Ares Management Corporation · NYSE:ARES
Ares Management — Investor Day (2021)
46 slides from Ares Management's investor day presentation, 2021
Slide 1: Strategy Overview & Outlook
Strategy Overview & Outlook Michael Arougheti Co-Founder, Chief Executive Officer and President Ares Management Corporation Investor Day 2021 - Not for Publication or Distribution
Slide 2: Important Notice
Important Notice This presentation is prepared for Ares Management Corporation (NYSE: ARES) for the benefit of its public stockholders. This presentation is solely for information purposes in connection with evaluating the business, operations and financial results of Ares Management Corporation (“A
Slide 3: Important Notice
Important Notice Dated information: This video may contain dated information. Viewers are cautioned that this video and the associated presentation is maintained here solely for the purposes of providing historical background about Ares Management Corporation. As the video may contain dated informat
Slide 4: We Believe Our Platform Provides Advantages and a Strong Foundation for Growth
We Believe Our Platform Provides Advantages and a Strong Foundation for Growth Culture of Consistent Growth Business Model Focus on long-term growth Deep Team Alignment of Management informs how we manage with a fee-centric model creates Interests with the business and serve our clients Collaborativ
Slide 5: We Operate with a Repeatable Business Model That Drives Strong Outcomes
We Operate with a Repeatable Business Model That Drives Strong Outcomes Annual Fundraising Deployment ($ in billions) ($ in billions) $28.2 $56 +18% ARES Total Return $23 +23% CAGR $9.0 $70.70 CAGR $7.11 Cumulative Dividends 2015 Q2-21 LTM 2015 Q2-21 LTM +36% CAGR $63.59 Stock Price Direct Instituti
Slide 6: Multi-Decade Trend Towards Private Capital Will Continue
Multi-Decade Trend Towards Private Capital Will Continue As Investors Expand Into Alternatives Growth in Private Debt • Private debt experiences Bank Retrenchment from increasing demand from borrowers Middle Market Growth in Private Equity • Investors begin increasing allocations to private debt • M
Slide 7: We Have Meaningfully Diversified and Expanded our Business Lines (IPO)
We Have Meaningfully Diversified and Expanded our Business Lines Our focus on investment performance and broadening the platform has supported significant asset growth since our IPO AUM at IPO in 2014: $77 billion1 Number of Total Funds & 58 22 8 5 9 42 144 Accounts $30 $23 $11 $8 $6 $1 Liquid Credi
Slide 8: We Have Meaningfully Diversified and Expanded our Business Lines (Today)
We Have Meaningfully Diversified and Expanded our Business Lines Our focus on investment performance and broadening the platform has supported significant asset growth since our IPO AUM Today: $262 billion1 Total Number of Funds & 92 60 30 28 22 52 55 17 356 Accounts $69 $48 $36 $33 $31 $19 $15 $10
Slide 9: Our Repeatable Formula for Successful Growth and Expansion
Our Repeatable Formula for Successful Growth and Expansion 1 2 3 Invest in Large and Leverage the Power of Grow through Growing Markets Our Platform to deliver Innovation where we add value strong performance & Business Building and have Substantial Room to Expand Ares Management Corporation Investo
Slide 10: We Are Market Leaders In Large, Global Markets
We Are Market Leaders In Large, Global Markets We have meaningful opportunities for growth with fragmented competition Addressable Market Ares AUM Ares Share of the ($ in trillions) ($ in billions) Addressable Market Credit $10.61 $168 1.6% Private Equity $4.22 $278* 0.6% Infrastructure $0.83 $48* 0
Slide 11: We Are Significantly Outpacing the Growth in Our Market
We Are Significantly Outpacing the Growth in Our Market Our growth has been > 2x the alternative market which is growing faster than overall market for AUM. The alternative market is expected to continue to grow 2x the overall market for AUM and ARES is targeting to continue such growth 2016 – 2020
Slide 12: Our Repeatable Formula for Successful Growth and Expansion
Our Repeatable Formula for Successful Growth and Expansion 1 2 3 Invest in Large and Leverage the Power of Grow through Growing Markets Our Platform to deliver Innovation where we add value strong performance & Business Building and have Substantial Room to Expand Ares Management Corporation Investo
Slide 13: Our Scaled Platform Drives Strong Performance Across Funds
Our Scaled Platform Drives Strong Performance Across Funds Extensive sourcing, information advantages and opportunities within our portfolio help drive strong performance Global Direct Sourcing Drives Proprietary Deal Flow and Outcomes • Broad market coverage enables better relative value lens and a
Slide 14: Delivering Consistent and Attractive Investment Performance Through Cycles
Delivering Consistent and Attractive Investment Performance Through Cycles Gross Return Since Inception 34% Net Return Since Inception Annualized Total Stock-Based Return Since Inception 22% 22% 16% 14% 13% 13% 12% 9% 10% 8% 8% 7% 7% 8% 7% 6% U.S. Direct European Direct Alternative U.S. High Yield U
Slide 15: Delivering Consistent and Attractive Investment Performance Through Cycles
Delivering Consistent and Attractive Investment Performance Through Cycles Gross Return Since Inception Net Return Since Inception 68% 33% 24% 52% 22% 21% 25% 19% 19% 18% 17% 15% 14% 13% Special Corporate Infrastructure & U.S. Value-Add European Value- Private Equity Real Estate Opportunities Opport
Slide 16: Our Repeatable Formula for Successful Growth and Expansion
Our Repeatable Formula for Successful Growth and Expansion 1 2 3 Invest in Large and Leverage the Power of Grow through Growing Markets Our Platform to deliver Innovation where we add value strong performance & Business Building and have Substantial Room to Expand Ares Management Corporation Investo
Slide 17: We Build Businesses Using a Consistent Playbook for Results
We Build Businesses Using a Consistent Playbook for Results Phase 1 Phase 2 Phase 3 Identify Opportunity and Build Integrate Platform and Provide Expansion and Drive Scale Platform Flexible Capital Identify Market Needs or Inefficiencies in Integrate Into the Ares Culture Expand Product Suite Large
Slide 18: Examples of Using Our Growth Playbook For Organic & Inorganic Opportunities
Examples of Using Our Growth Playbook For Organic & Inorganic Opportunities De Novo Team Build Strategic Acquisitions Growth Playbook EU DL ASOF Indicus AREA SSG Aspida Landmark Black Creek Invest In Large Addressable End Markets High Quality Leadership Team and Investment Talent
Slide 19: History of Innovation, Business Building and Strategic Acquisitions
History of Innovation, Business Building and Strategic Acquisitions Following strategic acquisitions and de novo builds we add adjacent strategies to drive scale and profitability ($ in billions) Since Initial AUM1 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Slide 20: Case Study – European Direct Lending
Case Study – European Direct Lending European Team Lift Out (2007) Created Ares European Direct Lending Strategy Hired London Financial Sponsor Team @ Large European Bank $0 Billion AUM at Inception Growth Strategy Current Fund Statistics European Direct Lending • $48 billion in AUM, up nearly 5x in
Slide 21: Case Study – Special Opportunities
Case Study – Special Opportunities Special Opportunities Team Formation (2017) Hired Scott Graves, Craig Snyder & Aaron Rosen $0 Billion AUM At Hiring Growth Strategy Current Fund Statistics • 67.9% Gross / 52.2% Net IRR since inception • Built a team of 17 investment professionals housed within ASO
Slide 22: Case Study – Indicus (Alternative Credit)
Case Study – Indicus (Alternative Credit) Acquired Indicus in 2011 Created Ares Alternative Credit 17 professionals in London & New York $2 Billion AUM At Acquisition1 Growth Strategy Current Fund Statistics Alternative Credit • $14.5 billion in AUM* • Formed the basis for our Alternative Credit tea
Slide 23: Case Study – AREA Property Partners (Real Estate Equity)
Case Study – AREA Property Partners (Real Estate Equity) Acquired AREA Property Partners - 2013 Added Ares Real Estate Group 50+ professionals with 6 offices across U.S. & Europe Approximately $6 Billion AUM At Acquisition1 Growth Strategy Current Fund Statistics Real Estate Group • $33.4 billion in
Slide 24: We Continue to Innovate and Create New Investment Strategies
We Continue to Innovate and Create New Investment Strategies Established Emerging Future Growth Strategies & Products Strategies & Products Strategies & Products Credit Credit Credit ARCC PCS Series Pathfinder Series Global Multi Asset Core Alternative Non-Traded Credit ACE Series SDL Series Secured
Slide 25: Expanding Our Primary Distribution Channels
Expanding Our Primary Distribution Channels We have expanded our fundraising and client servicing platforms in the ~$280 Trillion addressable market $189 Billion in AUM • Commingled Funds Institutional Channel • Separately Managed Accounts • CLOs AUM $63 Trillion Addressable Market1 $262 Billion $41
Slide 26: Looking Forward…We Are Targeting $500+ Billion of AUM by Year-End 2025
Looking Forward…We Are Targeting $500+ Billion of AUM by Year-End 2025 We have multiple growth drivers for each of our business groups ($ in billions) $500+ Potential Tuck-In Inorganic Opportunities* Leverage Expanded Geographic Footprint Expand and Penetrate Distribution Channels Launch Ancillary P
Slide 27: Appendix
Appendix Ares Management Corporation Investor Day 2021 - Not for Publication or Distribution
Slide 28: GAAP Statement Of Operations
GAAP Statement Of Operations Year Ended December 31, $ in thousands, except share data Q2-21 LTM 2020 2019 2018 2017 2016 2015 2014 Revenues Management fees $1,307,451 $1,150,608 $979,417 $802,502 $722,419 $642,068 $634,399 $486,477 Carried interest allocation 1,583,262 505,608 621,872 42,410 620,45
Slide 29: RI and Other Measures Financial Summary
RI and Other Measures Financial Summary Year Ended December 31, $ in thousands, except share data (and as otherwise noted) Q2-21 LTM 2020 2019 2018 2017 2016 2015 2014 Management fees(1) $1,335,413 $1,186,565 $1,012,530 $836,744 $744,825 $659,451 $650,918 $598,046 Other fees 25,993 19,948 18,078 24,
Slide 30: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis Year Ended December 31, $ in thousands Q2-21 LTM 2020 2019 2018 2017 2016 2015 2014 Realized Income and Fee Related Earnings: Income before taxes $944,635 $379,478 $425,180 $184,341 $149,859 $297,920 $81,484 $556,915 Adjustments: Amort
Slide 31: GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd)
GAAP to Non-GAAP Reconciliation – Unconsolidated Reporting Basis (cont'd) Year Ended December 31, $ in thousands Q2-21 LTM 2020 2019 2018 2017 2016 2015 2014 Performance income and net investment income reconciliation: Carried interest allocation $1,583,262 $505,608 $621,872 $42,410 $620,454 $494,58
Slide 32: Glossary
Glossary Ares Management Corporation Investor Day 2021 - Not for Publication or Distribution
Slide 33: Glossary
Glossary ARCC Part II Fees ARCC Part II Fees refers to fees that are paid in arrears as of the end of each calendar year when the cumulative aggregate realized capital gains exceed the cumulative aggregate realized capital losses and aggregate unrealized capital depreciation, less the aggregate amou
Slide 34: Glossary
Glossary Fee Related Earnings Fee Related Earnings or “FRE”, a non-GAAP measure, is used to assess core operating performance by determining whether recurring revenue, primarily consisting of management fees, is sufficient to cover operating expenses and to generate profits. FRE differs from income
Slide 35: Glossary
Glossary Our Funds Our Funds refers to the funds, alternative asset companies, co-investment vehicles and other entities and accounts that are managed or co-managed by the Ares Operating Group, and which are structured to pay fees. It also includes funds managed by Ivy Hill Asset Management, L.P., a
Slide 36: Endnotes – Strategy Overview & Outlook
Endnotes – Strategy Overview & Outlook Ares Management Corporation Investor Day 2021 - Not for Publication or Distribution
Slide 37: Strategy Overview & Outlook Endnotes
Strategy Overview & Outlook Endnotes Multi-Decade Trend Towards Private Capital Will Continue As Investors Expand Into Alternatives 1. Source: The World Bank: World Federation of Exchanges Database as of June 30, 2021. Includes U.S. listed domestic companies. Most recent data for number of public co
Slide 38: Strategy Overview & Outlook Endnotes
Strategy Overview & Outlook Endnotes We Are Significantly Outpacing the Growth in Our Market 1. Sources: PwC AWM Research Centre analysis. Past data based on Lipper, ICI, Preqin, Hedge Fund Research, EFAMA, City UK, Insurance Europe, Financial Stability Board, Credit Suisse, Towers Watson, OECD and
Slide 39: Strategy Overview & Outlook Endnotes
Strategy Overview & Outlook Endnotes Delivering Consistent and Attractive Investment Performance Through Cycles (cont’d) • Credit Strategies (cont’d) o Alternative Credit – Illiquid The Total Alternative Credit track record shown includes the following: • Financial: all CLO investments in commingl
Slide 40: Strategy Overview & Outlook Endnotes
Strategy Overview & Outlook Endnotes Delivering Consistent and Attractive Investment Performance Through Cycles (cont’d) • Credit Strategies (cont’d) o U.S. High Yield The U.S. High Yield Composite ("Composite") includes all actual, fully discretionary, fee-paying, separately managed portfolios th
Slide 41: Strategy Overview & Outlook Endnotes
Strategy Overview & Outlook Endnotes Delivering Consistent and Attractive Investment Performance Through Cycles (cont’d) • Strategic Initiatives o Asia Distressed Credit & Asia Senior Lending Performance returns are represented by the combined performance of the underlying funds in each strategy.
Slide 42: Strategy Overview & Outlook Endnotes
Strategy Overview & Outlook Endnotes Delivering Consistent and Attractive Investment Performance Through Cycles (cont’d) • Private Equity Strategies o Special Opportunities Gross IRR presented is calculated on the basis of daily inflows and outflows of cash to and from the fund and Unrealized Valu
Slide 43: Strategy Overview & Outlook Endnotes
Strategy Overview & Outlook Endnotes Delivering Consistent and Attractive Investment Performance Through Cycles (cont’d) • Real Estate Equity Strategies o U.S. Value-Add Equity and European Value-Add Equity Performance presented in the chart is based on composites of funds with similar strategies.
Slide 44: Strategy Overview & Outlook Endnotes
Strategy Overview & Outlook Endnotes Delivering Consistent and Attractive Investment Performance Through Cycles (cont’d) • Secondary Solutions Strategies o Private Equity & Real Estate Performance returns are represented by the combined performance of the underlying funds in each strategy. Returns
Slide 45: Strategy Overview & Outlook Endnotes
Strategy Overview & Outlook Endnotes History of Innovation, Business Building and Strategic Acquisition 1. Represents AUM at initial launch or acquisition or in the case of liquid credit AUM as of 2003. 2. AUM amounts include funds managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio
Slide 46: Ares Management Corporation Investor Day 2021 - Not for Publication or Distribution
Ares Management Corporation Investor Day 2021 - Not for Publication or Distribution