# Ares Management Corp (ARES) FY 2023 MD&A Verbatim Item 7 Management's Discussion and Analysis from Ares Management Corp's 10-K for fiscal year 2023. SEC filing source: https://www.sec.gov/Archives/edgar/data/1176948/000162828024007014/ares-20231231.htm Accession: 0001628280-24-007014 Filing date: 2024-02-27 Report date: 2023-12-31 Extracted from a substantive MD&A body after the formal Item 7 span was a TOC or reference stub. Confidence: high Company profile: /company/ARES/ All MD&A years: /company/ARES/mda/ Previous year: /company/ARES/mda/fy2022/ (FY 2022) Next year: /company/ARES/mda/fy2024/ (FY 2024) Results of Operations Consolidated Results of Operations Although the consolidated results presented below include the results of our operations together with those of the Consolidated Funds and other joint ventures, we separate our analysis of those items primarily impacting the Company from those of the Consolidated Funds. The following table presents our summarized consolidated results of operations ($ in thousands): [[GREPCENT_TABLE]] [["","","","","","Year ended December 31,","","Favorable (Unfavorable)"],["","","","","","","","","","2023","","2022","","$ Change","","% Change"],["Total revenues","","","","","","","","","$","3,631,884","","","$","3,055,443","","","$","576,441","","","19%"],["Total expenses","","","","","","","","","(2,797,858)","","","(2,749,085)","","","(48,773)","","","(2)"],["Total other income, net","","","","","","","","","499,037","","","204,448","","","294,589","","","144"],["Less: Income tax expense","","","","","","","","","172,971","","","71,891","","","(101,080)","","","(141)"],["Net income","","","","","","","","","1,160,092","","","438,915","","","721,177","","","164"],["Less: Net income attributable to non-controlling interests in Consolidated Funds","","","","","","","","","274,296","","","119,333","","","154,963","","","130"],["Net income attributable to Ares Operating Group entities","","","","","","","","","885,796","","","319,582","","","566,214","","","177"],["Less: Net income (loss) attributable to redeemable interest in Ares Operating Group entities","","","","","","","","","226","","","(851)","","","1,077","","","NM"],["Less: Net income attributable to non-controlling interests in Ares Operating Group entities","","","","","","","","","411,244","","","152,892","","","258,352","","","169"],["Net income attributable to Ares Management Corporation Class A and non-voting common stockholders","","","","","","","","","$","474,326","","","$","167,541","","","306,785","","","183"]] [[/GREPCENT_TABLE]] Year Ended December 31, 2023 Compared to Year Ended December 31, 2022  Consolidated Results of Operations of the Company The following discussion sets forth information regarding our consolidated results of operations: Revenues [[GREPCENT_TABLE]] [["","","","","","Year ended December 31,","","Favorable (Unfavorable)"],["","","","","","","","","","2023","","2022","","$ Change","","% Change"],["Revenues"],["Management fees","","","","","","","","","$","2,551,150","","","$","2,136,433","","","$","414,717","","","19%"],["Carried interest allocation","","","","","","","","","618,579","","","458,012","","","160,567","","","35"],["Incentive fees","","","","","","","","","276,627","","","301,187","","","(24,560)","","","(8)"],["Principal investment income","","","","","","","","","36,516","","","12,279","","","24,237","","","197"],["Administrative, transaction and other fees","","","","","","","","","149,012","","","147,532","","","1,480","","","1"],["Total revenues","","","","","","","","","$","3,631,884","","","$","3,055,443","","","576,441","","","19"]] [[/GREPCENT_TABLE]] Management Fees. Capital deployment in direct lending funds within the Credit Group led to a rise in FPAUM and additional management fees of $166.1 million for the year ended December 31, 2023 compared to the prior year. Part I Fees contributed $109.6 million to the increase for the year ended December 31, 2023 compared to the prior year. The increase in Part I Fees was primarily due to the increase in pre-incentive fee net investment income generated by ARCC and CADC, driven by an increase in the average size of their portfolios and the impact of rising interest rates, given their primarily floating-rate loan portfolios. Of the total increase in Part I Fees, ASIF contributed $5.1 million as it began generating fees during the third quarter of 2023. Within the Real Assets Group, AIREIT and AREIT contributed additional management fees of $11.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 driven by increases in the average capital base of AIREIT and AREIT. Also, management fees from Ares Infrastructure Debt Fund V L.P. (“IDF V”) increased by $9.3 million for the year ended December 31, 2023 compared to the prior year, primarily driven by deployment of capital. Within the Private Equity Group, the Crescent Point Acquisition contributed $7.4 million to the increase in management fees for the year ended December 31, 2023. For detail regarding the fluctuations of management fees within each of our segments see “—Results of Operations by Segment.” 119 Table of Contents Carried Interest Allocation. The activity was principally composed of the following ($ in millions): [[GREPCENT_TABLE]] [["","Year ended December 31, 2023","Primary Drivers","Year ended December 31, 2022","Primary Drivers"],["Credit funds","$","498.7","","Primarily from six direct lending funds and one alternative credit fund with $28.2 billion of IGAUM generating returns in excess of their hurdle rates. Ares Capital Europe V, L.P. (\u201cACE V\u201d), Ares Private Credit Solutions II, L.P. (\u201cPCS II\u201d), Ares Sports Media and Entertainment Finance, L.P. and our sixth European direct lending fund generated carried interest allocation of $181.1 million, $37.6 million, $22.0 million and $16.6 million, respectively, driven by net investment income on an increasing invested capital base. Pathfinder I generated carried interest allocation of $66.3 million driven by market appreciation of certain investments and net investment income during the period. Ares Capital Europe IV, L.P. (\u201cACE IV\u201d) and Ares Private Credit Solutions, L.P. (\u201cPCS I\u201d) generated carried interest allocation of $58.4 million and $45.3 million, respectively, primarily driven by net investment income during the period. Our credit funds have benefited from rising interest rates on predominately floating-rate loans.","$","200.0","","Primarily from four direct lending funds and one alternative credit fund with $22.4 billion of IGAUM generating returns in excess of their hurdle rates. ACE V generated carried interest allocation of $80.9 million driven by net investment income on an increasing invested capital base. ACE IV, Pathfinder I, Ares Capital Europe III, L.P. (\u201cACE III\u201d) and PCS I generated carried interest allocation of $60.0 million, $25.7 million, $18.7 million and $6.5 million, respectively, primarily driven by net investment income during the period."],["Private equity funds","124.6","","Ares Corporate Opportunities Fund VI, L.P. (\u201cACOF VI\u201d) generated carried interest allocation of $190.0 million, driven by improving operating performance of portfolio companies that primarily operate in the retail and healthcare industries and market appreciation of an investment in a services company. In addition, appreciation of Ares Special Opportunities Fund, L.P. (\u201cASOF I\u201d) and Ares Special Situations Fund IV, L.P. (\u201cSSF IV\u201d) generated carried interest allocation of $82.7 million and $79.8 million, respectively, predominately driven by market appreciation and improved operating performance of portfolio companies that operate in the services industry. Ares Special Opportunities Fund II, L.P. (\u201cASOF II\u201d) generated carried interest allocation of $80.9 million, driven by improving operating performance of portfolio companies that operate in the healthcare industry. The appreciation was partially offset by the reversal of unrealized carried interest allocation of $268.1 million from Ares Corporate Opportunities Fund V, L.P. (\u201cACOF V\u201d), primarily driven by a lower stock price for Savers Value Village, Inc. (\u201cSVV\u201d), and $35.8 million from Ares Corporate Opportunities Fund IV, L.P. (\u201cACOF IV\u201d), primarily driven by lower operating performance metrics of a portfolio company that operates in the healthcare industry.","187.4","","Appreciation across several portfolio company investments, driven by improving operating performance metrics from portfolio companies that primarily operate in industries such as services, technology, retail, healthcare and energy, generated carried interest allocation of $76.9 million from ACOF V, $73.9 million from ACOF VI, $68.5 million from ASOF I and $42.6 million from SSF IV. The appreciation was partially offset by the reversal of unrealized carried interest allocation of $62.4 million and $27.0 million from ACOF IV and Ares Corporate Opportunities Fund III, L.P. (\u201cACOF III\u201d), respectively, primarily driven by lower stock prices for certain publicly-traded investments."],["Real assets funds","8.5","","IDF V generated carried interest allocation of $37.9 million driven by net investment income during the period. Ares Climate Infrastructure Partners, L.P. (\u201cACIP I\u201d) generated carried interest allocation of $13.8 million due to market appreciation of certain investments. Appreciation from properties, driven by increasing operating income primarily from industrial and multifamily investments, generated carried interest allocation of $3.1 million from U.S. Real Estate Fund IX, L.P. (\u201cUS IX\u201d). The appreciation was partially offset by the reversal of unrealized carried interest allocation of $12.6 million from Ares European Real Estate Fund IV SCSp. (\u201cEF IV\u201d), $5.7 million from Ares Real Estate Opportunity Fund III, L.P. (\u201cAREOF III\u201d), $5.5 million from Ares European Real Estate Fund V SCSp. (\u201cEF V\u201d) and $19.1 million from two European real estate equity funds, primarily driven by lower valuations of certain properties, which were impacted by the market environment.","49.6","","ACIP I and Ares Energy Investors Fund V, L.P. (\u201cEIF V\u201d) generated carried interest allocation of $38.1 million and $31.8 million, respectively, due to market appreciation of certain investments. Appreciation from properties within real estate equity funds, driven by increasing operating income primarily from industrial and multifamily investments, generated carried interest allocation of $15.0 million from U.S. Real Estate Fund VIII, L.P. (\u201cUS VIII\u201d), $7.4 million from US IX and $4.2 million from Ares U.S. Real Estate Fund X, L.P. (\u201cUS X\u201d). In addition, realized gains from the sale of properties generated carried interest allocation of $17.3 million from AREOF III. The activity was partially offset by the reversal of unrealized carried interest of $64.4 million from EF V, driven by a lower stock price for one of its publicly-traded investments."],["Secondaries funds","(13.2)","","Depreciation across several investments in Landmark Equity Partners XVI, L.P. (\u201cLEP XVI\u201d), led to the reversal of unrealized carried interest of $12.5 million.","21.0","","Market appreciation of certain investments held in Landmark Real Estate Fund VIII, L.P. (\u201cLREF VIII\u201d) generated carried interest allocation of $32.8 million. The activity was partially offset by the reversal of unrealized carried interest of $18.4 million from LEP XVI, driven primarily by losses from the revaluation of limited partnership interests denominated in foreign currencies."],["Carried interest allocation","$","618.6","","","$","458.0"]] [[/GREPCENT_TABLE]] 120 Table of Contents Incentive Fees. The activity was principally composed of the following ($ in millions): [[GREPCENT_TABLE]] [["","Year ended December 31, 2023","Primary Drivers","Year ended December 31, 2022","Primary Drivers"],["Credit funds","$","248.4","","Incentive fees generated from 24 U.S. direct lending funds, ten European direct lending funds and seven alternative credit funds.","$","101.2","","Incentive fees generated from 15 European direct lending funds, 12 U.S. direct lending funds and two alternative credit funds."],["Real assets funds","15.4","","Incentive fees generated from an open-ended industrial real estate fund.","199.4","","Incentive fees generated from U.S. real estate equity funds, including $140.5 million from AIREIT, $31.6 million from an open-ended industrial real estate fund and $23.7 million from AREIT."],["Secondaries funds","12.8","","Incentive fees generated from APMF.","0.6","","Incentive fees generated from a private equity secondaries fund and APMF."],["Incentive fees","$","276.6","","","$","301.2"]] [[/GREPCENT_TABLE]] Principal Investment Income. The activity for the year ended December 31, 2023 was primarily composed of: (i) appreciation of our investments in certain funds in our European and U.S. direct lending, special opportunities, infrastructure debt and alternative credit strategies; (ii) dividend income from SSF IV and a European real estate fund; (iii) interest income from an open-ended core alternative credit fund; partially offset by (iv) unrealized losses of our investments in certain funds in our corporate private equity and real estate secondaries strategies. The activity for the year ended December 31, 2022 was primarily composed of appreciation of our investments in certain funds in our infrastructure opportunities strategy, dividend income from various investments in funds within our U.S. direct lending strategy and realized gains from the sale of underlying properties held by funds in our U.S. real estate equity strategy. Administrative, Transaction and Other Fees. The increase in administrative, transaction and other fees for the year ended December 31, 2023 compared to the prior year was primarily driven by: (i) higher administrative fees of $13.6 million as a result of the deconsolidation of a commercial finance fund during the second quarter of 2023; (ii) an increase of $8.7 million in administrative service fees based on invested capital primarily from certain private funds within our Credit Group, driven by deployment; (iii) higher credit transaction fees of $2.4 million primarily from the infrastructure debt strategy that are generated periodically and relate to the arrangement and origination of loans; partially offset by (iv) lower acquisition and development fees of $11.4 million, resulting from a reduction in property-related activities within certain industrial U.S. real estate equity funds; (v) a decrease of $10.8 million in facilitation fees and program administration fees from reduced sales activity within the 1031 exchange programs associated with our non-traded REITs. Expenses [[GREPCENT_TABLE]] [["","","","","","Year ended December 31,","","Favorable (Unfavorable)"],["","","","","","","","","","2023","","2022","","$ Change","","% Change"],["Expenses"],["Compensation and benefits","","","","","","","","","$","1,486,698","","","$","1,498,590","","","$","11,892","","","1%"],["Performance related compensation","","","","","","","","","607,522","","","518,829","","","(88,693)","","","(17)"],["General, administrative and other expenses","","","","","","","","","660,146","","","695,256","","","35,110","","","5"],["Expenses of Consolidated Funds","","","","","","","","","43,492","","","36,410","","","(7,082)","","","(19)"],["Total expenses","","","","","","","","","$","2,797,858","","","$","2,749,085","","","48,773","","","2"]] [[/GREPCENT_TABLE]] Compensation and Benefits. The decrease in compensation and benefits was primarily driven by the performance-based, acquisition-related compensation arrangements (“earnouts”) that were established in connection with the acquisition of Black Creek Group’s real estate investment advisory and distribution business (the “Black Creek Acquisition”). The maximum contingent payment associated with the Black Creek Acquisition earnout was achieved and the incremental expense of $218.1 million was recorded during the year ended December 31, 2022. Conversely, the earnout associated with a Landmark private equity secondaries fund was not achieved because revenue targets associated with fundraising did not meet certain thresholds. As a result, the associated compensation expense of $21.0 million was reversed during the year ended December 31, 2022. Excluding the impact of earnouts as described above, compensation and benefits increased by 14% for the year ended December 31, 2023 compared to the prior year, primarily driven by: (i) an increase in salary expense of $74.4 million, primarily attributable to headcount growth to support the expansion of our business; (ii) higher Part I Fees compensation of $58.3 million; and (iii) higher equity-based compensation expense of $55.6 million as the number of unvested restricted units being amortized 121 Table of Contents has increased as has the value of these units with our rising stock price. Average headcount increased by 16% to 2,674 professionals for the year-to-date period in 2023 from 2,305 professionals in 2022. For detail regarding the fluctuations of compensation and benefits within each of our segments see “—Results of Operations by Segment.” Performance Related Compensation. Changes in performance related compensation are directly associated with the changes in carried interest allocation and incentive fees described above and include associated payroll related taxes as well as carried interest and incentive fees allocated to charitable organizations as part of our philanthropic initiatives. General, Administrative and Other Expenses. For each year presented, we recognized impairment charges and recorded accelerated amortization expense in connection with acquired intangible assets (as discussed further below). Before giving effect to these costs, general, administrative and other expenses increased by 13% for the year ended December 31, 2023 compared to the prior year. However, due to the recognition of higher impairment charges in the prior year, general, administrative and other expenses over the comparative period has actually decreased by $35.1 million, or 5%, but this trend is not expected to continue. Travel, marketing and certain fringe benefits collectively increased by $26.8 million for the year ended December 31, 2023 compared to the prior year as we: (i) continued to increase our marketing efforts driven by more investor meetings and events; and (ii) conducted more in-person company meetings and events with a focus on promoting collaboration and integration of acquired businesses. Occupancy costs, information services and information technology costs also increased during the comparative period, to support our growing headcount, the expansion of our business and the build out of our new corporate headquarters. Collectively, these expenses increased by $25.9 million for the year ended December 31, 2023 compared to the prior year. Additionally, professional service fees increased by $9.8 million for the year ended December 31, 2023 compared to 2022 primarily due to the reorganization of our income tax compliance function and to higher consulting fees to support various ongoing initiatives to enhance our operations. Separately, we expect to incur higher supplemental distribution fees in future periods as we continue to develop our distribution relationships and expand our retail product offerings. These expenses were $20.2 million and increased by $7.3 million for the year ended December 31, 2023 when compared to prior year and will fluctuate with sales volumes and assets under management of our non-traded products. During the year ended December 31, 2023, we recognized non-cash impairment charges of $78.7 million related to certain intangible assets comprised of: (i) $65.7 million to the fair value of certain client relationships from Landmark in connection with lower expected FPAUM in a private equity secondaries fund from existing investors; (ii) $7.8 million to the carrying value of SSG’s trade name as we rebranded Ares SSG as APAC credit and discontinued the use of the SSG trade name; and (iii) $5.2 million to the fair value of management contracts of certain funds in connection with lower than expected future fee revenue generated from these funds, of which $4.6 million was due to the shortened investment period of an infrastructure debt fund as we directed existing limited partner commitments to other investment vehicles within the strategy. During the year ended December 31, 2022, we recognized non-cash impairment charges of $181.6 million, in connection with intangible assets associated with Landmark’s trade name, management contracts of certain Landmark funds, Black Creek funds and SSG funds and resulted in the amortization expense associated with these intangible assets to decrease in subsequent periods. Excluding the non-cash impairment charges described above, amortization expense decreased by $7.6 million for the year ended December 31, 2023 compared to the prior year, as we no longer recognize amortization expense for the aforementioned intangible assets. Other Income (Expense) [[GREPCENT_TABLE]] [["","","","","","Year ended December 31,","","Favorable (Unfavorable)"],["","","","","","","","","","2023","","2022","","$ Change","","% Change"],["Other income (expense)"],["Net realized and unrealized gains on investments","","","","","","","","","$","77,573","","","$","4,732","","","$","72,841","","","NM"],["Interest and dividend income","","","","","","","","","19,276","","","9,399","","","9,877","","","105"],["Interest expense","","","","","","","","","(106,276)","","","(71,356)","","","(34,920)","","","(49)"],["Other income, net","","","","","","","","","4,819","","","13,119","","","(8,300)","","","(63)"],["Net realized and unrealized gains on investments of Consolidated Funds","","","","","","","","","262,700","","","73,386","","","189,314","","","258"],["Interest and other income of Consolidated Funds","","","","","","","","","995,545","","","586,529","","","409,016","","","70"],["Interest expense of Consolidated Funds","","","","","","","","","(754,600)","","","(411,361)","","","(343,239)","","","(83)"],["Total other income, net","","","","","","","","","$","499,037","","","$","204,448","","","294,589","","","144"]] [[/GREPCENT_TABLE]] 122 Table of Contents Net Realized and Unrealized Gains on Investments. The activity for the year ended December 31, 2023 primarily includes a net gain of $70.9 million from our investment in X-energy. AAC I entered into a contract to merge with X-energy that ultimately did not occur as the shareholders of AAC I elected to redeem the investments held in trust in lieu of completing the merger. As the merger was not completed, we directly invested in X-energy. The net gain is primarily a result of the increase in value of various common and preferred equity securities in X-energy. The fair value of these investments are sensitive to changes in underlying assumptions and may demonstrate significant volatility over the short term. The year ended December 31, 2023 also included: (i) unrealized gains from the appreciation of certain strategic investments in companies that manage portfolios of non-performing loans and real estate owned properties; (ii) unrealized gains and dividend income from our investment in APMF; and partially offset by (iii) unrealized losses from our strategic investment in a U.S. financial technology company. The activity for the year ended December 31, 2022 reflects unrealized gains from the same strategic investments that manage portfolios of non-performing loans and real estate owned properties and was partially offset by unrealized losses from our investments in the subordinated notes of U.S. CLOs. Interest Expense. Higher average interest rates driven by rising SOFR rates and a higher average outstanding balance of the Credit Facility contributed to an increase in interest expense for the year ended December 31, 2023 compared to 2022. The issuance of the 2028 Senior Notes in November 2023 also increased interest expense by $4.6 million for the year ended December 31, 2023 compared to the same period in 2022 and will result in interest expense of $8.2 million for the full quarter prospectively. Other Income, Net. The activity for the years ended December 31, 2023 and 2022 primarily included transaction gains (losses) associated with currency fluctuations impacting the revaluation of assets and liabilities denominated in foreign currencies other than an entity’s functional currency. We recognized transaction losses for the year ended December 31, 2023 primarily due to the Euro weakening against the British pound for the year-to-date period. Transaction gains for the year ended December 31, 2022 were primarily attributable to the British pound weakening against the Euro. 123 Table of Contents Income Tax Expense [[GREPCENT_TABLE]] [["","","","","","Year ended December 31,","","Favorable (Unfavorable)"],["","","","","","","","","","2023","","2022","","$ Change","","% Change"],["Income before taxes","","","","","","","","","$","1,333,063","","","$","510,806","","","$","822,257","","","161%"],["Less: Income tax expense","","","","","","","","","172,971","","","71,891","","","(101,080)","","","(141)"],["Net income","","","","","","","","","$","1,160,092","","","$","438,915","","","721,177","","","164"]] [[/GREPCENT_TABLE]] The increase in income tax expense was attributable to higher pre-tax income allocable to AMC for the year ended December 31, 2023 compared to the prior year as the income attributed to redeemable and non-controlling interests is generally passed through to partners and not subject to corporate income taxes. The calculation of income taxes is also sensitive to any changes in weighted average daily ownership. The following table summarizes weighted average daily ownership: [[GREPCENT_TABLE]] [["","","","","Year ended December 31,"],["","","","","","","2023","","2022"],["AMC common stockholders","","","","","","60.83","%","","59.76","%"],["Non-controlling AOG unitholders","","","","","","39.17","%","","40.24","%"]] [[/GREPCENT_TABLE]] The change in ownership was primarily driven by the issuance of Class A common stock in connection with stock option exercises, vesting of restricted stock awards, the completion of the SSG Buyout and the Crescent Point Acquisition. The increase in the weighted average daily ownership for AMC common stockholders was partially offset by the issuance of AOG Units in connection with the settlement of the Black Creek earnout that increased the ownership of AOG Units not held by AMC. Redeemable and Non-Controlling Interests [[GREPCENT_TABLE]] [["","","","","","Year ended December 31,","","Favorable (Unfavorable)"],["","","","","","","","","","2023","","2022","","$ Change","","% Change"],["Net income","","","","","","","","","$","1,160,092","","","$","438,915","","","$","721,177","","","164%"],["Less: Net income attributable to non-controlling interests in Consolidated Funds","","","","","","","","","274,296","","","119,333","","","154,963","","","130"],["Net income attributable to Ares Operating Group entities","","","","","","","","","885,796","","","319,582","","","566,214","","","177"],["Less: Net income (loss) attributable to redeemable interest in Ares Operating Group entities","","","","","","","","","226","","","(851)","","","1,077","","","NM"],["Less: Net income attributable to non-controlling interests in Ares Operating Group entities","","","","","","","","","411,244","","","152,892","","","258,352","","","169"],["Net income attributable to Ares Management Corporation Class A and non-voting common stockholders","","","","","","","","","$","474,326","","","$","167,541","","","306,785","","","183"]] [[/GREPCENT_TABLE]] The change in net income attributable to non-controlling interests in AOG entities over the comparative periods was a result of the respective changes in income before taxes and weighted average daily ownership, as presented above. 124 Table of Contents Consolidated Results of Operations of the Consolidated Funds The following table presents the results of operations of the Consolidated Funds ($ in thousands): [[GREPCENT_TABLE]] [["","","","","","Year ended December 31,","","","","","","Favorable (Unfavorable)"],["","","","","","","","","","","2023","","2022","","","","","","","","$ Change","","% Change"],["Expenses of the Consolidated Funds","","","","","","","","","","$","(43,492)","","","$","(36,410)","","","","","","","","","$","(7,082)","","","(19)%"],["Net realized and unrealized gains on investments of Consolidated Funds","","","","","","","","","","262,700","","","73,386","","","","","","","","","189,314","","","258"],["Interest and other income of Consolidated Funds","","","","","","","","","","995,545","","","586,529","","","","","","","","","409,016","","","70"],["Interest expense of Consolidated Funds","","","","","","","","","","(754,600)","","","(411,361)","","","","","","","","","(343,239)","","","(83)"],["Income before taxes","","","","","","","","","","460,153","","","212,144","","","","","","","","","248,009","","","117"],["Less: Income tax expense of Consolidated Funds","","","","","","","","","","3,823","","","331","","","","","","","","","(3,492)","","","NM"],["Net income","","","","","","","","","","456,330","","","211,813","","","","","","","","","244,517","","","115"],["Less: Revenues attributable to Ares Management Corporation eliminated upon consolidation","","","","","","","","","","188,155","","","110,809","","","","","","","","","77,346","","","70"],["Other expense, net attributable to Ares Management Corporation eliminated upon consolidation","","","","","","","","","","5,688","","","18,074","","","","","","","","","12,386","","","69"],["General, administrative and other expense attributable to Ares Management Corporation eliminated upon consolidation","","","","","","","","","","433","","","255","","","","","","","","","(178)","","","(70)"],["Net income attributable to non-controlling interests in Consolidated Funds","","","","","","","","","","$","274,296","","","$","119,333","","","","","","","","","154,963","","","130"]] [[/GREPCENT_TABLE]] The results of operations of the Consolidated Funds primarily represent activities from certain funds that we are deemed to control. When a fund is consolidated, we reflect the revenues and expenses of the entity on a gross basis, subject to eliminations from consolidation. Substantially all of our results of operations related to the Consolidated Funds are attributable to ownership interests that third parties hold in those funds. The Consolidated Funds are not necessarily the same funds in each year presented due to changes in ownership, changes in limited partners’ or investor rights, and the creation or termination of funds and entities. Accordingly, such amounts may not be comparable for the periods presented, and in any event have no material impact on net income attributable to Ares Management Corporation. 125 Table of Contents Segment Analysis For segment reporting purposes, revenues and expenses are presented before giving effect to the results of our Consolidated Funds and the results attributable to non-controlling interests of joint ventures that we consolidate. As a result, segment revenues from management fees, fee related performance revenues, performance income and investment income are different than those presented on a consolidated basis in accordance with GAAP. Revenues recognized from Consolidated Funds are eliminated in consolidation and those attributable to the non-controlling interests of joint ventures have been excluded by us. Furthermore, expenses and the effects of other income (expense) are different than related amounts presented on a consolidated basis in accordance with GAAP due to the exclusion of the results of Consolidated Funds and the non-controlling interests of joint ventures. Non-GAAP Financial Measures We use the following non-GAAP measures to make operating decisions, assess performance and allocate resources: •Fee Related Earnings (“FRE”) •Realized Income (“RI”) These non-GAAP financial measures supplement and should be considered in addition to and not in lieu of, the results of operations, which are discussed further under “—Components of Consolidated Results of Operations” and are prepared in accordance with GAAP. We operate through our distinct operating segments. On March 31, 2023, we completed the SSG Buyout. We 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, we will no longer use Strategic Initiatives to describe all other operating segments, instead reporting the collective results as Other. Separately, the Private Equity Group includes APAC private equity following the Crescent Point Acquisition. Historical periods have been modified to conform to the current period presentation. In February 2024, we announced that our special opportunities strategy, historically reported as a component of our 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 our results beginning in 2024. Adjusted for this change, as of December 31, 2023, the Credit Group managed $299.4 billion in AUM with approximately 490 investment professionals and the Private Equity Group managed $24.5 billion in AUM with approximately 85 investment professionals, with both groups continuing to manage investments across the U.S., Europe and Asia-Pacific. The following table sets forth FRE and RI by reportable segment and the OMG ($ in thousands): [[GREPCENT_TABLE]] [["","","","","","","Year ended December 31,","","Favorable (Unfavorable)"],["","","","","","","","","","","2023","","2022","","$ Change","","% Change"],["Fee Related Earnings:"],["Credit Group","","","","","","","","","","$","1,257,528","","","$","977,892","","","$","279,636","","","29%"],["Private Equity Group","","","","","","","","","","112,541","","","84,467","","","28,074","","","33"],["Real Assets Group","","","","","","","","","","218,807","","","271,626","","","(52,819)","","","(19)"],["Secondaries Group","","","","","","","","","","104,387","","","110,501","","","(6,114)","","","(6)"],["Other","","","","","","","","","","8,530","","","(2,252)","","","10,782","","","NM"],["Operations Management Group","","","","","","","","","","(538,052)","","","(447,884)","","","(90,168)","","","(20)"],["Fee Related Earnings","","","","","","","","","","$","1,163,741","","","$","994,350","","","169,391","","","17"],["Realized Income:"],["Credit Group","","","","","","","","","","$","1,368,671","","","$","1,055,634","","","$","313,037","","","30%"],["Private Equity Group","","","","","","","","","","122,769","","","107,998","","","14,771","","","14"],["Real Assets Group","","","","","","","","","","217,195","","","322,465","","","(105,270)","","","(33)"],["Secondaries Group","","","","","","","","","","101,056","","","109,165","","","(8,109)","","","(7)"],["Other","","","","","","","","","","(6,703)","","","(14,042)","","","7,339","","","52"],["Operations Management Group","","","","","","","","","","(537,460)","","","(450,193)","","","(87,267)","","","(19)"],["Realized Income","","","","","","","","","","$","1,265,528","","","$","1,131,027","","","134,501","","","12"]] [[/GREPCENT_TABLE]] 126 Table of Contents Income before provision for income taxes is the GAAP financial measure most comparable to RI and FRE. The following table presents the reconciliation of income before taxes as reported within the Consolidated Statements of Operations to RI and FRE of the reportable segments and the OMG ($ in thousands): [[GREPCENT_TABLE]] [["","","","Year ended December 31,"],["","","","","","2023","","2022"],["Income before taxes","","","","","$","1,333,063","","","$","510,806"],["Adjustments:"],["Depreciation and amortization expense","","","","","233,185","","","335,083"],["Equity compensation expense","","","","","255,419","","","198,948"],["Acquisition-related compensation expense(1)","","","","","7,334","","","206,252"],["Acquisition and merger-related expense","","","","","12,000","","","15,197"],["Placement fee adjustment","","","","","(5,819)","","","2,088"],["Other expense, net","","","","","976","","","1,874"],["Income before taxes of non-controlling interests in consolidated subsidiaries","","","","","(17,249)","","","(357)"],["Income before taxes of non-controlling interests in Consolidated Funds, net of eliminations","","","","","(278,119)","","","(119,664)"],["Total performance income\u2014unrealized","","","","","(305,370)","","","(106,978)"],["Total performance related compensation\u2014unrealized","","","","","206,923","","","88,502"],["Total net investment income\u2014unrealized","","","","","(176,815)","","","(724)"],["Realized Income","","","","","1,265,528","","","1,131,027"],["Total performance income\u2014realized","","","","","(415,899)","","","(418,021)"],["Total performance related compensation\u2014realized","","","","","282,406","","","274,541"],["Total investment loss\u2014realized","","","","","31,706","","","6,803"],["Fee Related Earnings","","","","","$","1,163,741","","","$","994,350"]] [[/GREPCENT_TABLE]] (1)Represents earnouts in connection with the acquisition of Landmark Partners, LLC (the “Landmark Acquisition”), the acquisition of AMP Capital’s infrastructure debt platform (“Infrastructure Debt Acquisition”), the Black Creek 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. For the specific components and calculations of these non-GAAP measures, as well as additional reconciliations to the most comparable measures in accordance with GAAP, see “Note 14. Segment Reporting” within our consolidated financial statements included in this Annual Report on Form 10-K. Discussed below are our results of operations for our reportable segments and the OMG. 127 Table of Contents Results of Operations by Segment Credit Group—Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Fee Related Earnings The following table presents the components of the Credit Group’s FRE ($ in thousands): [[GREPCENT_TABLE]] [["","","","","Year ended December 31,","","Favorable (Unfavorable)"],["","","","","","","","","","2023","","2022","","$ Change","","% Change"],["Management fees","","","","","","","","","$","1,749,796","","","$","1,416,518","","","$","333,278","","","24%"],["Fee related performance revenues","","","","","","","","","167,333","","","71,497","","","95,836","","","134"],["Other fees","","","","","","","","","35,257","","","31,992","","","3,265","","","10"],["Compensation and benefits","","","","","","","","","(598,125)","","","(462,681)","","","(135,444)","","","(29)"],["General, administrative and other expenses","","","","","","","","","(96,733)","","","(79,434)","","","(17,299)","","","(22)"],["Fee Related Earnings","","","","","","","","","$","1,257,528","","","$","977,892","","","279,636","","","29"]] [[/GREPCENT_TABLE]] Management Fees. The chart below presents Credit Group management fees and effective management fee rates ($ in millions): Management fees on existing funds increased primarily from deployment of capital with Pathfinder I, an open-ended core alternative credit fund, ACE V, PCS II and Ares Senior Direct Lending Fund II, L.P. (“SDL II”) collectively generating additional management fees of $97.0 million for the year ended December 31, 2023 compared to the prior year. Management fees from ARCC, excluding Part I Fees described below, increased by $19.3 million for the year ended December 31, 2023 compared to the prior year primarily due to an increase in the average size of ARCC’s portfolio. Excluding catch-up fees, management fees from Ares SSG Capital Partners VI, L.P. (“SSG Fund VI”) increased by $13.7 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to new capital commitments. The remaining increase in management fees from funds in existence in both periods was primarily driven by deployment of capital in other direct lending funds and SMAs. Management fees from CLOs also increased for the year 128 Table of Contents ended December 31, 2023 compared to the prior year primarily due to the net addition of four CLOs for the year ended December 31, 2023. Part I Fees increased for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to an increase in pre-incentive fee net investment income generated by ARCC and CADC, driven by an increase in the average size of their portfolios and by the impact of rising interest rates, given their primarily floating-rate loan portfolios. The increase in Part I Fees included fees from ASIF of $5.1 million beginning in the third quarter of 2023. The increase in effective management fee rate for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by the increase in Part I Fees’ contribution to the effective management fee rate. Fee Related Performance Revenues. The increase for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily attributable to higher returns from certain perpetual capital funds that have benefited from rising interest rates on predominately floating-rate loans. Incentive fees from perpetual capital were mostly generated from 14 U.S. direct lending funds, ten European direct lending funds and one alternative credit fund for the year ended December 31, 2023 compared to ten European direct lending and eight U.S. direct lending funds for the year ended December 31, 2022. Other Fees. The increase in other fees for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by higher administrative service fees of $8.1 million mostly earned from certain private funds that pay on invested capital. The increase in other fees is partially offset by a decrease of $5.1 million in transaction fees, primarily from lower loan origination income generated from certain credit funds. Compensation and Benefits. The increase in compensation and benefits for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by: (i) higher fee related performance compensation and Part I Fees compensation of $59.4 million and $58.3 million, respectively, corresponding to the increases in revenues; and (ii) an increase in salary expense of $14.1 million, primarily attributable to headcount growth to support the expansion of our business. Separately, compensation and benefits increased by $4.7 million for the nine months ended December 31, 2023 following the SSG Buyout on March 31, 2023, reflecting the costs associated with the 20% change in ownership that were previously not part of our cost structure. Average headcount increased by 12% to 566 investment and investment support professionals for the year-to-date period in 2023 from 504 professionals in 2022 as we continued to add professionals primarily to support our growing direct lending and APAC credit platforms. General, Administrative and Other Expenses. Certain expenses increased during the current period, including: (i) occupancy costs, which support our growing headcount that are based in higher cost locations; (ii) information services such as research and market data; and (iii) information technology costs. These expenses collectively increased by $9.4 million for the year ended December 31, 2023 compared to the prior year. Additionally, supplemental distribution fees which fluctuate with sales volumes and managed assets of our non-traded products, contributed $5.1 million of the increase for the year ended December 31, 2023 when compared to prior year. We expect to incur higher supplemental distribution fees in future periods as we continue to develop our distribution relationships and expand our retail product offerings. For the year ended December 31, 2023, travel and marketing expenses have also increased by $4.1 million when compared to the year ended December 31, 2022, as marketing efforts continued to increase driven by more in-person investor meetings and events. 129 Table of Contents Realized Income The following table presents the components of the Credit Group’s RI ($ in thousands): [[GREPCENT_TABLE]] [["","","","","Year ended December 31,","","Favorable (Unfavorable)"],["","","","","","","","","","2023","","2022","","$ Change","","% Change"],["Fee Related Earnings","","","","","","","","","$","1,257,528","","","$","977,892","","","$","279,636","","","29%"],["Performance income\u2014realized","","","","","","","","","271,550","","","156,929","","","114,621","","","73"],["Performance related compensation\u2014realized","","","","","","","","","(175,193)","","","(97,621)","","","(77,572)","","","(79)"],["Realized net performance income","","","","","","","","","96,357","","","59,308","","","37,049","","","62"],["Investment income\u2014realized","","","","","","","","","20,111","","","7,078","","","13,033","","","184"],["Interest and other investment income\u2014realized","","","","","","","","","21,975","","","27,288","","","(5,313)","","","(19)"],["Interest expense","","","","","","","","","(27,300)","","","(15,932)","","","(11,368)","","","(71)"],["Realized net investment income","","","","","","","","","14,786","","","18,434","","","(3,648)","","","(20)"],["Realized Income","","","","","","","","","$","1,368,671","","","$","1,055,634","","","313,037","","","30"]] [[/GREPCENT_TABLE]] Realized net performance income for the years ended December 31, 2023 and 2022 included aggregate tax distributions of $54.7 million and $48.1 million, respectively, from ACE IV, ACE V and PCS I, among other European direct lending funds. Realized net performance income for the year ended December 31, 2023 also included incentive fees primarily from ten direct lending funds and six alternative credit funds. Realized net performance income for the year ended December 31, 2022 also included incentive fees primarily from nine direct lending funds and two alternative credit funds. Realized net investment income for the years ended December 31, 2023 and 2022 was primarily attributable to interest income generated from our CLO investments. In addition, the year ended December 31, 2023 included realized gains from the sale of our investment in a commercial finance fund during the second quarter of 2023. Realized net investment income for the year ended December 31, 2022 was also attributable to: (i) realizations from the settlement of forward contracts entered into to hedge our exposure to foreign currency fluctuations, primarily from the Euro; (ii) distributions from a U.S. direct lending fund and a European direct lending fund; and (iii) income recognized in connection with distributions from a commercial finance fund. Interest expense, which is allocated among our segments based on the cost basis of balance sheet investments, increased over the comparative periods primarily due to rising SOFR rates and a higher average outstanding balance of the Credit Facility and to the issuance of the 2028 Senior Notes in November 2023. 130 Table of Contents Credit Group—Performance Income The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Credit Group. Accrued net performance income excludes net performance income that has been realized but not yet received as of the reporting date ($ in thousands): [[GREPCENT_TABLE]] [["","As of December 31,"],["","2023","","2022"],["","Accrued Performance Income","","Accrued Performance Compensation","","Accrued Net Performance Income","","Accrued Performance Income","","Accrued Performance Compensation","","Accrued Net Performance Income"],["ACE III","$","92,546","","","$","57,948","","","$","34,598","","","$","100,774","","","$","60,465","","","$","40,309"],["ACE IV","149,584","","","97,123","","","52,461","","","168,204","","","104,286","","","63,918"],["ACE V","232,201","","","146,219","","","85,982","","","115,969","","","69,581","","","46,388"],["PCS I","123,979","","","73,258","","","50,721","","","98,143","","","57,994","","","40,149"],["PCS II","38,128","","","22,573","","","15,555","","","\u2014","","","\u2014","","","\u2014"],["Pathfinder I","155,136","","","131,866","","","23,270","","","88,879","","","75,547","","","13,332"],["Other credit funds","184,783","","","106,447","","","78,336","","","93,640","","","52,482","","","41,158"],["Total Credit Group","$","976,357","","","$","635,434","","","$","340,923","","","$","665,609","","","$","420,355","","","$","245,254"]] [[/GREPCENT_TABLE]] The following table presents the change in accrued performance income for the Credit Group ($ in thousands): [[GREPCENT_TABLE]] [["","","","","As of December 31, 2022","","Activity during the period","","As of December 31, 2023"],["","","Waterfall Type","","Accrued Performance Income","","Change in Unrealized","","Realized","","Other Adjustments","","Accrued Performance Income"],["Accrued Carried Interest"],["ACE III","","European","","$","100,774","","","$","(1,931)","","","$","(6,237)","","","$","(60)","","","$","92,546"],["ACE IV","","European","","168,204","","","58,421","","","(77,097)","","","56","","","149,584"],["ACE V","","European","","115,969","","","181,054","","","(64,079)","","","(743)","","","232,201"],["PCS I","","European","","98,143","","","45,308","","","(19,867)","","","395","","","123,979"],["PCS II","","European","","\u2014","","","37,621","","","\u2014","","","507","","","38,128"],["Pathfinder I","","European","","88,879","","","66,257","","","\u2014","","","\u2014","","","155,136"],["Other credit funds","","European","","85,463","","","92,590","","","(19,078)","","","1,377","","","160,352"],["Other credit funds","","American","","8,177","","","19,394","","","(3,083)","","","(57)","","","24,431"],["Total accrued carried interest","","","","665,609","","","498,714","","","(189,441)","","","1,475","","","976,357"],["Other credit funds","","Incentive","","\u2014","","","82,109","","","(82,109)","","","\u2014","","","\u2014"],["Total Credit Group","","","","$","665,609","","","$","580,823","","","$","(271,550)","","","$","1,475","","","$","976,357"]] [[/GREPCENT_TABLE]] 131 Table of Contents Credit Group—Assets Under Management The tables below present rollforwards of AUM for the Credit Group ($ in millions): [[GREPCENT_TABLE]] [["","","Liquid Credit","","Alternative Credit","","U.S. Direct Lending","","European Direct Lending","","APAC Credit","","Other(1)","","Total Credit Group"],["Balance at 12/31/2022","","$","43,864","","","$","21,363","","","$","98,327","","","$","50,642","","","$","11,383","","","$","\u2014","","","$","225,579"],["Net new par/equity commitments","","2,808","","","8,351","","","15,960","","","12,508","","","387","","","379","","","40,393"],["Net new debt commitments","","1,978","","","400","","","8,492","","","3,826","","","201","","","\u2014","","","14,897"],["Capital reductions","","(858)","","","\u2014","","","(1,935)","","","(1,065)","","","\u2014","","","\u2014","","","(3,858)"],["Distributions","","(319)","","","(1,484)","","","(2,976)","","","(1,977)","","","(429)","","","\u2014","","","(7,185)"],["Redemptions","","(2,069)","","","(984)","","","(290)","","","(2)","","","\u2014","","","\u2014","","","(3,345)"],["Net allocations among investment strategies","","(33)","","","4,291","","","\u2014","","","\u2014","","","25","","","(25)","","","4,258"],["Change in fund value","","1,928","","","1,949","","","5,495","","","4,332","","","353","","","\u2014","","","14,057"],["Balance at 12/31/2023","","$","47,299","","","$","33,886","","","$","123,073","","","$","68,264","","","$","11,920","","","$","354","","","$","284,796"],["","","Liquid Credit","","Alternative Credit","","U.S. Direct Lending","","European Direct Lending","","APAC Credit","","Other","","Total Credit Group"],["Balance at 12/31/2021","","$","40,335","","","$","17,424","","","$","85,849","","","$","49,102","","","$","8,695","","","$","\u2014","","","$","201,405"],["Net new par/equity commitments","","3,126","","","4,628","","","7,137","","","1,476","","","1,782","","","\u2014","","","18,149"],["Net new debt commitments","","3,777","","","\u2014","","","7,310","","","1,901","","","1,474","","","\u2014","","","14,462"],["Capital reductions","","(237)","","","(45)","","","(991)","","","(2)","","","(5)","","","\u2014","","","(1,280)"],["Distributions","","(117)","","","(1,752)","","","(2,269)","","","(1,182)","","","(737)","","","\u2014","","","(6,057)"],["Redemptions","","(1,699)","","","(456)","","","(260)","","","\u2014","","","\u2014","","","\u2014","","","(2,415)"],["Net allocations among investment strategies","","(8)","","","1,983","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","1,975"],["Change in fund value","","(1,313)","","","(419)","","","1,551","","","(653)","","","174","","","\u2014","","","(660)"],["Balance at 12/31/2022","","$","43,864","","","$","21,363","","","$","98,327","","","$","50,642","","","$","11,383","","","$","\u2014","","","$","225,579"],["(1) Activity within Other represents equity commitments to the platform that have not yet been allocated to an investment strategy."]] [[/GREPCENT_TABLE]] The components of our AUM for the Credit Group are presented below ($ in billions): [[GREPCENT_TABLE]] [["","AUM: $284.8","","AUM: $225.6"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","","FPAUM","","AUM not yet paying fees","","Non-fee paying(1)"]] [[/GREPCENT_TABLE]] (1) Includes $15.1 billion and $14.4 billion of AUM of funds from which we indirectly earn management fees as of December 31, 2023 and 2022, respectively, and includes $1.5 billion and $1.2 billion of non-fee paying AUM based on our general partner commitment as of December 31, 2023 and 2022, respectively. 132 Table of Contents Credit Group—Fee Paying AUM The tables below present rollforwards of fee paying AUM for the Credit Group ($ in millions): [[GREPCENT_TABLE]] [["","Liquid Credit","","Alternative Credit","","U.S. Direct Lending","","European Direct Lending","","APAC Credit","","","","Total Credit Group"],["Balance at 12/31/2022","$","42,191","","","$","15,904","","","$","57,568","","","$","29,561","","","$","6,051","","","","","$","151,275"],["Commitments","4,958","","","65","","","3,068","","","\u2014","","","242","","","","","8,333"],["Deployment/subscriptions/increase in leverage","282","","","5,463","","","11,246","","","5,554","","","1,156","","","","","23,701"],["Capital reductions","(892)","","","\u2014","","","(2,304)","","","(268)","","","(193)","","","","","(3,657)"],["Distributions","(335)","","","(1,913)","","","(3,707)","","","(450)","","","(1,522)","","","","","(7,927)"],["Redemptions","(2,067)","","","(901)","","","(305)","","","(1,201)","","","\u2014","","","","","(4,474)"],["Net allocations among investment strategies","(33)","","","4,396","","","\u2014","","","\u2014","","","\u2014","","","","","4,363"],["Change in fund value","2,036","","","204","","","2,030","","","1,050","","","(144)","","","","","5,176"],["Balance at 12/31/2023","$","46,140","","","$","23,218","","","$","67,596","","","$","34,246","","","$","5,590","","","","","$","176,790"],["","Liquid Credit","","Alternative Credit","","U.S. Direct Lending","","European Direct Lending","","APAC Credit","","","","Total Credit Group"],["Balance at 12/31/2021","$","38,673","","","$","8,742","","","$","46,128","","","$","23,847","","","$","4,720","","","","","$","122,110"],["Commitments","6,739","","","369","","","2,291","","","\u2014","","","1,928","","","","","11,327"],["Deployment/subscriptions/increase in leverage","21","","","7,128","","","14,137","","","9,194","","","2,300","","","","","32,780"],["Capital reductions","(289)","","","(25)","","","(1,645)","","","(1,563)","","","(391)","","","","","(3,913)"],["Distributions","(138)","","","(1,442)","","","(3,501)","","","(764)","","","(1,520)","","","","","(7,365)"],["Redemptions","(1,713)","","","(400)","","","(260)","","","(311)","","","\u2014","","","","","(2,684)"],["Net allocations among investment strategies","(8)","","","1,943","","","\u2014","","","\u2014","","","\u2014","","","","","1,935"],["Change in fund value","(1,094)","","","(410)","","","418","","","(842)","","","(143)","","","","","(2,071)"],["Change in fee basis","\u2014","","","(1)","","","\u2014","","","\u2014","","","(843)","","","","","(844)"],["Balance at 12/31/2022","$","42,191","","","$","15,904","","","$","57,568","","","$","29,561","","","$","6,051","","","","","$","151,275"]] [[/GREPCENT_TABLE]] The charts below present FPAUM for the Credit Group by its fee bases ($ in billions): [[GREPCENT_TABLE]] [["","FPAUM: $176.8","","FPAUM: $151.3"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","Invested capital","","Market value(1)","","Collateral balances (at par)","","Capital commitments"]] [[/GREPCENT_TABLE]] (1)Includes $35.4 billion and $31.1 billion from funds that primarily invest in illiquid strategies as of December 31, 2023 and 2022, respectively. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies. 133 Table of Contents Credit Group—Fund Performance Metrics as of December 31, 2023 ARCC contributed approximately 37% of the Credit Group’s total management fees for the year ended December 31, 2023. In addition, eight other significant funds, CADC, Ares Senior Direct Lending Fund I, L.P. (“SDL I”), ACE IV, ACE V, PCS II, Pathfinder I, SDL II and an open-ended core alternative credit fund, collectively contributed approximately 27% of the Credit Group’s management fees for the year ended December 31, 2023.     The following table presents the performance data for our significant funds that are not drawdown funds in the Credit Group as of December 31, 2023 ($ in millions): [[GREPCENT_TABLE]] [["","","","","","","","","Returns(%)"],["","Year of Inception","","AUM","","","","Year-To-Date","","Since Inception(1)","","Primary Investment Strategy"],["Fund","","","","","","","Gross","","Net","","Gross","","Net"],["ARCC(2)","2004","","$","27,977","","","","","","","N/A","","12.0","","","N/A","","15.7","","U.S. Direct Lending"],["CADC(3)","2017","","5,030","","","","","","","N/A","","13.8","","","N/A","","6.4","","U.S. Direct Lending"]] [[/GREPCENT_TABLE]] (1)Since inception returns are annualized. (2)Returns are time-weighted rates of return and include the reinvestment of income and other earnings from securities or other investments and reflect the deduction of all trading expenses. Net returns are calculated using the fund’s NAV and assume dividends are reinvested at the closest quarter-end NAV to the relevant quarterly ex-dividend dates. Additional information related to ARCC can be found in its filings with the SEC, which are not part of this report. (3)Returns are time-weighted rates of return and include the reinvestment of income and other earnings from securities or other investments and reflect the deduction of all trading expenses. Returns are shown for institutional share class. Shares of other classes may have lower returns due to higher selling commissions and fees. Net returns are calculated using the fund’s NAV and assume distributions are reinvested at the NAV on the date of distribution. Additional information related to CADC can be found in its filings with the SEC, which are not part of this report. 134 Table of Contents The following table presents the performance data of the Credit Group’s significant drawdown funds as of December 31, 2023 ($ in millions): [[GREPCENT_TABLE]] [["","Year of Inception","","AUM","","Original Capital Commitments","","Capital Invested to Date","","Realized Value(1)","","Unrealized Value(2)","","Total Value","","MoIC","","IRR(%)","","Primary Investment Strategy"],["Fund","","","","","","","","Gross(3)","","Net(4)","","Gross(5)","","Net(6)"],["Funds Harvesting Investments"],["SDL I Unlevered","2018","","$","4,818","","","$","922","","","$","872","","","$","342","","","$","711","","","$","1,053","","","1.3x","","1.2x","","9.0","","6.9","","U.S. Direct Lending"],["SDL I Levered","","","2,045","","","2,022","","","915","","","1,755","","","2,670","","","1.4x","","1.3x","","15.3","","11.4"],["ACE IV Unlevered(7)","2018","","10,199","","","2,851","","","2,311","","","746","","","2,123","","","2,869","","","1.3x","","1.2x","","8.1","","5.8","","European Direct Lending"],["ACE IV Levered(7)","","","4,819","","","3,903","","","1,752","","","3,502","","","5,254","","","1.5x","","1.3x","","11.5","","8.2"],["Funds Deploying Capital"],["ACE V Unlevered(8)","2020","","17,270","","","7,026","","","5,201","","","555","","","5,433","","","5,988","","","1.2x","","1.2x","","11.4","","8.5","","European Direct Lending"],["ACE V Levered(8)","","","6,376","","","4,723","","","741","","","5,093","","","5,834","","","1.3x","","1.2x","","17.3","","12.5"],["PCS II","2020","","5,524","","","5,114","","","3,240","","","223","","","3,409","","","3,632","","","1.2x","","1.1x","","10.1","","7.2","","U.S. Direct Lending"],["Pathfinder I","2020","","4,286","","","3,683","","","2,702","","","201","","","3,127","","","3,328","","","1.3x","","1.2x","","18.1","","12.9","","Alternative Credit"],["SDL II Unlevered","2021","","15,747","","","1,989","","","1,221","","","129","","","1,242","","","1,371","","","1.2x","","1.1x","","12.2","","9.5","","U.S. Direct Lending"],["SDL II Levered","","","6,047","","","3,567","","","602","","","3,655","","","4,257","","","1.3x","","1.2x","","20.2","","15.2"],["Open-ended core alternative credit fund(9)","2021","","4,674","","","4,229","","","3,219","","","263","","","3,260","","","3,523","","","1.1x","","1.1x","","11.9","","8.6","","Alternative Credit"]] [[/GREPCENT_TABLE]] (1)Realized value represents the sum of all cash distributions to all partners and if applicable, exclude tax and incentive distributions made to the general partner. (2)Unrealized value represents the fund’s NAV reduced by the accrued incentive allocation, if applicable. There can be no assurance that unrealized values will be realized at the valuations indicated. (3)The gross multiple of invested capital (“MoIC”) is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The gross MoIC is before giving effect to management fees, carried interest and other expenses, as applicable, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the gross fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (4)The net MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes those interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The net MoIC is after giving effect to management fees and carried interest, other expenses and credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (5)The gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Gross IRR reflects returns to the fee-paying limited partners and, if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest and other expenses, as applicable, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Gross fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (6)The net IRR is an annualized since inception net internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Net IRRs reflect returns to the fee-paying limited partners and, if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the net IRR calculations are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees and carried interest, other expenses and credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (7)ACE IV is made up of four parallel funds, two denominated in Euros and two denominated in pound sterling: ACE IV (E) Unlevered, ACE IV (G) Unlevered, ACE IV (E) Levered and ACE IV (G) Levered. The gross and net IRR and MoIC presented in the table are for ACE IV (E) Unlevered and ACE IV (E) Levered. Metrics for ACE IV (E) Levered are inclusive of a U.S. dollar denominated feeder fund, which has not been presented separately. The gross and net IRR for ACE IV (G) Unlevered are 9.7% and 7.0%, respectively. The gross and net MoIC for ACE IV (G) Unlevered are 1.4x and 1.3x, respectively. The gross and net IRR for ACE IV (G) Levered are 12.8% and 9.1%, respectively. The gross and net MoIC for ACE IV (G) Levered are 1.5x and 1.4x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund’s closing. All other values for ACE IV Unlevered and ACE IV Levered are for the combined levered and unlevered parallel funds and are converted to U.S. dollars at the prevailing quarter-end exchange rate. (8)ACE V is made up of four parallel funds, two denominated in Euros and two denominated in pound sterling: ACE V (E) Unlevered, ACE V (G) Unlevered, ACE V (E) Levered, and ACE V (G) Levered, and two feeder funds: ACE V (D) Levered and ACE V (Y) Unlevered. ACE V (E) Levered includes the ACE V (D) Levered feeder fund and ACE V (E) Unlevered includes the ACE V (Y) Unlevered feeder fund. The gross and net IRR and gross and net MoIC presented in the table are for ACE V (E) Unlevered and ACE V (E) Levered. Metrics for ACE V (E) Levered exclude the ACE V (D) Levered feeder fund and metrics for ACE V (E) Unlevered exclude the ACE V (Y) Unlevered feeder fund. The gross and net IRR for ACE V (G) Unlevered are 13.3% and 10.0%, respectively. The gross and net MoIC for ACE V (G) Unlevered are 1.2x and 1.2x, respectively. The gross and net IRR for ACE V (G) Levered are 18.1% and 13.2%, respectively. The gross and net MoIC for ACE V (G) Levered are 1.3x and 1.2x, respectively. The gross and net IRR for ACE V (D) Levered are 16.6% and 12.3%, respectively. The gross and net MoIC for ACE V (D) Levered are 1.3x and 1.2x, respectively. The gross and net IRR for ACE V (Y) Unlevered are 11.1% and 8.0%, respectively. The gross and net MoIC for ACE V (Y) Unlevered are 1.2x and 1.1x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund's closing. All other values for ACE V Unlevered and ACE V Levered are for the combined levered and unlevered parallel funds and are converted to U.S. dollars at the prevailing quarter-end exchange rate. (9)Performance for the open-ended core alternative credit fund, a perpetual capital vehicle, is presented as a drawdown fund as investor commitments to the fund are drawn sequentially in order of closing date, typically over a period of approximately 12 to 18 months. The fund is made up of a Class M (“Main Class”) and a Class C (“Constrained Class”). The Main Class includes investors electing to participate in all investments and the Constrained Class includes investors electing to be excluded from exposure to liquid investments. The gross and net IRR and gross and net MoIC presented in the table are for the Main Class. The gross and net IRRs for the Constrained Class are 10.8% and 7.7%, respectively. The gross and net MoIC for the Constrained Class are 1.2x and 1.1x, respectively. 135 Table of Contents Private Equity Group—Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Fee Related Earnings The following table presents the components of the Private Equity Group’s FRE ($ in thousands): [[GREPCENT_TABLE]] [["","","","","","Year ended December 31,","","Favorable (Unfavorable)"],["","","","","","","","","","2023","","2022","","$ Change","","% Change"],["Management fees","","","","","","","","","$","230,251","","","$","199,837","","","$","30,414","","","15%"],["Other fees","","","","","","","","","3,076","","","1,888","","","1,188","","","63"],["Compensation and benefits","","","","","","","","","(85,024)","","","(86,561)","","","1,537","","","2"],["General, administrative and other expenses","","","","","","","","","(35,762)","","","(30,697)","","","(5,065)","","","(16)"],["Fee Related Earnings","","","","","","","","","$","112,541","","","$","84,467","","","28,074","","","33"]] [[/GREPCENT_TABLE]] Management Fees. The chart below presents Private Equity Group management fees and effective management fee rates ($ in millions): Management fees from ASOF II increased by $35.3 million for the year ended December 31, 2023 compared to the prior year primarily driven by deployment. Management fees also increased by $7.4 million for the year ended December 31, 2023 due to the Crescent Point Acquisition. The increase in management fees was partially offset by decrease of $5.0 million in fees from ACOF IV for the year ended December 31, 2023 compared to the prior year as the fund stopped paying management fees during the fourth quarter of 2022. Management fees from ASOF I also decreased by $5.6 million for the year ended December 31, 2023 compared to the prior year due to asset realizations that reduced the fee base. The increase in effective management fee rate for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by deployment of capital in ASOF II, which has a higher effective management fee rate than the Private Equity Group’s average effective management fee rate. In addition, certain funds from the Crescent Point Acquisition contributed to the increase in effective management fee rate as those funds have a higher effective management fee rate than the Private Equity Group’s average effective management fee rate. 136 Table of Contents Other Fees. Other fees increased year ended December 31, 2023 compared to the prior year primarily due to higher administrative service fees on funds that pay on invested capital, driven by deployment from ASOF II and ACOF VI. Compensation and Benefits. Although salary and benefits costs have modestly increased during the year ended December 31, 2023 compared to the prior year to reflect merit increases for existing personnel, as well as changes in headcount from the Crescent Point Acquisition, compensation and benefits have decreased over the comparative period, primarily driven by lower incentive-based compensation which is discretionary and may fluctuate each year. In connection to the Crescent Point Acquisition, we recognized $3.1 million of compensation and benefits for the three months ended December 31, 2023 following the transaction close date of October 2, 2023. Average headcount increased by 6% to 129 investment and investment support professionals for the year-to-date period in 2023 from 122 professionals in 2022, primarily due to the Crescent Point Acquisition. General, Administrative and Other Expenses. Placement fees increased by $2.9 million for the year ended December 31, 2023 compared to the prior year primarily driven by new capital commitments to ASOF II subsequent to the second quarter of 2022 and through its final close in the fourth quarter of 2022. Additionally, occupancy costs which support our professionals that are based in higher cost locations, increased by $1.4 million for the year ended December 31, 2023 when compared to the year ended December 31, 2022. Separately, the Crescent Point Acquisition that closed on October 2, 2023, contributed an additional $1.2 million of expenses, primarily consisted of consulting fees and occupancy costs. Realized Income The following table presents the components of the Private Equity Group’s RI ($ in thousands): [[GREPCENT_TABLE]] [["","","","","","Year ended December 31,","","Favorable (Unfavorable)"],["","","","","","","","","","2023","","2022","","$ Change","","% Change"],["Fee Related Earnings","","","","","","","","","$","112,541","","","$","84,467","","","$","28,074","","","33%"],["Performance income\u2014realized","","","","","","","","","117,899","","","123,806","","","(5,907)","","","(5)"],["Performance related compensation\u2014realized","","","","","","","","","(89,767)","","","(90,300)","","","533","","","1"],["Realized net performance income","","","","","","","","","28,132","","","33,506","","","(5,374)","","","(16)"],["Investment income (loss)\u2014realized","","","","","","","","","(1,434)","","","3,432","","","(4,866)","","","NM"],["Interest and other investment income\u2014realized","","","","","","","","","4,952","","","2,546","","","2,406","","","95"],["Interest expense","","","","","","","","","(21,422)","","","(15,953)","","","(5,469)","","","(34)"],["Realized net investment loss","","","","","","","","","(17,904)","","","(9,975)","","","(7,929)","","","(79)"],["Realized Income","","","","","","","","","$","122,769","","","$","107,998","","","14,771","","","14"]] [[/GREPCENT_TABLE]] Realized net performance income for the years ended December 31, 2023 and 2022 was primarily attributable to tax distributions from ASOF I. Realized net performance income for the year ended December 31, 2023 also included realized gains from the partial sale of ACOF IV’s investment in AZEK, while the year ended December 31, 2022 included realized gains from the partial sale and recapitalization of ACOF IV’s investment in an energy company. Realized net investment loss for the years ended December 31, 2023 and 2022 was primarily attributable to interest expense exceeding investment income during these periods. Interest expense, which is allocated among our segments based on the cost basis of balance sheet investments, increased over the comparative periods primarily due to rising SOFR rates and a higher average outstanding balance of the Credit Facility and to the issuance of the 2028 Senior Notes in November 2023. Realized net investment loss for the year ended December 31, 2023 also reflects realized losses from two corporate private equity funds, including the liquidation of one of those funds following the disposition of its remaining assets. The activity for the year ended December 31, 2023 was partially offset by dividend income from SSF IV and realized gains from the partial sale of ACOF IV’s investment in AZEK. 137 Table of Contents Private Equity Group—Performance Income The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Private Equity Group ($ in thousands): [[GREPCENT_TABLE]] [["","As of December 31,"],["","2023","","2022"],["","Accrued Performance Income","","Accrued Performance Compensation","","Accrued Net Performance Income","","Accrued Performance Income","","Accrued Performance Compensation","","Accrued Net Performance Income"],["ACOF IV","$","181,317","","","$","145,197","","","$","36,120","","","$","282,624","","","$","226,099","","","$","56,525"],["ACOF V","474,878","","","380,807","","","94,071","","","742,962","","","594,369","","","148,593"],["ACOF VI","337,142","","","289,118","","","48,024","","","147,185","","","117,748","","","29,437"],["ASOF I","357,016","","","250,198","","","106,818","","","326,471","","","228,529","","","97,942"],["ASOF II","80,926","","","56,648","","","24,278","","","\u2014","","","\u2014","","","\u2014"],["Other funds","192,167","","","141,481","","","50,686","","","108,997","","","75,583","","","33,414"],["Total Private Equity Group","$","1,623,446","","","$","1,263,449","","","$","359,997","","","$","1,608,239","","","$","1,242,328","","","$","365,911"]] [[/GREPCENT_TABLE]] The following table presents the change in accrued carried interest for the Private Equity Group ($ in thousands): [[GREPCENT_TABLE]] [["","","","","As of December 31, 2022","","Activity during the period","","As of December 31, 2023"],["","","Waterfall Type","","Accrued Carried Interest","","Change in Unrealized","","Realized","","Other Adjustments","","Accrued Carried Interest"],["ACOF IV","","American","","$","282,624","","","$","(35,830)","","","$","(65,477)","","","$","\u2014","","","$","181,317"],["ACOF V","","American","","742,962","","","(268,084)","","","\u2014","","","\u2014","","","474,878"],["ACOF VI","","American","","147,185","","","189,957","","","\u2014","","","\u2014","","","337,142"],["ASOF I","","European","","326,471","","","82,728","","","(52,183)","","","\u2014","","","357,016"],["ASOF II","","European","","\u2014","","","80,926","","","\u2014","","","\u2014","","","80,926"],["Other funds","","European","","92,509","","","82,079","","","\u2014","","","8,479","","","183,067"],["Other funds","","American","","16,488","","","(7,149)","","","(239)","","","\u2014","","","9,100"],["Total Private Equity Group","","","","$","1,608,239","","","$","124,627","","","$","(117,899)","","","$","8,479","","","$","1,623,446"]] [[/GREPCENT_TABLE]] Private Equity Group—Assets Under Management The tables below present rollforwards of AUM for the Private Equity Group ($ in millions): [[GREPCENT_TABLE]] [["","","Corporate Private Equity","","Special Opportunities","","APAC Private Equity","","Other(1)","","Total Private Equity Group"],["Balance at 12/31/2022","$","20,939","","","$","13,720","","","$","90","","","$","\u2014","","","$","34,749"],["Acquisitions","\u2014","","","\u2014","","","3,697","","","\u2014","","","3,697"],["Net new par/equity commitments","1,482","","","\u2014","","","\u2014","","","139","","","1,621"],["Capital reductions","(9)","","","\u2014","","","\u2014","","","\u2014","","","(9)"],["Distributions","(1,794)","","","(499)","","","(16)","","","\u2014","","","(2,309)"],["Change in fund value","380","","","1,333","","","(357)","","","\u2014","","","1,356"],["Balance at 12/31/2023","$","20,998","","","$","14,554","","","$","3,414","","","$","139","","","$","39,105"],["","","Corporate Private Equity","","Special Opportunities","","APAC Private Equity","","Other","","Total Private Equity Group"],["Balance at 12/31/2021","$","21,502","","","$","11,765","","","$","137","","","$","\u2014","","","$","33,404"],["Net new par/equity commitments","\u2014","","","2,202","","","\u2014","","","\u2014","","","2,202"],["Capital reductions","(8)","","","(200)","","","\u2014","","","\u2014","","","(208)"],["Distributions","(1,009)","","","(268)","","","(56)","","","\u2014","","","(1,333)"],["Change in fund value","453","","","221","","","10","","","\u2014","","","684"],["Balance at 12/31/2022","$","20,938","","","$","13,720","","","$","91","","","$","\u2014","","","$","34,749"],["(1) Activity within Other represents equity commitments to the platform that have not yet been allocated to an investment strategy."]] [[/GREPCENT_TABLE]] 138 Table of Contents The components of our AUM for the Private Equity Group are presented below ($ in billions): [[GREPCENT_TABLE]] [["","AUM: $39.1","","AUM: $34.7"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","FPAUM","","Non-fee paying(1)","","AUM not yet paying fees"]] [[/GREPCENT_TABLE]] (1) Includes $1.7 billion and $1.3 billion of non-fee paying AUM based on our general partner commitment as of December 31, 2023 and 2022, respectively. Private Equity Group—Fee Paying AUM The tables below present rollforwards of fee paying AUM for the Private Equity Group ($ in millions): [[GREPCENT_TABLE]] [["","","Corporate Private Equity","","Special Opportunities","","APAC Private Equity","","","","Total Private Equity Group"],["Balance at 12/31/2022","$","11,277","","","$","7,166","","","$","4","","","","","$","18,447"],["Acquisitions","\u2014","","","\u2014","","","1,692","","","","","1,692"],["Deployment/subscriptions/increase in leverage","220","","","2,518","","","14","","","","","2,752"],["Distributions","(38)","","","(1,194)","","","\u2014","","","","","(1,232)"],["Change in fee basis","\u2014","","","\u2014","","","(45)","","","","","(45)"],["Balance at 12/31/2023","$","11,459","","","$","8,490","","","$","1,665","","","","","$","21,614"],["","","Corporate Private Equity","","Special Opportunities","","APAC Private Equity","","","","Total Private Equity Group"],["Balance at 12/31/2021","$","12,420","","","$","4,216","","","$","53","","","","","$","16,689"],["Deployment/subscriptions/increase in leverage","36","","","4,453","","","\u2014","","","","","4,489"],["Distributions","(385)","","","(1,503)","","","(14)","","","","","(1,902)"],["Change in fund value","\u2014","","","\u2014","","","(4)","","","","","(4)"],["Change in fee basis","(794)","","","\u2014","","","(31)","","","","","(825)"],["Balance at 12/31/2022","$","11,277","","","$","7,166","","","$","4","","","","","$","18,447"]] [[/GREPCENT_TABLE]] 139 Table of Contents The charts below present FPAUM for the Private Equity Group by its fee bases ($ in billions): [[GREPCENT_TABLE]] [["","FPAUM: $21.6","","FPAUM: $18.5"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","","Invested capital","","","Capital commitments"]] [[/GREPCENT_TABLE]] Private Equity Group—Fund Performance Metrics as of December 31, 2023 Four significant funds, ACOF V, ASOF I, ACOF VI and ASOF II, collectively contributed approximately 85% of the Private Equity Group’s management fees for the year ended December 31, 2023. The following table presents the performance data of the Private Equity Group’s significant drawdown funds as of December 31, 2023 ($ in millions): [[GREPCENT_TABLE]] [["","Year of Inception","","AUM","","Original Capital Commitments","","Capital Invested to Date","","Realized Value(1)","","Unrealized Value(2)","","Total Value","","MoIC","","IRR(%)","","Primary Investment Strategy"],["Fund","","","","","","","","Gross(3)","","Net(4)","","Gross(5)","","Net(6)"],["Funds Harvesting Investments"],["ACOF V","2017","","$","8,765","","","$","7,850","","","$","7,611","","","$","3,505","","","$","8,253","","","$","11,758","","","1.5x","","1.4x","","11.6","","8.3","","Corporate Private Equity"],["ASOF I","2019","","5,559","","","3,518","","","5,500","","","4,462","","","3,775","","","8,237","","","1.8x","","1.6x","","26.0","","20.2","","Special Opportunities"],["Funds Deploying Capital"],["ACOF VI","2020","","7,419","","","5,743","","","5,109","","","593","","","6,696","","","7,289","","","1.4x","","1.3x","","24.2","","17.9","","Corporate Private Equity"],["ASOF II","2021","","7,580","","","7,128","","","5,926","","","1,371","","","5,241","","","6,612","","","1.2x","","1.1x","","14.4","","9.6","","Special Opportunities"]] [[/GREPCENT_TABLE]] (1)Realized value represents the sum of all cash dividends, interest income, other fees and cash proceeds from realizations of interests in portfolio investments. Realized value excludes any proceeds related to bridge financings. (2)Unrealized value represents the fair market value of remaining investments. Unrealized value does not take into account any bridge financings. There can be no assurance that unrealized investments will be realized at the valuations indicated. (3)The gross MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The gross MoIC is before giving effect to management fees, carried interest, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The gross MoICs are also calculated before giving effect to any bridge financings. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the gross fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (4)The net MoIC is calculated at the fund-level. The net MoIC is based on the interests of the fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or performance fees. The net MoIC is after giving effect to management fees, carried interest, as applicable, and other expenses. The net MoICs are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the net MoIC would be 1.3x for ACOF V and 1.2x for ACOF VI. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (5)The gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Gross IRRs reflect returns to the fee-paying limited partners and, if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The gross IRRs are also calculated before giving effect to any bridge financings. The funds may utilize a credit facility during the investment period and for general cash management purposes. Gross fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (6)The net IRR is an annualized since inception net internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Net IRRs reflect returns to the fee-paying limited partners and if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the net IRR calculation are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees, carried interest as applicable, and other expenses and exclude commitments by the general partner and Schedule I investors who do not pay either management fees or carried interest. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. The net IRRs are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the net IRRs would be 8.4% for ACOF V and 16.6% for ACOF VI. 140 Table of Contents Real Assets Group—Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Fee Related Earnings The following table presents the components of the Real Assets Group’s FRE ($ in thousands): [[GREPCENT_TABLE]] [["","","","","","Year ended December 31,","","Favorable (Unfavorable)"],["","","","","","","","","","2023","","2022","","$ Change","","% Change"],["Management fees","","","","","","","","","$","389,437","","","$","347,808","","","$","41,629","","","12%"],["Fee related performance revenues","","","","","","","","","334","","","167,693","","","(167,359)","","","(100)"],["Other fees","","","","","","","","","29,695","","","35,879","","","(6,184)","","","(17)"],["Compensation and benefits","","","","","","","","","(153,870)","","","(240,015)","","","86,145","","","36"],["General, administrative and other expenses","","","","","","","","","(46,789)","","","(39,739)","","","(7,050)","","","(18)"],["Fee Related Earnings","","","","","","","","","$","218,807","","","$","271,626","","","(52,819)","","","(19)"]] [[/GREPCENT_TABLE]] Management Fees. The chart below presents Real Assets Group management fees and effective management fee rates ($ in millions): Management fees from IDF V increased by $9.3 million for the year ended December 31, 2023 compared to the prior year primarily driven by deployment of capital. Our second climate infrastructure fund, which launched during the second quarter of 2023, contributed additional management fees of $4.8 million primarily driven by new capital commitments for the year ended December 31, 2023. Management fees from AREIT and AIREIT also collectively increased by $11.4 million for the year ended December 31, 2023 compared to the prior year driven by increases in the average capital base of AREIT and AIREIT. The increase over the comparative period also included $1.5 million from make-whole termination fees, driven by the early termination of the advisory agreements of two U.S. industrial real estate equity funds, which resulted in the acceleration of contractual management fees. 141 Table of Contents Management fees for the year ended December 31, 2023 included: (i) $1.8 million of catch-up fees from our fourth U.S. opportunistic real estate equity fund; and (ii) $0.3 million of catch-up fees from Ares European Real Estate Fund VI, L.P. (“EF VI”). Catch-up fees for the year ended December 31, 2022 included $4.8 million from US X. Excluding catch-up fees previously discussed, management fees for the year ended December 31, 2023 compared to the prior year increased by: (i) $15.1 million for our fourth U.S. opportunistic real estate equity fund; (ii) $2.9 million for EF VI; and (iii) $3.3 million for US X, which closed in the third quarter of 2022. The increase in management fees for these funds was primarily driven by new capital commitments. Management fees from our most recent real estate equity funds increase once capital is invested and deployment in these funds has also contributed to the increase in fees over the comparative period. The increase in effective management fee rate for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to additional capital raised in our non-traded REITs, which have effective management fee rates between 1.10% and 1.25%. Fee Related Performance Revenues. AREIT and AIREIT generated $164.3 million of incentive fees for the year ended December 31, 2022 but did not meet the performance hurdles to generate incentive fees for the year ended December 31, 2023, resulting in a decrease in fee related performance revenues. Other Fees. The decrease in other fees for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily attributable to a decrease of: (i) $11.4 million in acquisition and development fees resulting from a reduction in property-related activities within certain industrial U.S. real estate equity funds; and (ii) $2.9 million related to program administration fees resulting from the management and creation of our 1031 exchange program that is used by our non-traded REITs. The decrease for the year ended December 31, 2023 compared to the year ended December 31, 2022 was partially offset by higher credit transaction fees of $7.5 million. Credit transaction fees are generated periodically within the infrastructure debt strategy and relate to the arrangement and origination of loans. Compensation and Benefits. The decrease in compensation and benefits for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by lower fee related performance compensation of $103.3 million, corresponding to the decrease in fee related performance revenues. The decrease over the comparative period was partially offset by higher salary expense of $11.5 million, primarily attributable to headcount growth. Average headcount increased by 13% to 356 investment and investment support professionals for the year-to-date period in 2023 from 314 professionals in 2022. General, Administrative and Other Expenses. Certain expenses increased during the current period, including: (i) occupancy costs which support our growing headcount that are based in higher cost locations; (ii) information services such as research and market data; and (iii) information technology costs. Collectively, these expenses increased by $4.0 million for the year ended December 31, 2023 compared to the prior year. Additionally, the increase in general, administrative and other expenses was also driven by: (i) travel, marketing and certain fringe benefits, which collectively increased by $3.1 million, as we continued to increase marketing efforts driven by more investor meetings and events and conducted more in-person company meetings and events with a focus on promoting collaboration; and (ii) placement fees, which increased by $1.5 million, primarily attributable to new commitments in IDF V during 2022 and our fourth U.S. opportunistic real estate equity fund in connection with our fundraising efforts. 142 Table of Contents Realized Income The following table presents the components of the Real Assets Group’s RI ($ in thousands): [[GREPCENT_TABLE]] [["","","","","","Year ended December 31,","","Favorable (Unfavorable)"],["","","","","","","","","","2023","","2022","","$ Change","","% Change"],["Fee Related Earnings","","","","","","","","","$","218,807","","","$","271,626","","","$","(52,819)","","","(19)%"],["Performance income\u2014realized","","","","","","","","","20,990","","","133,130","","","(112,140)","","","(84)"],["Performance related compensation\u2014realized","","","","","","","","","(12,768)","","","(83,105)","","","70,337","","","85"],["Realized net performance income","","","","","","","","","8,222","","","50,025","","","(41,803)","","","(84)"],["Investment income (loss)\u2014realized","","","","","","","","","(4,498)","","","3,115","","","(7,613)","","","NM"],["Interest and other investment income\u2014realized","","","","","","","","","11,055","","","9,045","","","2,010","","","22"],["Interest expense","","","","","","","","","(16,391)","","","(11,346)","","","(5,045)","","","(44)"],["Realized net investment income (loss)","","","","","","","","","(9,834)","","","814","","","(10,648)","","","NM"],["Realized Income","","","","","","","","","$","217,195","","","$","322,465","","","(105,270)","","","(33)"]] [[/GREPCENT_TABLE]] Realized net performance income for the years ended December 31, 2023 and 2022 included incentive fees generated from an open-ended industrial real estate fund and carried interest received upon realizations from US VIII, driven by multifamily property sales. Realized net performance income for the year ended December 31, 2023 also included carried interest received upon realizations from a U.S. real estate equity fund driven by multifamily property sales, while realized net performance income for the year ended December 31, 2022 included tax distributions from US IX. Realized net investment loss for the year ended December 31, 2023 was primarily attributable to: (i) interest expense exceeding investment income during the periods; and (ii) realized losses recognized from a real estate debt vehicle, where financing costs are exceeding investment returns due to limited investment opportunities. This activity was partially offset by distributions of investment income from multiple real estate equity and real estate debt vehicles during the period. Realized net investment income for the year ended December 31, 2022 included dividend income generated from an infrastructure opportunities fund. Interest expense, which is allocated among our segments based on the cost basis of balance sheet investments, increased over the comparative periods primarily due to rising SOFR rates and a higher average outstanding balance of the Credit Facility and to the issuance of the 2028 Senior Notes in November 2023. Real Assets Group—Performance Income The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Real Assets Group. Accrued net performance income excludes net performance income that has been realized but not yet received as of the reporting date ($ in thousands): [[GREPCENT_TABLE]] [["","As of December 31,"],["","2023","","2022"],["","Accrued Performance Income","","Accrued Performance Compensation","","Accrued Net Performance Income","","Accrued Performance Income","","Accrued Performance Compensation","","Accrued Net Performance Income"],["US VIII","$","32,199","","","$","20,651","","","$","11,548","","","$","36,822","","","$","23,566","","","$","13,256"],["US IX","89,958","","","55,774","","","34,184","","","86,905","","","53,881","","","33,024"],["EF IV","49,150","","","29,490","","","19,660","","","61,791","","","37,075","","","24,716"],["IDF V","56,065","","","33,677","","","22,388","","","16,848","","","10,108","","","6,740"],["AREOF III","35,715","","","21,429","","","14,286","","","41,463","","","24,878","","","16,585"],["EIF V","93,598","","","69,969","","","23,629","","","94,398","","","70,562","","","23,836"],["Other real assets funds","140,167","","","92,468","","","47,699","","","154,641","","","97,894","","","56,747"],["Total Real Assets Group","$","496,852","","","$","323,458","","","$","173,394","","","$","492,868","","","$","317,964","","","$","174,904"]] [[/GREPCENT_TABLE]] 143 Table of Contents The following table presents the change in accrued performance income for the Real Assets Group ($ in thousands): [[GREPCENT_TABLE]] [["","","","","As of December 31, 2022","","Activity during the period","","As of December 31, 2023"],["","","Waterfall Type","","Accrued Performance Income","","Change in Unrealized","","Realized","","Other Adjustments","","Accrued Performance Income"],["Accrued Carried Interest"],["US VIII","","European","","$","36,822","","","$","(2,162)","","","$","(2,461)","","","$","\u2014","","","$","32,199"],["US IX","","European","","86,905","","","3,053","","","\u2014","","","\u2014","","","89,958"],["EF IV","","American","","61,791","","","(12,641)","","","\u2014","","","\u2014","","","49,150"],["IDF V","","European","","16,848","","","37,875","","","\u2014","","","1,342","","","56,065"],["AREOF III","","European","","41,463","","","(5,748)","","","\u2014","","","\u2014","","","35,715"],["EIF V","","European","","94,398","","","(800)","","","\u2014","","","\u2014","","","93,598"],["Other real assets funds","","European","","97,934","","","16,973","","","(2,462)","","","32","","","112,477"],["Other real assets funds","","American","","56,707","","","(28,074)","","","(926)","","","(17)","","","27,690"],["Total accrued carried interest","","","","492,868","","","8,476","","","(5,849)","","","1,357","","","496,852"],["Other real assets funds","","Incentive","","\u2014","","","15,141","","","(15,141)","","","\u2014","","","\u2014"],["Total Real Assets Group","","","","$","492,868","","","$","23,617","","","$","(20,990)","","","$","1,357","","","$","496,852"]] [[/GREPCENT_TABLE]] Real Assets Group—Assets Under Management The tables below present rollforwards of AUM for the Real Assets Group ($ in millions): [[GREPCENT_TABLE]] [["","U.S. Real Estate Equity","","European Real Estate Equity","","Real Estate Debt","","Infrastructure Opportunities","","Infrastructure Debt","","Total Real Assets Group"],["Balance at 12/31/2022","$","31,460","","","$","8,561","","","$","11,161","","","$","5,194","","","$","9,685","","","$","66,061"],["Net new par/equity commitments","3,116","","","775","","","539","","","1,218","","","428","","","6,076"],["Net new debt commitments","\u2014","","","326","","","400","","","\u2014","","","\u2014","","","726"],["Capital reductions","(245)","","","\u2014","","","(235)","","","\u2014","","","\u2014","","","(480)"],["Distributions","(2,813)","","","(264)","","","(259)","","","(322)","","","(1,138)","","","(4,796)"],["Redemptions","(1,207)","","","\u2014","","","(552)","","","\u2014","","","\u2014","","","(1,759)"],["Change in fund value","(1,134)","","","(12)","","","98","","","158","","","475","","","(415)"],["Balance at 12/31/2023","$","29,177","","","$","9,386","","","$","11,152","","","$","6,248","","","$","9,450","","","$","65,413"],["","U.S. Real Estate Equity","","European Real Estate Equity","","Real Estate Debt","","Infrastructure Opportunities","","Infrastructure Debt","","Total Real Assets Group"],["Balance at 12/31/2021","$","24,677","","","$","6,827","","","$","9,659","","","$","4,756","","","$","\u2014","","","$","45,919"],["Acquisitions","\u2014","","","\u2014","","","\u2014","","","\u2014","","","8,184","","","8,184"],["Net new par/equity commitments","5,811","","","2,038","","","1,012","","","431","","","1,346","","","10,638"],["Net new debt commitments","1,305","","","719","","","1,229","","","\u2014","","","\u2014","","","3,253"],["Capital reductions","(234)","","","\u2014","","","(282)","","","\u2014","","","\u2014","","","(516)"],["Distributions","(1,539)","","","(538)","","","(196)","","","(514)","","","(396)","","","(3,183)"],["Redemptions","(516)","","","\u2014","","","(435)","","","\u2014","","","\u2014","","","(951)"],["Change in fund value","1,956","","","(485)","","","174","","","521","","","551","","","2,717"],["Balance at 12/31/2022","$","31,460","","","$","8,561","","","$","11,161","","","$","5,194","","","$","9,685","","","$","66,061"]] [[/GREPCENT_TABLE]] 144 Table of Contents The components of our AUM for the Real Assets Group are presented below ($ in billions): [[GREPCENT_TABLE]] [["","AUM: $65.4","","AUM: $66.1"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","FPAUM","","Non-fee paying(1)","","AUM not yet paying fees"]] [[/GREPCENT_TABLE]] (1) Includes $0.6 billion of non-fee paying AUM based on our general partner commitment as of December 31, 2023 and 2022, respectively. Real Assets Group—Fee Paying AUM The tables below present rollforwards of fee paying AUM for the Real Assets Group ($ in millions): [[GREPCENT_TABLE]] [["","","U.S. Real Estate Equity","","European Real Estate Equity","","Real Estate Debt","","Infrastructure Opportunities","","Infrastructure Debt","","Total Real Assets Group"],["Balance at 12/31/2022","$","21,788","","","$","5,634","","","$","3,691","","","$","4,524","","","$","5,970","","","$","41,607"],["Commitments","2,525","","","26","","","(5)","","","1,128","","","\u2014","","","3,674"],["Deployment/subscriptions/increase in leverage","199","","","455","","","368","","","350","","","1,596","","","2,968"],["Capital reductions","(245)","","","(99)","","","(111)","","","\u2014","","","\u2014","","","(455)"],["Distributions","(1,125)","","","(7)","","","(264)","","","(854)","","","(1,612)","","","(3,862)"],["Redemptions","(1,207)","","","(3)","","","(565)","","","\u2014","","","\u2014","","","(1,775)"],["Change in fund value","(1,091)","","","85","","","163","","","\u2014","","","(74)","","","(917)"],["Change in fee basis","\u2014","","","98","","","\u2014","","","\u2014","","","\u2014","","","98"],["Balance at 12/31/2023","$","20,844","","","$","6,189","","","$","3,277","","","$","5,148","","","$","5,880","","","$","41,338"],["","","U.S. Real Estate Equity","","European Real Estate Equity","","Real Estate Debt","","Infrastructure Opportunities","","Infrastructure Debt","","Total Real Assets Group"],["Balance at 12/31/2021","$","15,687","","","$","4,916","","","$","3,516","","","$","4,496","","","$","\u2014","","","$","28,615"],["Acquisitions","\u2014","","","\u2014","","","\u2014","","","\u2014","","","4,855","","","4,855"],["Commitments","4,947","","","1,627","","","106","","","\u2014","","","\u2014","","","6,680"],["Deployment/subscriptions/increase in leverage","871","","","433","","","740","","","363","","","1,595","","","4,002"],["Capital reductions","\u2014","","","(17)","","","(183)","","","\u2014","","","\u2014","","","(200)"],["Distributions","(865)","","","(252)","","","(237)","","","(360)","","","(387)","","","(2,101)"],["Redemptions","(516)","","","\u2014","","","(449)","","","\u2014","","","\u2014","","","(965)"],["Change in fund value","1,696","","","(254)","","","198","","","25","","","(93)","","","1,572"],["Change in fee basis","(32)","","","(819)","","","\u2014","","","\u2014","","","\u2014","","","(851)"],["Balance at 12/31/2022","$","21,788","","","$","5,634","","","$","3,691","","","$","4,524","","","$","5,970","","","$","41,607"]] [[/GREPCENT_TABLE]] 145 Table of Contents The charts below present FPAUM for the Real Assets Group by its fee bases ($ in billions): [[GREPCENT_TABLE]] [["","FPAUM: $41.3","","FPAUM: $41.6"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","Market value(1)","","Invested capital/other(2)","","Capital commitments"]] [[/GREPCENT_TABLE]] (1)Amounts represent FPAUM from funds that primarily invest in illiquid strategies. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies. (2)Other consists of ACRE’s FPAUM, which is based on ACRE’s stockholders’ equity. Real Assets Group—Fund Performance Metrics as of December 31, 2023 Five significant funds, AIREIT, AREIT, Ares Infrastructure Debt Fund IV L.P. (“IDF IV”), IDF V and an open-ended industrial real estate fund, collectively contributed approximately 44% of the Real Assets Group’s management fees for the year ended December 31, 2023. The following table presents the performance data for our significant funds that are not drawdown funds in the Real Assets Group as of December 31, 2023 ($ in millions): [[GREPCENT_TABLE]] [["","","","","","","","","","Returns(%)"],["","Year of Inception","","AUM","","","","Year-To-Date","","Since Inception(1)","","Primary Investment Strategy"],["Fund","","","","","","","Gross","","Net","","Gross","","Net"],["AREIT(2)","2012","","$","5,267","","","","","","","N/A","","(4.8)","","","N/A","","6.7","","","U.S. Real Estate Equity"],["AIREIT(3)","2017","","7,718","","","","","","","N/A","","(9.8)","","","N/A","","9.9","","","U.S. Real Estate Equity"],["Open-ended industrial real estate fund(4)","2017","","4,957","","","","","","","(8.1)","","","(7.7)","","","19.9","","","16.2","","","U.S. Real Estate Equity"]] [[/GREPCENT_TABLE]] (1)Since inception returns are annualized. (2)Performance is measured by total return, which includes income and appreciation and reinvestment of all distributions for the respective time period. Returns are shown for institutional share class. Shares of other classes may have lower returns due to higher selling commissions and fees. Actual individual stockholder returns will vary. Net returns are calculated using the fund’s NAV and assume distributions are reinvested at the NAV on the date of distribution. The inception date used in the calculation of the since inception return is the date in which the first shares of common stock were sold after converting to a NAV-based REIT. Additional information related to AREIT can be found in its filings with the SEC, which are not part of this report. (3)Performance is measured by total return, which includes income and appreciation and reinvestment of all distributions for the respective time period. Returns are shown for institutional share class. Shares of other classes may have lower returns due to higher selling commissions and fees. Actual individual stockholder returns will vary. Net returns are calculated using the fund’s NAV and assume distributions are reinvested at the NAV on the date of distribution. Additional information related to AIREIT can be found in its filings with the SEC, which are not part of this report. (4)Returns are time-weighted rates of return and include the reinvestment of income and other earnings from securities or other investments and reflect the deduction of all trading expenses. Gross returns do not reflect the deduction of management fees, incentive fees, as applicable, or other expenses. Net returns are calculated by subtracting the applicable management fees, incentive fees, as applicable and other expenses from the gross returns on a quarterly basis. 146 Table of Contents The following table presents the performance data of the Real Assets Group’s significant drawdown funds as of December 31, 2023 ($ in millions): [[GREPCENT_TABLE]] [["","Year of Inception","","AUM","","Original Capital Commitments","","Capital Invested to Date","","Realized Value(1)","","Unrealized Value(2)","","Total Value","","MoIC","","IRR(%)","","Primary Investment Strategy"],["Fund","","","","","","","","Gross(3)","","Net(4)","","Gross(5)","","Net(6)"],["Fund Harvesting Investments"],["IDF IV(7)","2018","","$","3,120","","","$","4,012","","","$","4,531","","","$","2,235","","","$","2,875","","","$","5,110","","","1.2x","","1.2x","","6.9","","","5.3","","","Infrastructure Debt"],["Fund Deploying Capital"],["IDF V(8)","2020","","4,771","","","4,585","","","3,152","","","519","","","2,945","","","3,464","","","1.1x","","1.1x","","12.4","","","9.5","","","Infrastructure Debt"]] [[/GREPCENT_TABLE]] (1)Realized value includes distributions of operating income, sales and financing proceeds received. (2)Unrealized value represents the fund's NAV reduced by the accrued incentive allocation, if applicable. There can be no assurance that unrealized values will be realized at the valuations indicated. (3)The gross MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The gross MoIC is before giving effect to management fees, carried interest, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the gross fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (4)The net MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and, if applicable, excludes interests attributable to the non fee-paying limited partners and/or the general partner which does not pay management fees or carried interest. The net MoIC is after giving effect to management fees, carried interest, as applicable, credit facility interest expense, as applicable, and other expenses. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (5)The gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Gross IRR reflects returns to the fee-paying limited partners and, if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Gross fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (6)The net IRR is an annualized since inception net internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Net IRRs reflect returns to the fee-paying limited partners and, if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the net IRR calculations are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees and carried interest, other expenses and credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (7)IDF IV is made up of U.S. Dollar hedged, U.S. Dollar unhedged, Euro unhedged, Yen hedged parallel funds and a single investor U.S. Dollar parallel fund. The gross and net IRR and MoIC presented in the table are for the U.S. Dollar hedged parallel fund. The gross and net IRR for the U.S. Dollar unhedged parallel fund are 6.6% and 4.5%, respectively. The gross and net MoIC for the U.S. Dollar unhedged parallel fund are 1.2x and 1.1x, respectively. The gross and net IRR for the Euro unhedged parallel fund are 6.4% and 5.1%, respectively. The gross and net MoIC for the Euro unhedged parallel fund are 1.2x and 1.1x, respectively. The gross and net IRR for the Yen hedged parallel fund are 4.6% and 2.8%, respectively. The gross and net MoIC for the Yen hedged parallel fund are 1.1x and 1.1x, respectively. The gross and net IRR for the single investor U.S. Dollar parallel fund are 5.1% and 4.0%, respectively. The gross and net MoIC for the single investor U.S. Dollar parallel fund are 1.1x and 1.1x, respectively. Original capital commitments are converted to U.S. Dollars at the prevailing exchange rate at the time of fund's closing. All other values for IDF IV are for the combined fund and are converted to U.S. Dollars at the prevailing quarter-end exchange rate. (8)IDF V is made up of U.S. Dollar hedged, Euro unhedged, GBP hedged, Yen hedged and a single investor parallel fund. The gross and net IRR and MoIC presented in the table are for the U.S. Dollar hedged parallel fund. The gross and net IRR for the Euro unhedged parallel fund are 11.5% and 8.6%, respectively. The gross and net MoIC for the Euro unhedged parallel fund are 1.1x and 1.1x, respectively. The gross and net IRR for the GBP hedged parallel fund are 11.9% and 8.8%, respectively. The gross and net MoIC for the GBP hedged parallel fund are 1.1x and 1.1x, respectively. The gross and net IRR for the Yen hedged parallel fund are 9.5% and 6.7%, respectively. The gross and net MoIC for the Yen hedged parallel fund are 1.1x and 1.0x, respectively. The gross and net IRR for the single investor U.S. Dollar parallel fund are 10.0% and 7.7%, respectively. The gross and net MoIC for the single investor U.S. Dollar parallel fund are 1.1x and 1.1x, respectively. Original capital commitments are converted to U.S. Dollars at the prevailing exchange rate at the time of fund's closing. All other values for IDF V are for the combined fund and are converted to U.S. Dollars at the prevailing quarter-end exchange rate. 147 Table of Contents Secondaries Group—Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Fee Related Earnings The following table presents the components of the Secondaries Group’s FRE ($ in thousands): [[GREPCENT_TABLE]] [["","","","","","Year ended December 31,","","Favorable (Unfavorable)"],["","","","","","","","","","2023","","2022","","$ Change","","% Change"],["Management fees","","","","","","","","","$","174,942","","","$","176,694","","","$","(1,752)","","","(1)%"],["Fee related performance revenues","","","","","","","","","12,782","","","235","","","12,547","","","NM"],["Other fees","","","","","","","","","22","","","\u2014","","","22","","","NM"],["Compensation and benefits","","","","","","","","","(62,160)","","","(53,743)","","","(8,417)","","","(16)"],["General, administrative and other expenses","","","","","","","","","(21,199)","","","(12,685)","","","(8,514)","","","(67)"],["Fee Related Earnings","","","","","","","","","$","104,387","","","$","110,501","","","(6,114)","","","(6)"]] [[/GREPCENT_TABLE]] Management Fees. The chart below presents Secondaries Group management fees and effective management fee rates ($ in millions): Management fees from Landmark Equity Partners XV, L.P. (“LEP XV”) decreased by $8.0 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to the change in fee base to reported value, which largely reflects the NAV of each fund’s limited partnership interests, from called capital plus unfunded commitments. Management fees also decreased by $3.3 million from a real estate secondaries fund and three private equity secondaries funds due to distributions that reduced their fee bases. Management fees for the year ended December 31, 2023 included: (i) $7.9 million of catch-up fees from Landmark Real Estate Fund IX, L.P. (“LREF IX”). Management fees for the year ended December 31, 2022 included: (i) $9.2 million of catch-up fees from Landmark Equity Partners XVII, L.P. (“LEP XVII”); and (ii) $0.2 million from LREF IX. 148 Table of Contents The decrease in management fees was partially offset by: (i) additional management fees from LREF IX of $7.7 million, generated from new commitments, excluding catch-up fees previously discussed; and (ii) higher management fees from APMF of $4.0 million, as we contractually agreed to a reduced fee rate of 0.25% from inception through March 31, 2023 that subsequently increased to 1.40%. The increase in effective management fee rate for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to the higher fee rate for APMF following the expiration of the contractually reduced rate. Fee Related Performance Revenues. Fee related performance revenues reflects incentive fees recognized from APMF for the years ended December 31, 2023 and 2022. Compensation and Benefits. The increase in compensation and benefits for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by: (i) higher fee related performance compensation of $5.5 million corresponding to the increase in fee related performance revenue; and (ii) an increase in salary expense of $3.8 million which primarily attributable to headcount growth. Average headcount increased by 12% to 105 investment and investment support professionals for the year-to-date period in 2023 from 94 professionals in 2022. General, Administrative and Other Expenses. In an effort to accelerate the growth of APMF’s assets, we have entered into agreements that pay distribution partners a fee based on assets and/or sales. These agreements increased our expenses by $3.7 million for the year ended December 31, 2023 when compared to prior year and are expected to fluctuate with sales and the growth in assets. Additionally, travel and marketing collectively increased by $2.9 million for the year ended December 31, 2023 compared to the prior year driven by more in-person company meetings and events. Certain other expenses have also increased during the current period, primarily from occupancy costs which support our growing headcount that are based in higher cost locations and information technology costs. Collectively, these expenses increased by $1.3 million for the year ended December 31, 2023 compared to the prior year. Realized Income The following table presents the components of the Secondaries Group’s RI ($ in thousands): [[GREPCENT_TABLE]] [["","","","","","Year ended December 31,","","Favorable (Unfavorable)"],["","","","","","","","","","2023","","2022","","$ Change","","% Change"],["Fee Related Earnings","","","","","","","","","$","104,387","","","$","110,501","","","$","(6,114)","","","(6)%"],["Performance income\u2014realized","","","","","","","","","5,460","","","4,156","","","1,304","","","31"],["Performance related compensation\u2014realized","","","","","","","","","(4,678)","","","(3,515)","","","(1,163)","","","(33)"],["Realized net performance income","","","","","","","","","782","","","641","","","141","","","22"],["Interest and other investment income\u2014realized","","","","","","","","","4,867","","","3,683","","","1,184","","","32"],["Interest expense","","","","","","","","","(8,980)","","","(5,660)","","","(3,320)","","","(59)"],["Realized net investment loss","","","","","","","","","(4,113)","","","(1,977)","","","(2,136)","","","(108)"],["Realized Income","","","","","","","","","$","101,056","","","$","109,165","","","(8,109)","","","(7)"]] [[/GREPCENT_TABLE]] Realized net performance income for the years ended December 31, 2023 and 2022 was primarily attributable to tax distributions from LREF VIII. Realized investment income for the year ended December 31, 2023 reflects dividend income received from APMF. Realized investment income for the year ended December 31, 2022 included dividend income received from LREF VIII and an infrastructure secondaries fund. Interest expense, which is allocated among our segments based on the cost basis of balance sheet investments, increased over the comparative periods primarily due to rising SOFR rates and a higher average outstanding balance of the Credit Facility and to the issuance of the 2028 Senior Notes in November 2023. 149 Table of Contents Secondaries Group—Performance Income The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Secondaries Group. Accrued net performance income excludes net performance income that has been realized but not yet received as of the reporting date ($ in thousands): [[GREPCENT_TABLE]] [["","As of December 31,"],["","2023","","2022"],["","Accrued Performance Income","","Accrued Performance Compensation","","Accrued Net Performance Income","","Accrued Performance Income","","Accrued Performance Compensation","","Accrued Net Performance Income"],["LEP XVI","$","128,650","","","$","110,053","","","$","18,597","","","$","141,122","","","$","120,659","","","$","20,463"],["LREF VIII","97,366","","","84,256","","","13,110","","","109,928","","","94,538","","","15,390"],["Other secondaries funds","57,339","","","48,897","","","8,442","","","58,135","","","49,726","","","8,409"],["Total Secondaries Group","$","283,355","","","$","243,206","","","$","40,149","","","$","309,185","","","$","264,923","","","$","44,262"]] [[/GREPCENT_TABLE]] The following table presents the change in accrued performance income for the Secondaries Group ($ in thousands): [[GREPCENT_TABLE]] [["","","","","As of December 31, 2022","","Activity during the period","","","","As of December 31, 2023"],["","","Waterfall Type","","Accrued Carried Interest","","Change in Unrealized","","Realized","","","","Accrued Carried Interest"],["Accrued Carried Interest"],["LEP XVI","","European","","$","141,122","","","$","(12,472)","","","$","\u2014","","","","","$","128,650"],["LREF VIII","","European","","109,928","","","(8,002)","","","(4,560)","","","","","97,366"],["Other secondaries funds","","European","","58,135","","","104","","","(900)","","","","","57,339"],["Total Secondaries Group","","","","$","309,185","","","$","(20,370)","","","$","(5,460)","","","","","$","283,355"]] [[/GREPCENT_TABLE]] Secondaries Group—Assets Under Management The table below presents the rollforwards of AUM for the Secondaries Group ($ in millions): [[GREPCENT_TABLE]] [["","Private Equity Secondaries","","Real Estate Secondaries","","Infrastructure Secondaries","","Credit Secondaries","","Other(1)","","Total Secondaries Group"],["Balance at 12/31/2022","$","12,769","","","$","7,552","","","$","1,640","","","$","\u2014","","","$","\u2014","","","$","21,961"],["Net new par/equity commitments","567","","","952","","","721","","","1,358","","","50","","","3,648"],["Distributions","(477)","","","(537)","","","(102)","","","\u2014","","","\u2014","","","(1,116)"],["Redemptions","(1)","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","(1)"],["Net allocations among investment strategies","30","","","\u2014","","","\u2014","","","25","","","(50)","","","5"],["Change in fund value","286","","","(141)","","","121","","","(3)","","","\u2014","","","263"],["Balance at 12/31/2023","$","13,174","","","$","7,826","","","$","2,380","","","$","1,380","","","$","\u2014","","","$","24,760"],["","Private Equity Secondaries","","Real Estate Secondaries","","Infrastructure Secondaries","","Credit Secondaries","","Other","","Total Secondaries Group"],["Balance at 12/31/2021","$","13,833","","","$","6,662","","","$","1,624","","","$","\u2014","","","$","\u2014","","","$","22,119"],["Acquisitions","199","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","199"],["Net new par/equity commitments","1,011","","","1,425","","","74","","","\u2014","","","\u2014","","","2,510"],["Distributions","(1,632)","","","(932)","","","(223)","","","\u2014","","","\u2014","","","(2,787)"],["Change in fund value","(642)","","","397","","","165","","","\u2014","","","\u2014","","","(80)"],["Balance at 12/31/2022","$","12,769","","","$","7,552","","","$","1,640","","","$","\u2014","","","$","\u2014","","","$","21,961"],["(1) Activity within Other represents equity commitments to the platform that have not yet been allocated to an investment strategy."]] [[/GREPCENT_TABLE]] 150 Table of Contents The components of our AUM for the Secondaries Group are presented below ($ in billions): [[GREPCENT_TABLE]] [["","AUM: $24.7","","AUM: $22.0"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","FPAUM","","AUM not yet paying fees","","Non-fee paying(1)"]] [[/GREPCENT_TABLE]] (1) Includes $0.5 billion and $0.3 billion of non-fee paying AUM based on our general partner commitment as of December 31, 2023 and 2022, respectively. Secondaries Group—Fee Paying AUM The table below presents the rollforwards of fee paying AUM for the Secondaries Group ($ in millions): [[GREPCENT_TABLE]] [["","Private Equity Secondaries","","Real Estate Secondaries","","Infrastructure Secondaries","","Credit Secondaries","","","","Total Secondaries Group"],["Balance at 12/31/2022","$","11,062","","","$","5,313","","","$","1,293","","","$","\u2014","","","","","$","17,668"],["Commitments","367","","","772","","","506","","","\u2014","","","","","1,645"],["Deployment/subscriptions/increase in leverage","51","","","317","","","20","","","85","","","","","473"],["Distributions","(95)","","","(421)","","","(88)","","","(9)","","","","","(613)"],["Redemptions","(1)","","","\u2014","","","\u2014","","","\u2014","","","","","(1)"],["Net allocations among investment strategies","30","","","\u2014","","","\u2014","","","\u2014","","","","","30"],["Change in fund value","(162)","","","(53)","","","32","","","19","","","","","(164)"],["Change in fee basis","(48)","","","50","","","\u2014","","","\u2014","","","","","2"],["Balance at 12/31/2023","$","11,204","","","$","5,978","","","$","1,763","","","$","95","","","","","$","19,040"],["","Private Equity Secondaries","","Real Estate Secondaries","","Infrastructure Secondaries","","Credit Secondaries","","","","Total Secondaries Group"],["Balance at 12/31/2021","$","11,787","","","$","5,389","","","$","1,188","","","$","\u2014","","","","","$","18,364"],["Acquisitions","131","","","\u2014","","","\u2014","","","\u2014","","","","","131"],["Commitments","929","","","1,039","","","74","","","\u2014","","","","","2,042"],["Deployment/subscriptions/increase in leverage","58","","","473","","","29","","","\u2014","","","","","560"],["Distributions","(229)","","","(906)","","","(184)","","","\u2014","","","","","(1,319)"],["Change in fund value","(130)","","","716","","","186","","","\u2014","","","","","772"],["Change in fee basis","(1,484)","","","(1,398)","","","\u2014","","","\u2014","","","","","(2,882)"],["Balance at 12/31/2022","$","11,062","","","$","5,313","","","$","1,293","","","$","\u2014","","","","","$","17,668"]] [[/GREPCENT_TABLE]] 151 Table of Contents The chart below presents FPAUM for the Secondaries Group by its fee bases ($ in billions): [[GREPCENT_TABLE]] [["FPAUM: $19.1","","FPAUM: $17.7"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","Market value(1)","","Capital commitments","","Invested capital/other"]] [[/GREPCENT_TABLE]] (1)Amounts represent FPAUM from funds that primarily invest in illiquid strategies. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies. Secondaries Group—Fund Performance Metrics as of December 31, 2023 One significant fund LEP XVI contributed approximately 26% of the Secondaries Group’s management fees for the year ended December 31, 2023. The following table presents the performance data of the Secondaries Group’s significant drawdown fund as of December 31, 2023 ($ in millions): [[GREPCENT_TABLE]] [["","Year of Inception","","AUM","","Original Capital Commitments","","Capital Invested to Date","","Realized Value(1)","","Unrealized Value(2)","","Total Value","","MoIC","","IRR(%)","","Primary Investment Strategy"],["Fund","","","","","","","","Gross(3)","","Net(4)","","Gross(5)","","Net(6)"],["Fund Harvesting Investments"],["LEP XVI(7)","2016","","$","4,769","","","$","4,896","","","$","3,571","","","$","1,990","","","$","2,952","","","$","4,942","","","1.5x","","1.4x","","26.9","","18.1","","Private Equity Secondaries"]] [[/GREPCENT_TABLE]] For all funds in the Secondaries Group, returns are calculated from results of the underlying portfolio that are generally reported on a three month lag and may not include the impact of economic and market activities occurring in the current reporting period. (1)Realized value represents the sum of all cash distributions to all limited partners and if applicable, exclude tax and incentive distributions made to the general partner. (2)Unrealized value represents the limited partners’ share of fund’s NAV reduced by the accrued incentive allocation, if applicable. There can be no assurance that unrealized values will be realized at the valuations indicated. (3)The gross MoIC is calculated at the fund-level and is based on the interests of all partners. If applicable, limiting the gross MoIC to exclude interests attributable to the non-fee paying limited partners and/or the general partner who does not pay management fees or carried interest would have no material impact on the result. The gross MoIC is before giving effect to management fees, carried interest, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a short-term credit facility for general cash management purposes, as well as a long-term credit facility as permitted by the respective fund’s governing documentation. The gross fund-level MoIC would have generally been lower had such fund called capital from its partners instead of utilizing the credit facility. (4)The net MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes those interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The net MoIC is after giving effect to management fees and other expenses, carried interest and credit facility interest expense, as applicable. The funds may utilize a short-term credit facility for general cash management purposes, as well as a long-term credit facility as permitted by the respective fund’s governing documentation. The net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (5)The gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Gross IRR reflects returns to all partners. If applicable, limiting the gross IRR to exclude interests attributable to the non-fee paying limited partners and/or the general partner who does not pay management fees or carried interest would have no material impact on the result. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a short-term credit facility for general cash management purposes, as well as a long-term credit facility as permitted by the respective fund’s governing documents. The gross fund-level IRR would generally have been lower had such fund called capital from its partners instead of utilizing the credit facility. (6)The net IRR is an annualized since inception net internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Net IRRs reflect returns to the fee-paying limited partners and, if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner who does not pay management fees or carried interest. The cash flow dates used in the net IRR calculations are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees and other expenses, carried interest and credit facility interest expenses, as applicable. The funds may utilize a short-term credit facility for general cash management purposes, as well as a long-term credit facility as permitted by the respective fund’s governing documents. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (7)The results of each fund is presented on a combined basis with the affiliated parallel funds or accounts, given that the investments are substantially the same. 152 Table of Contents Operations Management Group—Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Fee Related Earnings The following table presents the components of the Operations Management Group’s FRE ($ in thousands): [[GREPCENT_TABLE]] [["","","","","","Year ended December 31,","","Favorable (Unfavorable)"],["","","","","","","","","","2023","","2022","","$ Change","","% Change"],["Other fees","","","","","","","","","$","23,685","","","$","24,529","","","$","(844)","","","(3)%"],["Compensation and benefits","","","","","","","","","(361,124)","","","(317,396)","","","(43,728)","","","(14)"],["General, administrative and other expenses","","","","","","","","","(200,613)","","","(155,017)","","","(45,596)","","","(29)"],["Fee Related Earnings","","","","","","","","","$","(538,052)","","","$","(447,884)","","","(90,168)","","","(20)"]] [[/GREPCENT_TABLE]] Other Fees. The decrease in other fees for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by lower: (i) facilitation fees from the 1031 exchange programs associated with our non-traded REITs of $7.9 million; and (ii) sales-based, net distribution fees associated with our non-traded REITs of $2.4 million. Conversely, asset-based, net distribution fees associated with our non-traded REITs increased by $5.3 million. The year ended December 31, 2023 also included broker-dealer advisory fees of $2.2 million, which were earned in connection with advisory services provided by AMCM for capital markets transactions executed during the period. Compensation and Benefits. The increase in compensation and benefits for the year ended December 31, 2023, compared to the year ended December 31, 2022 was primarily driven by: (i) the expansion of our strategy and relationship management teams to support global fundraising; and (ii) the expansion of our business operations teams to support the growth of our business and other strategic initiatives. Average headcount increased by 19% to 1,492 operations management professionals for the year-to-date period in 2023 from 1,252 professionals in 2022. Separately, compensation and benefits increased by $3.4 million for the nine months ended December 31, 2023 following the SSG Buyout on March 31, 2023, reflecting the costs associated with the 20% change in ownership that were previously not part of our cost structure. Our engagement of a third party subject matter expert to support the reorganization of our income tax compliance function during the third quarter of 2022 reduced salary expense by $5.9 million for the first two quarters of 2023 with a corresponding increase in general, administrative and other expenses. As this reorganization occurred at the end of the second quarter of 2022, we did not have comparable results for the year ended December 31, 2023. Employee commissions are earned in connection with the sale and distribution of fund shares in our non-traded, retail channel products and private placements of our exchange programs. Employee commissions have decreased over the comparative period primarily due to the lower sales volumes from our non-traded REITs and have begun to trend upward with increased sales volumes from ASIF and APMF. General, Administrative and Other Expenses. Travel and marketing collectively increased by $10.5 million for the year ended December 31, 2023 compared to the prior year as we continued to increase our marketing efforts driven by more investor meetings and events. AWMS has contributed $3.7 million to the increase in travel and marketing over the comparative period. As we build out our retail distribution infrastructure and capabilities through AWMS to support our prospective sales and AUM growth, we expect marketing and distribution expenses, including travel, to increase in future periods. Additionally, professional service fees increased by $15.9 million for the year ended December 31, 2023 compared to the prior year primarily due to (i) tax related service fees of $10.5 million from the reorganization of our income tax compliance function during the third quarter of 2022, with a corresponding decrease in compensation and benefits; and (ii) consulting fees to support various ongoing initiatives to enhance our operations. Certain expenses have also increased during the current year to support our growing headcount, the expansion of our business and the build out of our new corporate headquarters. Most notably, occupancy costs, information technology and information services have collectively increased by $9.1 million for the year ended December 31, 2023 compared to the prior year. 153 Table of Contents Realized Income The following table presents the components of the OMG’s RI ($ in thousands): [[GREPCENT_TABLE]] [["","","","","","Year ended December 31,","","Favorable (Unfavorable)"],["","","","","","","","","","2023","","2022","","$ Change","","% Change"],["Fee Related Earnings","","","","","","","","","$","(538,052)","","","$","(447,884)","","","$","(90,168)","","","(20)%"],["Investment loss\u2014realized","","","","","","","","","\u2014","","","(37)","","","37","","","100"],["Interest and other investment income (loss)\u2014realized","","","","","","","","","748","","","(1,588)","","","2,336","","","NM"],["Interest expense","","","","","","","","","(156)","","","(684)","","","528","","","77"],["Realized net investment income (loss)","","","","","","","","","592","","","(2,309)","","","2,901","","","NM"],["Realized Income","","","","","","","","","$","(537,460)","","","$","(450,193)","","","(87,267)","","","(19)"]] [[/GREPCENT_TABLE]] Liquidity and Capital Resources Management assesses liquidity in terms of our ability to generate cash to fund operating, investing and financing activities. Management believes that the Company is well-positioned and its liquidity will continue to be sufficient for its foreseeable working capital needs, contractual obligations, dividend payments, pending acquisitions and strategic initiatives. Sources and Uses of Liquidity Our sources of liquidity are: (i) cash on hand; (ii) net working capital; (iii) cash from operations, including management fees and fee related performance revenues, which are collected monthly, quarterly or semi-annually, and net realized performance income, which may be unpredictable as to amount and timing; (iv) fund distributions related to our investments that are unpredictable as to amount and timing; and (v) net borrowing from the Credit Facility. As of December 31, 2023, our cash and cash equivalents were $348.3 million, and we have $430.0 million available under our Credit Facility. Our ability to draw from the Credit Facility is subject to leverage and other covenants. We remain in compliance with all covenants as of December 31, 2023. We believe that these sources of liquidity will be sufficient to fund our working capital requirements and to meet our commitments in the ordinary course of business and under the current market conditions for the foreseeable future. Cash flows from management fees may be impacted by a slowdown or declines in deployment, declines or write downs in valuations, or a slowdown or negatively impacted fundraising. In addition, management fees may be subject to deferral and fee related performance revenues may be subject to hold backs. Declines or delays and transaction activity may impact our fund distributions and net realized performance income which could adversely impact our cash flows and liquidity. Market conditions may make it difficult to extend the maturity or refinance our existing indebtedness or obtain new indebtedness with similar terms. We expect that our primary liquidity needs will continue to be to: (i) provide capital to facilitate the growth of our existing investment management businesses; (ii) fund our investment commitments; (iii) provide capital to facilitate our expansion into businesses that are complementary to our existing investment management businesses as well as other strategic growth initiatives; (iv) pay operating expenses, including cash compensation to our employees; (v) fund capital expenditures; (vi) service our debt; (vii) pay income taxes and make payments under the tax receivable agreement (“TRA”); (viii) make dividend payments to our Class A and non-voting common stockholders in accordance with our dividend policy; and (ix) pay distributions to AOG unitholders. In the normal course of business, we expect to pay dividends to our Class A and non-voting common stockholders that are aligned with our expected fee related earnings after an allocation of current taxes paid. For the purposes of determining this amount, we allocate the current taxes paid to FRE and to realized incentive and investment income in a manner that may be disproportionate to earnings generated by these metrics, and the actual taxes paid on these metrics should they be considered separately. Additionally, our methodology uses the tax benefits from certain expenses that are not included in these non-GAAP metrics, such as equity-based compensation from the vesting of restricted units and the exercise of stock options and from the amortization of intangible assets, among others. We allocate the taxes by multiplying the statutory tax rate currently in effect by our realized performance and net investment income and removing this amount from total current taxes. The remaining current tax paid is the amount that we allocate to FRE. We use this method to allocate the current provision for income taxes to approximate the amount of cash that is available to pay dividends to our stockholders. If cash flows from operations were insufficient to fund dividends over a sustained period of time, we expect that we would suspend or reduce paying such dividends. In addition, there is no assurance that dividends would continue at the current levels or at all. Our ability to obtain debt financing and complete stock offerings provides us with additional sources of liquidity. For 154 Table of Contents further discussion of financing transactions occurring in the current period, see “Cash Flows” within this section and “Note 6. Debt” and “Note 13. Equity and Redeemable Interest” within our consolidated financial statements included in this Annual Report on Form 10-K. Our consolidated financial statements reflect the cash flows of our operating businesses as well as those of our Consolidated Funds. The assets of our Consolidated Funds, on a gross basis, are significantly larger than the assets of our operating businesses and therefore have a substantial effect on the amounts reported within our consolidated statements of cash flows. The primary cash flow activities of our Consolidated Funds include: (i) raising capital from third-party investors, which is reflected as non-controlling interests of our Consolidated Funds; (ii) financing certain investments by issuing debt; (iii) purchasing and selling investment securities; (iv) generating cash through the realization of certain investments; (v) collecting interest and dividend income; and (vi) distributing cash to investors. Our Consolidated Funds are generally accounted for as investment companies under GAAP; therefore, the character and classification of all Consolidated Fund transactions are presented as cash flows from operations. Liquidity available at our Consolidated Funds is not available for corporate liquidity needs, and debt of the Consolidated Funds is non–recourse to the Company except to the extent of the Company’s investment in the fund. Cash Flows The following tables summarize our consolidated statements of cash flows by activities attributable to the Company and Consolidated Funds. For more details on the activity of the Company and Consolidated Funds, refer to “Note 15. Consolidation” within our consolidated financial statements included in this Annual Report on Form 10-K. [[GREPCENT_TABLE]] [["","Year ended December 31,"],["","2023","","2022"],["Net cash provided by operating activities","$","473,107","","","$","632,968"],["Net cash used in the Consolidated Funds\u2019 operating activities, net of eliminations","(706,368)","","","(1,367,080)"],["Net cash used in operating activities","(233,261)","","","(734,112)"],["Net cash used in the Company\u2019s investing activities","(111,079)","","","(337,379)"],["Net cash used in the Company\u2019s financing activities","(404,761)","","","(238,500)"],["Net cash provided by the Consolidated Funds\u2019 financing activities, net of eliminations","696,887","","","1,366,563"],["Net cash provided by financing activities","292,126","","","1,128,063"],["Effect of exchange rate changes","10,501","","","(10,240)"],["Net change in cash and cash equivalents","$","(41,713)","","","$","46,332"]] [[/GREPCENT_TABLE]] The Consolidated Funds had no effect on cash flows attributable to the Company for the periods presented and are excluded from the discussion below. The following discussion focuses on cash flow by activities attributable to the Company. Operating Activities In the table below cash flows from operations have been summarized to present: (i) cash generated from our core operating activities, primarily consisting of profits generated principally from management fees and fee related performance revenues after covering for operating expenses and fee related performance compensation; (ii) net realized performance income; and (iii) net cash from investment related activities including purchases, sales, net realized investment income and interest payments. We generated meaningful cash flow from operations in each period presented. [[GREPCENT_TABLE]] [["","Year ended December 31,","","Favorable (Unfavorable)"],["","2023","","2022","","$ Change","","% Change"],["Core operating activities","$","981,981","","","$","708,039","","","$","273,942","","","39%"],["Net realized performance income","50,119","","","161,141","","","(111,022)","","","(69)"],["Net cash used in investment related activities","(558,993)","","","(236,212)","","","(322,781)","","","137"],["Net cash provided by operating activities","$","473,107","","","$","632,968","","","(159,861)","","","(25)"]] [[/GREPCENT_TABLE]] Cash generated from our core operating activities increased as a result of growing fee revenues and sustained profitability. Net realized performance income represents a source of cash and includes incentive fees that are realized annually at the end of the measurement period, which is typically at the end of the calendar year. Cash from these realizations are generally received in the period subsequent to the measurement period. Our incentive fee realizations were higher in the fourth quarter of 2021 compared to the fourth quarter of 2022, which resulted in a decrease in cash payments received over the comparative periods. 155 Table of Contents Net cash used in investment related activities for the year ended December 31, 2023 primarily represents: (i) purchases associated with funding capital commitments and strategic investments in our investment portfolio; (ii) interest payments on our debt obligations; offset by (iii) distributions received from our capital investments; and (iv) sales of our capital investments to employees. Our investment related activities may fluctuate depending on timing of capital investments and distributions of each fund from year to year. For further discussion of our capital commitments, see “Note 8. Commitments and Contingencies,” within our consolidated financial statements included in this Annual Report on Form 10-K. Our working capital needs are generally rising to support the growth of our business, while the capital requirements needed to support fund-related activities vary based upon the specific investment activities being conducted during such period. Investing Activities [[GREPCENT_TABLE]] [["","Year ended December 31,"],["","2023","","2022"],["Purchase of furniture, equipment and leasehold improvements, net of disposals","$","(67,183)","","","$","(35,796)"],["Acquisitions, net of cash acquired","(43,896)","","","(301,583)"],["Net cash used in investing activities","$","(111,079)","","","$","(337,379)"]] [[/GREPCENT_TABLE]] Net cash used in the Company’s investing activities was principally composed of cash to purchase furniture, fixtures, equipment and leasehold improvements during both years to support the growth in our staffing levels and to expand our global presence. Net cash used in the Company's investing activities included cash used to complete the Crescent Point Acquisition in the current year and to complete the Infrastructure Debt Acquisition in the prior year. Financing Activities [[GREPCENT_TABLE]] [["","Year ended December 31,"],["","2023","","2022"],["Net borrowings of Credit Facility","$","195,000","","","$","285,000"],["Proceeds from issuance of senior notes","499,010","","","488,915"],["Class A and non-voting common stock dividends","(599,934)","","","(447,634)"],["AOG unitholder distributions","(430,732)","","","(388,730)"],["Stock option exercises","85,959","","","21,205"],["Taxes paid related to net share settlement of equity awards","(157,007)","","","(201,311)"],["Other financing activities","2,943","","","4,055"],["Net cash used in the Company\u2019s financing activities","$","(404,761)","","","$","(238,500)"]] [[/GREPCENT_TABLE]] As a result of generating higher fee related earnings, we increased the level of dividends paid to a growing shareholder base of Class A and non-voting common stockholders and distributions paid to AOG unitholders, resulting in net cash used in the Company’s financing activities for the years ended December 31, 2023 and 2022. In connection with the vesting of restricted units that are granted to our employees under the 2023 Equity Incentive Plan (the “Equity Incentive Plan”) and the predecessor plan, we withhold shares equal to the fair value of our employees tax withholding liabilities and pay the taxes on their behalf in cash and thus net issue fewer shares. The use of cash decreased from the prior year primarily as a result of fewer restricted units that vested in the current year and that a greater number of restricted units vested in the prior year primarily due to certain non-recurring awards that cliff vested in their entirety on the fifth anniversary of their applicable grant dates. This decrease was partially offset by our higher stock price, which resulted in employees recognizing additional compensation. For the years ended December 31, 2023 and 2022, we net settled and did not issue 1.7 million shares and 2.4 million shares, respectively. The Company’s financing activities also included cash received from stock options exercises with 5.1 million and 1.1 million options exercised for the years ended December 31, 2023 and 2022, respectively. Additionally, the Company’s financing activities for the years ended December 31, 2023 and 2022 included the net proceeds from the issuance of the 2028 Senior Notes and 2052 Senior Notes, respectively. A portion of these proceeds was used to repay borrowings under our Credit Facility and to fund strategic growth initiatives in the current year and to fund the Infrastructure Debt Acquisition in the prior year. 156 Table of Contents Capital Resources We intend to use a portion of our available liquidity to pay cash dividends to our Class A and non-voting common stockholders on a quarterly basis in accordance with our dividend policy. Our ability to make cash dividends is dependent on a myriad of factors, including among others: general economic and business conditions; our strategic plans and prospects; our business and investment opportunities; timing of capital calls by our funds in support of our commitments; our financial condition and operating results; working capital requirements and other anticipated cash needs; contractual restrictions and obligations; legal, tax and regulatory restrictions; restrictions on the payment of distributions by our subsidiaries to us and other relevant factors. We are required to maintain minimum net capital balances for regulatory purposes for our broker-dealer entities. These net capital requirements are met in part by retaining cash, cash equivalents and investment securities. Additionally, certain of our subsidiaries operating outside the U.S. are also subject to capital adequacy requirements in each of the applicable jurisdictions. As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions. As of December 31, 2023, we were required to maintain approximately $64.9 million in net assets within these subsidiaries to meet regulatory net capital and capital adequacy requirements. We remain in compliance with all regulatory requirements. Holders of AOG Units, subject to the terms of the exchange agreement, may exchange their AOG Units for shares of our Class A common stock on a one-for-one basis. These exchanges are expected to result in increases in the tax basis of the tangible and intangible assets of AMC that otherwise would not have been available. These increases in tax basis may increase depreciation and amortization for U.S. income tax purposes and thereby reduce the amount of tax that we would otherwise be required to pay in the future. We entered into the TRA that provides payment to the TRA recipients of 85% of the amount of actual cash savings, if any, in U.S. federal, state, local and foreign income tax or franchise tax that we actually realize as a result of these increases in tax basis and of certain other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA and interest accrued thereon (“Tax Benefit Payment”). Effective as of May 1, 2023, pursuant to an amendment to the TRA, to the extent Ares Owners Holdings L.P. would have been a recipient of certain Tax Benefit Payments under the TRA for taxable exchanges on or after May 1, 2023, Ares Owners Holdings L.P. will no longer be entitled to any Tax Benefit Payment for such exchanges. Future payments under the TRA in respect of subsequent exchanges are expected to be substantial. The TRA liability balance was $191.3 million and $118.5 million as of December 31, 2023 and 2022, respectively. For a discussion of our debt obligations, including the debt obligations of our consolidated funds, see “Note 6. Debt,” within our consolidated financial statements included in this Annual Report on Form 10-K. Critical Accounting Estimates We prepare our consolidated financial statements in accordance with GAAP. In applying many of these accounting principles, we need to make assumptions, estimates or judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates or judgments, however, are both subjective and subject to change, and actual results may differ from our assumptions and estimates. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known. We believe the following critical accounting policies could potentially produce materially different results if we were to change the underlying assumptions, estimates or judgments. See “—Components of Consolidated Results of Operations” and “Note 2. Summary of Significant Accounting Policies,” within our consolidated financial statements included in this Annual Report on Form 10-K for a summary of our significant accounting policies. Principles of Consolidation We consolidate entities based on either a variable interest model or voting interest model. As such, for entities that are determined to be variable interest entities (“VIEs”), we consolidate those entities where we have both significant economics and the power to direct the activities of the entity that impact economic performance. For limited partnerships and similar entities evaluated under the voting interest model, we do not consolidate those entities for which we act as the general partner unless we hold a majority voting interest. The consolidation guidance requires qualitative and quantitative analysis to determine whether our involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests (e.g., management fees and performance related income), would give us a controlling financial interest. This analysis requires judgment. These 157 Table of Contents judgments include: (i) determining whether the equity investment at risk is sufficient to permit the entity to finance its activities without additional subordinated financial support; (ii) evaluating whether the equity holders, as a group, can make decisions that have a significant effect on the success of the entity; (iii) determining whether two or more parties’ equity interests should be aggregated; (iv) determining whether the equity investors have proportionate voting rights to their obligations to absorb losses or rights to receive returns from an entity; and (v) evaluating the nature of relationships and activities of the parties involved in determining which party within a related-party group is most closely associated with a VIE and hence would be deemed the primary beneficiary. The creditors of the consolidated VIEs do not have recourse to us other than to the assets of the respective consolidated VIEs. The assets and liabilities of the consolidated VIEs are comprised primarily of investments and loans payable, respectively. Fair Value Measurement GAAP establishes a hierarchical disclosure framework prioritizing the inputs used in measuring financial instruments at fair value into three levels based on their market observability. Market price observability is affected by a number of factors, including the type of instrument and the characteristics specific to the instrument. Financial instruments with readily available quoted prices from an active market or where fair value can be measured based on actively quoted prices generally have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value. Financial assets and liabilities measured and reported at fair value are classified as follows: •Level I—Quoted prices in active markets for identical instruments. •Level II—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in inactive markets; and model-derived valuations with directly or indirectly observable significant inputs. Level II inputs include prices in markets with few transactions, non-current prices, prices for which little public information exists or prices that vary substantially over time or among brokered market makers. Other inputs include interest rate, yield curve, volatility, prepayment risk, loss severity, credit risk and default rate. •Level III—Valuations that rely on one or more significant unobservable inputs. These inputs reflect the Company’s assessment of the assumptions that market participants would use to value the instrument based on the best information available. In some instances, an instrument may fall into multiple levels of the fair value hierarchy. In such instances, the instrument’s level within the fair value hierarchy is based on the lowest of the three levels (with Level III being the lowest) that is significant to the fair value measurement. Our assessment of the significance of an input requires judgment and considers factors specific to the instrument. See “Note 5. Fair Value,” within our consolidated financial statements included in this Annual Report on Form 10-K for a summary of our valuation of investments and other financial instruments by fair value hierarchy levels. Acquisitions Management’s determination of fair value of assets acquired and liabilities assumed at the acquisition date is based on the best information available in the circumstances and may incorporate management’s own assumptions and involve a significant degree of judgment. We use our best estimates and assumptions to accurately assign fair value to the tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date as well as the useful lives of those acquired intangible assets. For business combinations accounted for under the acquisition method, the purchase consideration, including the fair value of certain elements of contingent consideration as of the acquisition date, in excess of the fair value of net assets acquired is recorded as goodwill. Conversely, any excess of the fair value of the net assets acquired over the purchase consideration is recognized as a bargain purchase gain. Examples of critical estimates in valuing certain of the intangible assets we have acquired include, but are not limited to, future expected cash inflows and outflows, future fundraising assumptions, expected useful lives, discount rates and income tax rates. Our estimates for future cash flows are based on historical data, internal estimates and external sources, and are based on assumptions that are consistent with the plans and estimates we are using to manage the underlying assets acquired. We estimate the useful lives of the intangible assets based on the expected period over which we anticipate generating economic benefit from the asset. We base our estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Unanticipated events and circumstances may occur that could affect the accuracy or validity of such assumptions, estimates or actual results. 158 Table of Contents Impairment of Intangible Assets We evaluate intangible assets for impairment annually, or if certain events occur or circumstances change indicating that the carrying amount of the intangible asset may not be recoverable. We evaluate impairment by comparing the estimated undiscounted cash flows attributable to the intangible asset being evaluated with its carrying amount. If an impairment is determined to exist, we accelerate amortization expense so that the carrying amount represents fair value. We estimate fair value using a discounted future cash flow methodology. Inherent in such fair value determinations are certain judgments and estimates relating to future cash flows, including our strategic plans. We base our estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Additionally, future estimates may differ materially from current estimates and assumptions. Income Taxes The Company is taxed as corporation for U.S. federal and state income tax purposes. We use the liability method of accounting for deferred income taxes pursuant to GAAP. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the carrying value of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the statutory tax rates expected to be applied in the periods in which those temporary differences are settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized during the year the change is enacted. A valuation allowance is recorded on our net deferred tax assets when it is more likely than not that such assets will not be realized or when timing is unknown. When evaluating the realizability of our deferred tax assets, all evidence, both positive and negative, is evaluated. Items considered in this analysis include the ability to carry back losses, the reversal of temporary differences, tax planning strategies and expectations of future earnings. Under GAAP, the amount of tax benefit to be recognized is the amount of benefit that is more likely than not to be sustained upon examination. We analyze our tax filing positions in all of the U.S. federal, state, local and foreign tax jurisdictions where we are required to file income tax returns, as well as for all open tax years in these jurisdictions. If, based on this analysis, we determine that uncertainties in tax positions exist, a liability is established. We recognize accrued interest and penalties related to unrecognized tax positions within interest expense and general, administrative and other expenses, respectively, within the Consolidated Statements of Operations. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties under GAAP. We review our tax positions quarterly and adjust our tax balances as new legislation is passed or new information becomes available. Recent Accounting Pronouncements Information regarding recent accounting pronouncements and their impact on the Company can be found in “Note 2. Summary of Significant Accounting Policies,” within our consolidated financial statements included in this Annual Report on Form 10-K. 159 Table of Contents Contractual Obligations, Commitments and Contingencies and Other Arrangements In the normal course of business, we enter into contractual obligations that may require future cash payments. We may also engage in off-balance sheet arrangements, including guarantees, capital commitments to funds, indemnifications and potential contingent repayment obligations. The following table sets forth our contractual obligations and capital commitments of the Company and of the Consolidated Funds as of December 31, 2023 ($ in thousands): [[GREPCENT_TABLE]] [["","","Less than 1 year","","1 - 3 years","","4 - 5 years","","Thereafter","","Total"],["The Company:"],["Operating lease obligations(1)","","$","52,911","","","$","105,865","","","$","70,328","","","$","181,823","","","$","410,927"],["Debt obligations payable(2)","","249,427","","","\u2014","","","1,389,863","","","1,326,190","","","2,965,480"],["Interest obligations on debt(3)","","130,259","","","240,518","","","168,462","","","866,069","","","1,405,308"],["Other long-term obligations(4)","","1,892","","","1,524","","","91","","","\u2014","","","3,507"],["Capital commitments(5)","","1,030,623","","","\u2014","","","\u2014","","","\u2014","","","1,030,623"],["Subtotal","","1,465,112","","","347,907","","","1,628,744","","","2,374,082","","","5,815,845"],["Consolidated Funds:"],["Debt obligations payable","","125,241","","","1,057,053","","","71,025","","","11,429,585","","","12,682,904"],["Interest obligations on debt(3)","","781,240","","","1,538,417","","","1,483,688","","","2,682,665","","","6,486,010"],["Capital commitments of Consolidated Funds(5)","","771,485","","","\u2014","","","\u2014","","","\u2014","","","771,485"],["","","$","3,143,078","","","$","2,943,377","","","$","3,183,457","","","$","16,486,332","","","$","25,756,244"]] [[/GREPCENT_TABLE]] (1)The table includes future minimum commitments for our operating leases, including leases that have been executed but have not yet commenced. The majority of our operating lease obligations represents office space agreements with expirations through June 2036. Rent expense includes only base contractual rent. (2)Debt obligations include $1,650.0 million of senior notes and $450.0 million of subordinated notes, net of unamortized discount, and outstanding balance under the Credit Facility as of December 31, 2023. (3)Interest obligations reflect future interest payments on outstanding debt obligations with stated interest rates for fixed rate debt and at the prevailing rate in effect as of the reporting date for floating rate debt. (4)Represents payment obligations with respect to long-term service contracts entered into by the Company and future minimum commitments for our finance leases. (5)Represents commitments to fund certain investments or to support certain strategic investments. These amounts are generally due on demand and are therefore presented as obligations payable in less than one-year. We entered into a TRA with the TRA Recipients that requires us to pay them 85% of any cash tax savings, if any, realized by AMC from any step-up in tax basis resulting from an exchange of AOG Units for shares of our Class A common stock or, at our option, for cash. Because the timing of amounts to be paid under the TRA cannot be determined, this contractual commitment has not been presented in the table above. The cash tax savings, if any, achieved may not ensure that we have sufficient cash available to pay this liability, and we may be required to incur additional debt to satisfy this liability. For further discussion of our capital commitments, indemnification arrangements and contingent obligations, see “Note 8. Commitments and Contingencies,” within our consolidated financial statements included in this Annual Report on Form 10-K. 160 Table of Contents