	(28,093)		(10,318)		(3,470)		(4,541)		(924)		(47,346)		(52,460)		(99,806)
Fee related earnings	318,590		51,136		13,614		24,518		3,464		411,322		(137,090)		274,232
Performance income—realized	12,223		5,589		(15)		—		—		17,797		—		17,797
Performance related compensation—realized	(7,181)		(3,338)		15		—		—		(10,504)		—		(10,504)
Realized net performance income	5,042		2,251		—		—		—		7,293		—		7,293
Investment income (loss)—realized	1,475		(875)		(4,631)		—		—		(4,031)		—		(4,031)
Interest and other investment income—realized	5,601		3,148		214		552		3,305		12,820		114		12,934
Interest expense	(5,825)		(3,985)		(4,313)		(2,020)		(9,809)		(25,952)		(23)		(25,975)
Realized net investment income (loss)	1,251		(1,712)		(8,730)		(1,468)		(6,504)		(17,163)		91		(17,072)
Realized income	$	324,883	$	51,675	$	4,884	$	23,050	$	(3,040)	$	401,452	$	(136,999)	$	264,453

	Nine months ended September 30, 2024
	Credit Group		Real Assets Group		Private Equity Group		Secondaries Group		Other		Total Segments		OMG		Total
Management fees	$	1,603,080	$	299,156	$	103,126	$	140,650	$	30,726	$	2,176,738	$	—	$	2,176,738
Fee related performance revenues	48,920		—		—		20,633		—		69,553		—		69,553
Other fees	30,912		18,783		1,258		116		396		51,465		15,066		66,531
Compensation and benefits	(457,494)		(119,403)		(42,737)		(47,971)		(17,937)		(685,542)		(294,639)		(980,181)
General, administrative and other expenses	(116,022)		(43,857)		(15,282)		(26,428)		(5,041)		(206,630)		(160,514)		(367,144)
Fee related earnings	1,109,396		154,679		46,365		87,000		8,144		1,405,584		(440,087)		965,497
Performance income—realized	121,214		24,324		9,032		361		—		154,931		—		154,931
Performance related compensation—realized	(73,127)		(15,134)		(7,235)		110		—		(95,386)		—		(95,386)
Realized net performance income	48,087		9,190		1,797		471		—		59,545		—		59,545
Investment income (loss)—realized	(1)		1,671		505		—		2,382		4,557		—		4,557
Interest and other investment income—realized	23,609		1,280		794		454		38,803		64,940		1,588		66,528
Interest expense	(25,412)		(17,189)		(16,519)		(7,467)		(38,190)		(104,777)		(280)		(105,057)
Realized net investment income (loss)	(1,804)		(14,238)		(15,220)		(7,013)		2,995		(35,280)		1,308		(33,972)
Realized income	$	1,155,679	$	149,631	$	32,942	$	80,458	$	11,139	$	1,429,849	$	(438,779)	$	991,070
	Nine months ended September 30, 2023
	Credit Group		Real Assets Group		Private Equity Group		Secondaries Group		Other		Total Segments		OMG		Total
Management fees	$	1,349,434	$	285,463	$	89,461	$	124,597	$	19,065	$	1,868,020	$	—	$	1,868,020
Fee related performance revenues	866		334		—		5,737		—		6,937		—		6,937
Other fees	25,810		24,616		1,245		13		268		51,952		18,205		70,157
Compensation and benefits	(382,929)		(116,232)		(43,184)		(46,101)		(9,759)		(598,205)		(261,325)		(859,530)
General, administrative and other expenses	(82,345)		(33,465)		(11,556)		(12,984)		(2,120)		(142,470)		(148,099)		(290,569)
Fee related earnings	910,836		160,716		35,966		71,262		7,454		1,186,234		(391,219)		795,015
Performance income—realized	106,162		14,412		63,534		5,460		—		189,568		—		189,568
Performance related compensation—realized	(68,792)		(8,764)		(51,238)		(4,678)		—		(133,472)		—		(133,472)
Realized net performance income	37,370		5,648		12,296		782		—		56,096		—		56,096
Investment income (loss)—realized	19,546		(4,196)		(1,668)		—		170		13,852		—		13,852
Interest and other investment income—realized	21,058		7,362		571		1,959		11,492		42,442		350		42,792
Interest expense	(23,072)		(11,987)		(14,237)		(6,776)		(20,668)		(76,740)		(60)		(76,800)
Realized net investment income (loss)	17,532		(8,821)		(15,334)		(4,817)		(9,006)		(20,446)		290		(20,156)
Realized income	$	965,738	$	157,543	$	32,928	$	67,227	$	(1,552)	$	1,221,884	$	(390,929)	$	830,955

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

	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Segment revenues
Management fees	$	757,262	$	643,649	$	2,176,738	$	1,868,020
Fee related performance revenues	44,269		2,212		69,553		6,937
Other fees	18,327		14,031		51,465		51,952
Performance income—realized	22,108		17,797		154,931		189,568
Total segment revenues	$	841,966	$	677,689	$	2,452,687	$	2,116,477
Segment expenses
Compensation and benefits	$	257,901	$	201,224	$	685,542	$	598,205
General, administrative and other expenses	69,663		47,346		206,630		142,470
Performance related compensation—realized	13,234		10,504		95,386		133,472
Total segment expenses	$	340,798	$	259,074	$	987,558	$	874,147
Segment realized net investment income (loss)
Investment income (loss)—realized	$	3,848	$	(4,031)	$	4,557	$	13,852
Interest and other investment income —realized	15,960		12,820		64,940		42,442
Interest expense	(29,598)		(25,952)		(104,777)		(76,740)
Total segment realized net investment loss	$	(9,790)	$	(17,163)	$	(35,280)	$	(20,446)

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

	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Total consolidated revenue	$	1,129,739	$	671,255	$	2,625,784	$	2,577,903
Performance (income) loss—unrealized	(263,553)		31,400		(95,759)		(384,533)
Management fees of Consolidated Funds eliminated in consolidation	11,660		12,181		36,115		35,787
Performance income of Consolidated Funds eliminated in consolidation	1,032		1,874		18,484		9,365
Administrative, transaction and other fees of Consolidated Funds eliminated in consolidation	128		83		409		7,061
Administrative fees(1)	(18,093)		(16,154)		(52,201)		(46,692)
OMG revenue	(5,252)		(5,717)		(15,066)		(18,205)
Principal investment income, net of eliminations	(8,036)		(9,339)		(44,547)		(38,985)
Net revenue of non-controlling interests in consolidated subsidiaries	(5,659)		(7,894)		(20,532)		(25,224)
Total consolidation adjustments and reconciling items	(287,773)		6,434		(173,097)		(461,426)
Total segment revenue	$	841,966	$	677,689	$	2,452,687	$	2,116,477

(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 September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Total consolidated expenses	$	854,887	$	560,960	$	1,957,924	$	2,027,334
Performance related compensation-unrealized	(180,174)		38,650		(8,478)		(261,996)
Expenses of Consolidated Funds added in consolidation	(14,083)		(19,329)		(48,200)		(64,365)
Expenses of Consolidated Funds eliminated in consolidation	11,355		12,297		36,520		36,600
Administrative fees(1)	(18,093)		(16,154)		(52,201)		(46,321)
OMG expenses	(158,236)		(142,807)		(455,153)		(409,424)
Acquisition and merger-related expense	(25,166)		(2,414)		(39,394)		(10,126)
Equity compensation expense	(85,613)		(61,976)		(266,267)		(193,335)
Acquisition-related compensation expense(2)	(5,435)		(589)		(16,374)		(1,831)
Placement fee adjustment	4,485		(944)		(825)		6,032
Depreciation and amortization expense	(46,005)		(105,524)		(118,900)		(194,174)
Expense of non-controlling interests in consolidated subsidiaries	2,876		(3,096)		(1,094)		(14,247)
Total consolidation adjustments and reconciling items	(514,089)		(301,886)		(970,366)		(1,153,187)
Total segment expenses	$	340,798	$	259,074	$	987,558	$	874,147

(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 (loss):

	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Total consolidated other income	$	52,254	$	116,577	$	207,619	$	299,394
Investment (income) loss—unrealized	(4,950)		(31,246)		13,836		(104,170)
Interest and other investment (income) loss—unrealized	15,258		(5,720)		15,093		(1,202)
Other income, net from Consolidated Funds added in consolidation	(87,804)		(125,857)		(276,107)		(335,708)
Other expense, net from Consolidated Funds eliminated in consolidation	194		(383)		(137)		(15,326)
OMG other (income) expense	(220)		(591)		(1,002)		1,213
Principal investment income	14,101		29,980		12,038		130,679
Other (income) expense, net	3,389		286		(7,910)		589
Other (income) loss of non-controlling interests in consolidated subsidiaries	(2,012)		(209)		1,290		4,085
Total consolidation adjustments and reconciling items	(62,044)		(133,740)		(242,899)		(319,840)
Total segment realized net investment loss	$	(9,790)	$	(17,163)	$	(35,280)	$	(20,446)

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 September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Income before taxes	$	327,106	$	226,872	$	875,479	$	849,963
Adjustments:
Depreciation and amortization expense	46,005		105,524		118,900		194,174
Equity compensation expense	85,612		61,976		266,267		192,964
Acquisition-related compensation expense(1)	5,435		589		16,374		1,831
Acquisition and merger-related expense	25,166		2,414		39,394		10,126
Placement fee adjustment	(4,485)		944		825		(6,032)
OMG expense, net	152,763		136,499		439,085		392,432
Other (income) expense, net	3,389		286		(7,910)		589
Income before taxes of non-controlling interests in consolidated subsidiaries	(10,544)		(5,007)		(18,148)		(6,892)
Income before taxes of non-controlling interests in Consolidated Funds, net of eliminations	(65,998)		(84,429)		(242,065)		(179,362)
Total performance (income) loss—unrealized	(263,553)		31,400		(95,759)		(384,533)
Total performance related compensation—unrealized	180,174		(38,650)		8,478		261,996
Total investment (income) loss—unrealized	10,308		(36,966)		28,929		(105,372)
Realized income	491,378		401,452		1,429,849		1,221,884
Total performance income—realized	(22,108)		(17,797)		(154,931)		(189,568)
Total performance related compensation—realized	13,234		10,504		95,386		133,472
Total investment loss—realized	9,790		17,163		35,280		20,446
Fee related earnings	$	492,294	$	411,322	$	1,405,584	$	1,186,234

(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.