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What changed in Ares Management Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Ares Management Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+1136 added−1110 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-24)

Top changes in Ares Management Corp's 2023 10-K

1136 paragraphs added · 1110 removed · 788 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

154 edited+47 added−36 removed108 unchanged
Biggest changeMany jurisdictions in which we operate have laws and regulations relating to data privacy, cybersecurity and protection of personal information, including the General Data Protection Regulation (“GDPR”), a European Union (“EU”) regulation designed to protect privacy rights of individuals residing in the European Economic Area (the “EEA”), the GDPR as it forms part of the laws of England and Wales, Scotland and Northern Ireland by virtue of Section 3 of the European Union Withdrawal Act 2018 (“U.K.
Biggest changeOur compliance policies and procedures seek to address a variety of regulatory and compliance risks such as the handling of material non-public information, position reporting, personal securities trading, valuation of investments on a fund-specific basis, document retention, potential conflicts of interest and the allocation of investment opportunities. 33 Table of Contents Many jurisdictions in which we operate have laws and regulations relating to data privacy, cybersecurity and protection of personal information, including the General Data Protection Regulation (“GDPR”), a European Union (“EU”) regulation designed to protect privacy rights of individuals residing in the European Economic Area (the “EEA”), the GDPR as it forms part of the laws of England and Wales, Scotland and Northern Ireland by virtue of Section 3 of the European Union Withdrawal Act 2018 (as amended) and the Data Protection Act 2018 (collectively, “U.K.
The management of our operating businesses is currently overseen by our Executive Management Committee which meets frequently to discuss strategy and operational matters, and includes as representatives Holdco Members and other senior leadership from our investment groups and business operations team.
The management of our operating businesses is currently overseen by our Executive Management Committee which meets frequently to discuss strategy and operational matters, and includes as representatives our Holdco Members and other senior leadership from our investment groups and business operations team.
While our culture is the foundation of our work environment, our equal opportunity employment, diversity, and anti-harassment/anti-discrimination policies reinforce a professional atmosphere. • Recruiting and Onboarding: We pursue several strategic paths to hire top talent, including campus and lateral recruiting efforts, and focus on diversity.
While our culture is the foundation of our work environment, our equal opportunity employment, diversity, anti-harassment and anti-discrimination policies reinforce a professional atmosphere. • Recruiting and Onboarding: We pursue several strategic paths to hire top talent, including campus and lateral recruiting efforts, and focus on diversity.
We also partner with select Ares private equity portfolio companies to understand the current state of their DEI efforts, as well as to share best practices and establish mutually agreed strategies and targets for driving DEI improvements in parallel with our internal efforts. • Communities: We partner with organizations to foster diversity within our communities and promote corporate citizenship through charity and volunteerism, much of which targets historically underrepresented and economically disadvantaged populations.
We also partner with select Ares private equity portfolio companies to understand the current state of their DEI efforts, as well as to share best practices and establish mutually agreed strategies for driving DEI improvements in parallel with our internal efforts. • Communities: We partner with organizations to foster diversity within our communities and promote corporate citizenship through charity and volunteerism, much of which targets historically underrepresented and economically disadvantaged populations.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Sources and Uses of Liquidity.” Regulatory and Compliance Matters Our businesses, as well as the financial services industry, generally are subject to extensive regulation, including periodic examinations, by governmental agencies and self-regulatory organizations or exchanges in the U.S. and foreign jurisdictions in which we operate relating to, among other things, antitrust laws, anti-money laundering laws, anti-bribery laws relating to foreign officials, tax laws and privacy laws with respect to client and other information, and some of our funds invest in businesses that operate in highly regulated industries.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Sources and Uses of Liquidity.” Regulatory and Compliance Matters Our businesses, as well as the financial services industry, generally are subject to extensive regulation, including periodic examinations, by governmental agencies and self-regulatory organizations or exchanges in the U.S. and foreign jurisdictions in which we operate relating to, among other things, antitrust laws, anti-money laundering laws, anti-bribery laws relating to foreign officials, tax laws and data privacy laws with respect to client and other information, and some of our funds invest in businesses that operate in highly regulated industries.
In addition, our investment vehicles have investment policies and procedures that generally contain requirements and limitations, such as concentrations of securities, industries, and geographies in which such investment vehicle will invest, as well as other limitations required by law. • Credit : Our experienced team takes a value-oriented approach which, among other factors, considers industry and market analysis, technical analysis, fundamental credit analysis and in-house research to identify investments that offer attractive value in comparison to the perceived credit risk profile.
In addition, our investment vehicles have investment policies and procedures that generally contain requirements and limitations, such as concentrations of securities, industries, and geographies in which such investment vehicles will invest, as well as other limitations required by law. • Credit : Our experienced team takes a value-oriented approach which, among other factors, considers industry and market analysis, technical analysis, fundamental credit analysis and in-house research to identify investments that offer attractive value in comparison to the perceived credit risk profile.
Certain aspects of MIFID II and MiFIR are subject to review and change in both the EU and the U.K. Effective January 1, 2022, the U.K. introduced a new prudential regulatory framework for U.K. investment firms (the “Investment Firm Prudential Regime” or “IFPR”). IFPR applies to AML and AELM as U.K.
Certain aspects of MIFID II and MiFIR are subject to review and change in both the EU and the U.K. Effective January 1, 2022, the U.K. introduced a prudential regulatory framework for U.K. investment firms (the “Investment Firm Prudential Regime” or “IFPR”). IFPR applies to AML and AELM as U.K.
The holder of shares of our Class C common stock is generally entitled to a number of votes equal to the number of Ares Operating Group Units (as defined in the Certificate of Incorporation) held of record by each Ares Operating Group Limited Partner (as defined in the Certificate of Incorporation) other than the Company and its subsidiaries.
The holder of shares of our Class C common stock is generally entitled to a number of votes equal to the number of AOG Units (as defined in the Certificate of Incorporation) held of record by each Ares Operating Group Limited Partner (as defined in the Certificate of Incorporation) other than the Company and its subsidiaries.
We also manage closed-end interval funds (CADC and APMF) that allow for periodic redemptions of the various share classes, four publicly-traded corporations (AAC, ACRE, ARCC and ARDC), two non-traded REITs (AREIT and AIREIT) and a non-traded BDC (ASIF).
We also manage closed-end interval funds (APMF and CADC) that allow for periodic redemptions of the various share classes, four publicly-traded corporations (AAC II, ACRE, ARCC and ARDC), two non-traded REITs (AIREIT and AREIT) and a non-traded BDC (ASIF).
Our funds are generally advised by Ares Management LLC, which is registered under the Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”), a wholly owned subsidiary thereof or subsidiary controlled by Ares Management LLC.
Our funds are generally advised by Ares Management LLC, which is registered under the Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”), a wholly owned subsidiary thereof or subsidiary controlled by AMC.
Since our inception in 1997, we have adhered to a disciplined investment philosophy that focuses on delivering strong risk-adjusted investment returns through market cycles. Ares believes each of its distinct but complementary investment groups in Credit, Private Equity, Real Assets, Secondaries and Strategic Initiatives is a market leader based on assets under management and investment performance.
Since our inception in 1997, we have adhered to a disciplined investment philosophy that focuses on delivering strong risk-adjusted investment returns through market cycles. Ares believes each of its distinct but complementary investment groups in Credit, Private Equity, Real Assets and Secondaries is a market leader based on assets under management and investment performance.
A s shown in the chart below, over the past five and 10 years, our assets under management have achieved a compound annual growth rate (“CAGR”) of 27% and 19%, respectively ($ in billions): We have an established track record of delivering strong risk-adjusted returns through market cycles.
A s shown in the chart below, over the past five and 10 years, our assets under management have achieved a compound annual growth rate (“CAGR”) of 26% and 19%, respectively ($ in billions): We have an established track record of delivering strong risk-adjusted returns through market cycles.
Special Opportunities: Our special opportunities team consists of approximately 25 investment professionals and employs an “all weather” flexible capital strategy to finance debt and non-control equity solutions in healthy, stressed and distressed middle market companies undergoing transformational change.
Special Opportunities: Our special opportunities team consists of over 25 investment professionals and employs an “all weather” flexible capital strategy to finance debt and non-control equity solutions in healthy, stressed and distressed middle market companies undergoing transformational change.
We believe that our strong performance, consistent growth and high talent retention through economic cycles is due largely to the effective application of this principle across our broad organization of over 2,550 employees.
We believe that our strong performance, consistent growth and high talent retention through economic cycles is due largely to the effective application of this principle across our broad organization of over 2,850 employees.
Ownership information in the diagram below is presented as of December 31, 2022. Ares Management Corporation (“AMC”) is a holding company and through subsidiaries is the general partner of the Ares Operating Group entity and operates and controls the business and affairs of the Ares Operating Group.
Ownership information in the diagram below is presented as of December 31, 2023. Ares Management Corporation (“AMC”) is a holding company and through subsidiaries is the general partner of the Ares Operating Group entity and operates and controls the business and affairs of the Ares Operating Group.
GDPR”) with respect to individuals residing in the United Kingdom (the “U.K.”), and various privacy laws applicable to individuals residing in the U.S., including the California Consumer Privacy Act (the “CCPA”), as amended by the California Privacy Rights Act.
GDPR”) with respect to individuals residing in the United Kingdom (the “U.K.”), and various state and federal privacy laws applicable to individuals residing in the U.S., including the California Consumer Privacy Act (the “CCPA”), as amended by the California Privacy Rights Act.
We believe our experience as value-add investors, flexible approach, and broad infrastructure experience positions us well to take advantage of the transitioning infrastructure industry. • Infrastructure Debt: Our global infrastructure debt team consists of over 25 investment professionals and sources global assets and businesses with defensive characteristics across the digital, transport, energy and utility sectors.
We believe our experience as value-add investors, flexible approach, and broad infrastructure experience positions us well to take advantage of the transitioning infrastructure industry. • Infrastructure Debt: Our global infrastructure debt team consists of over 20 investment professionals and sources assets and businesses across regions with defensive characteristics across the digital, transport, energy and utility sectors.
Training is provided for each phase of our performance assessment process. • Retention, Rewards and Recognition: We provide competitive compensation and benefits to (i) attract and retain talent, (ii) align the incentives of our employees with our investors and stakeholders and (iii) support our employees across many aspects of their lives.
Training is provided for each phase of our performance assessment process. 12 Table of Contents • Retention, Rewards and Recognition: We provide competitive compensation and benefits to: (i) attract and retain talent; (ii) align the incentives of our employees with our investors and stakeholders; and (iii) support our employees across many aspects of their lives.
AWMS, our wholly owned subsidiary, facilitates the product development, distribution, marketing and client management activities for investment offerings in the global wealth management channel with over 70 professionals.
AWMS, our wholly owned subsidiary, facilitates the product development, distribution, marketing and client management activities for investment offerings in the global wealth management channel with over 125 professionals.
Primary areas of focus for our real estate equity teams include: • Real Estate Core/Core-Plus : Our U.S. core/core-plus real estate strategy focuses on the acquisition of assets with strong long-term cash flow potential and durable tenancy diversified across end-user industries and geographies.
Primary areas of focus for our real estate equity teams include: • Real Estate Core/Core-Plus : Our U.S. core/core-plus real estate strategy focuses on the acquisition of assets with strong long-term cash flow potential and durable tenancy diversified across end-user industries and 24 Table of Contents geographies.
We seek to be a private equity partner of choice and believe our partnership mentality well-positions our investments for long-term success, whereby management teams gain access to our expertise and extensive internal and external networks from diligence to exit.
We seek to be a private equity partner of choice and believe our partnership 10 Table of Contents mentality well-positions our investments for long-term success, whereby management teams gain access to our expertise and extensive internal and external networks from diligence to exit.
ARCC has elected to be regulated as a BDC and was the largest publicly-traded BDC by market capitalization in the U.S. as of December 31, 2022. • Ares Strategic Income Fund: ASIF is a closed-end investment company focused primarily on providing direct loans to private middle market companies in the U.S., and to a lesser extent, broadly syndicated loans and other more liquid credit opportunities, including in publicly-traded debt instruments.
ARCC has elected to be regulated as a BDC and was the largest publicly-traded BDC by market capitalization in the U.S. as of December 31, 2023. • Ares Strategic Income Fund: ASIF is a closed-end investment company focused primarily on providing direct loans to private middle market companies in the U.S., and to a lesser extent, broadly syndicated loans and 21 Table of Contents other more liquid credit opportunities, including in publicly-traded debt instruments.
Direct Lending: Our leading U.S. team is comprised of over 170 investment professionals that cover more than 635 financial sponsors and provide a wide range of financing solutions to middle market companies that typically range from $10 million to over $500 million in earnings before interest, tax, depreciation and amortization (“EBITDA”).
Direct Lending: Our leading U.S. team is comprised of over 180 investment professionals that cover more than 650 financial sponsors and provide a wide range of financing solutions to middle market companies that typically range from $10 million to over $500 million in earnings before interest, tax, depreciation and amortization (“EBITDA”).
Our general partner capital commitments are typically funded with cash and not with carried interest or deferral of management fees. We generally offer a portion of the general partner commitments to our eligible professionals in accordance with the Investment Company Act. Ares employees had capital commitments of $2.0 billion in Ares-managed funds as of December 31, 2022.
Our general partner capital commitments are typically funded with cash and not with carried interest or deferral of management fees. We generally offer a portion of the general partner commitments to our eligible professionals in accordance with the Investment Company Act. Ares employees had capital commitments of $2.4 billion in Ares-managed funds as of December 31, 2023.
This proficiency is complemented by our flexibility in deploying capital in a range of structures and different market environments to maximize risk-adjusted returns. • Differentiated Market Intelligence: Our proprietary research on over 55 industries and insights from a broad, global investment portfolio enable us to more effectively diligence and structure our products and investments. 9 T a b l e o f C o n t e n t s • Consistent Investment Approach: We believe our rigorous, credit-oriented investment approach across each of our investment groups is a key contributor to our strong investment performance and ability to expand our product offering. • Robust Sourcing Model: Our investment professionals’ local market presence and ability to effectively cross-source for other investment groups generates a robust pipeline of high-quality investment opportunities across our platform. • Talented and Committed Professionals: We attract, develop and retain highly accomplished professionals who not only demonstrate deep and broad investment and non-investment expertise but also have a strong sense of commitment to our firm. • Collaborative Culture: We share ideas, relationships and information across our investment groups, which enables us to more effectively source, evaluate and manage investments.
This proficiency is complemented by our flexibility in deploying capital in a range of structures and different market environments to maximize risk-adjusted returns. 9 Table of Contents • Differentiated Market Intelligence: Our proprietary research on over 55 industries and insights from a broad, global investment portfolio enable us to more effectively diligence and structure our products and investments. • Consistent Investment Approach: We believe our rigorous, credit-oriented investment approach across each of our investment groups is a key contributor to our strong investment performance and ability to expand our product offering. • Robust Sourcing Model: Our investment professionals’ local market presence and ability to effectively cross-source for other investment groups generates a robust pipeline of high-quality investment opportunities across our platform. • Talented and Committed Professionals: We attract, develop and retain highly accomplished professionals who not only demonstrate deep and broad investment and non-investment expertise but also have a strong sense of commitment to our firm. • Collaborative Culture: We share ideas, relationships and information across our investment groups, which enables us to more effectively source, evaluate and manage investments.
Our operations and our investment activities worldwide are subject to a variety of regulatory regimes that vary by country. These include operating subsidiaries of Ares SSG Capital Holdings Limited, which are subject to regulation by various regulatory authorities, including the Securities and Futures Commission of Hong Kong and Monetary Authority of Singapore.
Our operations and our investment activities worldwide are subject to a variety of regulatory regimes that vary by country. These include operating subsidiaries of Ares Management Asia (Holdings) Limited, which are subject to regulation by various regulatory authorities, including the Securities and Futures Commission of Hong Kong and Monetary Authority of Singapore.
We manage various types of direct lending vehicles within our U.S. and European direct lending teams including commingled funds, SMAs for large institutional investors seeking tailored investment solutions and joint venture lending programs. As of December 31, 2022, we managed over 50 SMAs across our direct lending strategy.
We manage various types of direct lending vehicles within our U.S. and European direct lending teams including commingled funds, SMAs for large institutional investors seeking tailored investment solutions and joint venture lending programs. As of December 31, 2023 , we managed over 55 SMAs across our direct lending strategy.
Qualifying assets include investments in “eligible portfolio companies.” ARCC is also generally prohibited from issuing and selling its common stock at a price below net asset value per share and from incurring indebtedness (including for this purpose, preferred stock), if ARCC’s asset coverage, as calculated pursuant to the Investment Company Act, equals less than 150% after such incurrence.
Qualifying assets include investments in “eligible portfolio companies.” ARCC and ASIF are also generally prohibited from issuing and selling its common stock at a price below net asset value per share and from incurring indebtedness (including for this purpose, preferred stock), if ARCC and ASIF’s respective asset coverage, as calculated pursuant to the Investment Company Act, equals less than 150% after such incurrence.
We also recognize the importance of considering environmental, social and governance (“ESG”) factors in our investment process and have adopted an ESG policy for the conduct of our business. We work collaboratively with our various underwriting, asset management, legal and compliance teams to appropriately integrate relevant ESG considerations into our investment process.
We also recognize the importance of considering environmental, social and governance (“ESG”) factors in our investment process and have adopted a Responsible Investment Program for the conduct of our business. We work collaboratively with our various underwriting, asset management, legal and compliance teams to appropriately integrate relevant ESG considerations into our investment process.
ACRE, ARDC and ARCC do not have redemption provisions or a requirement to return capital to investors upon exiting the investments made with such capital, except as required by applicable law (including distribution requirements that must be met to maintain RIC or REIT status).
ACRE, ARDC and ARCC do not have redemption provisions or a requirement to return capital to investors upon exiting the investments made with such capital, except as required by applicable law (including distribution requirements that must be met to maintain regulated investment company (“RIC”) or REIT status).
We also leverage our operations management group to help drive the efficiencies across the platforms and support our investment process. Integrated Investment Platform and Process We operate our firm as an integrated investment platform with a collaborative culture that emphasizes sharing of knowledge and expertise.
We also leverage the OMG to help drive the efficiencies across the platforms and support our investment process. Integrated Investment Platform and Process We operate our firm as an integrated investment platform with a collaborative culture that emphasizes sharing of knowledge and expertise.
Additional legislation, increasing global regulatory oversight of fundraising activities, changes in rules promulgated by self-regulatory organizations or exchanges or changes in the laws or rules, or interpretation or enforcement of existing laws and rules, either in the United States (“U.S.”) or elsewhere, may directly affect our mode of operation and profitability. See “Item 1A.
Additional legislation, increasing global regulatory oversight of fundraising activities, changes in rules promulgated by self-regulatory organizations or exchanges or changes in the laws or rules, or interpretation or enforcement of existing laws and rules, either in the U.S. or elsewhere, may directly affect our mode of operation and profitability. See “Item 1A.
Each of the registered investment companies has elected, for U.S. federal tax purposes, to be treated as a regulated investment company (“RIC”) under Subchapter M of the U.S. Internal Revenue Code of 1986, as amended (the “Code”).
Each of the registered investment companies has elected, for U.S. federal tax purposes, to be treated as a RIC under Subchapter M of the U.S. Internal Revenue Code of 1986, as amended (the “Code”).
Our team primarily acquires standing assets and improves them through renovating, repositioning and retenanting and selectively developing assets in supply-constrained markets. As of December 31, 2022, our real estate equity team managed $40.1 billion of AUM in over 40 investment vehicles.
Our team primarily acquires standing assets and improves them through renovating, repositioning and retenanting and selectively developing assets in supply-constrained markets. As of December 31, 2023, our real estate equity team managed $38.6 billion of AUM in over 40 investment vehicles.
Risk Factors—Risks Related to Regulation—Extensive regulation affects our activities, increases the cost of doing business and creates the potential for significant liabilities and penalties that could adversely affect our businesses and results of operations.” Effective September 2019, the SEC adopted a rule that requires a broker-dealer, or a natural person who is an associated person of a broker-dealer, to act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities, without placing the financial or other interest of the broker, dealer or natural person who is an associated person of a broker-dealer making the recommendation ahead of the interest of the retail customer (“Regulation Best Interest”).
Risk Factors—Risks Related to Regulation—Extensive regulation affects our activities, increases the cost of doing business and creates the potential for significant liabilities and penalties that could adversely affect our businesses and results of operations.” Since September 2019, the SEC has required broker-dealers, or natural persons who are associated persons of broker-dealers, to act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities, without placing the financial or other interest of the broker, dealer or natural person who is an associated person of a broker-dealer making the recommendation ahead of the interest of the retail customer (“Regulation Best Interest”).
As of December 31, 2022, our total AUM was divided by channel, and further our institutional direct AUM by client type and geographic origin as follows ($ in billions): Institutional Direct Public Entities and Related Institutional Intermediaries Pension Insurance Bank North America Europe Asia-Pacific Sovereign Wealth Fund High Net Worth and Private Bank Investment Manager Middle East & Africa Other Other The following chart presents the AUM of investors committed to more than one of our funds as of December 31, 2022 compared to December 31, 2017 ($ in billions): We believe that the AUM of multi-fund investors demonstrates our investors’ satisfaction with our performance, disciplined management of their capital and diverse product offering.
As of December 31, 2023, our total AUM was divided by channel, and further our institutional direct AUM by client type and geographic origin as follows ($ in billions): Institutional Direct Retail Institutional Intermediaries Pension Insurance Bank North America Europe APAC Sovereign Wealth Fund High Net Worth and Private Bank Investment Manager Middle East & Africa Other Other The following chart presents the AUM of investors committed to more than one of our funds as of December 31, 2023 compared to December 31, 2018 ($ in billions): We believe that the AUM of multi-fund investors demonstrates our investors’ satisfaction with our performance, disciplined management of their capital and diverse product offering.
We prioritize making all new team members feel welcome and seek to set them up for success through onboarding training, ongoing touchpoints, and connecting them with our employee resource groups (“ERGs”), which are grassroots, employee-led, executive-sponsored groups and open to all team members. • Internship Training Program: Ares offers a formal analyst internship program for students between their sophomore and senior years of college with the possibility of full-time hire into our analyst program upon graduation for those who intern between their junior and senior years.
We prioritize making all new team members feel welcome and seek to set them up for success through onboarding training, ongoing touchpoints, and connecting them with our employee resource groups (“ERGs”), which are grassroots, employee-led, executive-sponsored groups and open to all team members. • Internship Training Program: Ares offers a formal internship program for students between their junior and senior years of college with the possibility of conversion to a full-time position in our analyst program upon graduation.
Our clients seek to partner with investment management firms that not only have compelling investment track records across multiple investment products but also possess seasoned infrastructure support functions. As such, significant investments have been made to develop the OMG. The OMG also includes AWMS to facilitate our investment offerings in the global wealth management channel.
Our clients seek to partner with investment management firms that not only have compelling investment track records across multiple investment products but also possess seasoned infrastructure support functions. As such, significant investments have been made to develop the OMG. The OMG also includes AWMS.
(“AREIT”) and Ares Industrial REIT, Inc. (“AIREIT”), and our publicly-traded commercial mortgage REIT, ACRE. The group’s activities are managed by dedicated equity and debt teams in the U.S. and Europe. Real Estate Equity: Our real estate equity team, with over 205 investment professionals, has extensive real estate private equity experience in the U.S. and Europe.
(“AIREIT”), and our publicly-traded commercial mortgage REIT, ACRE. The group’s activities are managed by dedicated equity and debt teams in the U.S. and Europe. Real Estate Equity: Our real estate equity team, with over 220 investment professionals, has extensive real estate private equity experience in the U.S. and Europe.
We have identified DEI champions within each investment group to develop bespoke strategies focused on representation, DEI governance, equitable access and employee engagement/equity ownership, which will be integrated into our business plans each year. In addition, we are focused on increasing vendor and supplier diversity in our procurement practices.
We have identified DEI champions within each investment group to develop bespoke strategies focused on representation, DEI governance, equitable access, and employee engagement and equity ownership, which we intend to integrate into our business plans each year. In addition, we are focused on supporting vendor and supplier diversity in our procurement practices.
Our investment approach is designed to capture and create value by leveraging our firm’s platform insights to assess risk and relative value. Direct Lending: Our direct lending strategy is one of the largest self-originating direct lenders to the U.S. and European markets, with $148.9 billion of AUM in over 100 funds and investment vehicles as of December 31, 2022 .
Our investment approach is designed to capture and create value by leveraging our firm’s platform insights to assess risk and relative value. Direct Lending: Our direct lending strategy is one of the largest self-originating direct lenders to the U.S. and European markets, with $191.4 billion of AUM in over 90 funds and investment vehicles as of December 31, 2023 .
Our dedicated and extensive in-house relationship management team, comprised of over 55 professionals located in North America, Europe and Asia-Pacific, is dedicated to raising capital globally across all of our funds, servicing existing fund investors and tailoring offerings to meet their needs, developing products to complement our existing offerings, and deepening existing relationships to expand them across our platform.
Our dedicated and extensive in-house relationship management team, comprised of over 135 professionals located in North America, Europe, APAC and the Middle East, is dedicated to raising capital globally across all of our funds, servicing existing fund investors and tailoring offerings to meet their needs, developing products to complement our existing offerings, and deepening existing relationships to expand them across our platform.
In addition, as a business development company, ARCC must not acquire any assets other than “qualifying assets” specified in the Investment Company Act unless, at the time the acquisition is made, at least 70% of ARCC’s total assets are qualifying assets (with certain limited exceptions).
In addition, as business development companies, ARCC and ASIF must not acquire any assets other than “qualifying assets” specified in the Investment Company Act unless, at the time the acquisition is made, at least 70% of ARCC and ASIF’s respective total assets are qualifying assets (with certain limited exceptions).
The strategy seeks to create value and generate stable and growing distributions to investors by buying properties at attractive valuations, implementing asset management initiatives to increase income and by identifying multiple exit strategies upfront. • Real Estate Opportunistic : Our U.S. and European opportunistic real estate investment activities capitalize on increased investor demand for developed and stabilized assets by focusing on the repositioning of assets, capitalization of distressed and special situations, and development of core-quality assets across all major property types including multifamily, industrial, office, hotel, and retail properties and adjacent sectors throughout the U.S. and Europe.
The strategy seeks to create value and generate stable and growing distributions to investors by buying properties at attractive valuations, implementing asset management initiatives to increase income and identifying multiple exit strategies upfront. • Real Estate Opportunistic: Our U.S. and European opportunistic real estate strategy capitalizes on increased investor demand for developed and stabilized assets by focusing on the repositioning of assets, capitalization of distressed and special situations, and development of core-quality assets across all major property types, as well as select and adjacent sectors, throughout the U.S. and Europe.
The team maintains a flexible investment strategy with the capability to invest in first lien senior secured loans (including “ unitranche ” loans which are loans that combine senior and subordinated debt, generally in a first lien position), second lien senior secured loans, subordinated debt, preferred equity and non-control equity co-investments in private middle market companies. 22 T a b l e o f C o n t e n t s U.S.
The team maintains a flexible investment strategy with the capability to invest in first lien senior secured loans (including “ unitranche ” loans which are loans that combine senior and subordinated debt, generally in a first lien position), second lien senior secured loans, subordinated debt, preferred equity and non-control equity co-investments in private middle market companies. U.S.
Real Estate Secondaries : Our real estate secondaries team has a track record of innovation through customized transaction solutions tailored to meet the needs of limited partners and general partners. As of December 31, 2022, our real estate secondaries team of approximately 20 investment professionals managed $7.6 billion of AUM in over 25 funds and related co-investment vehicles.
Real Estate Secondaries : Our real estate secondaries team has a track record of innovation through customized transaction solutions tailored to meet the needs of limited partners and general partners. As of December 31, 2023, our real estate secondaries team of more than 25 investment professionals managed $7.8 billion of AUM in approximately 30 funds and related co-investment vehicles.
The U.K. is introducing an important and substantial regime, the Consumer Duty, designed to improve outcomes for retail investors, aspects of which will begin to apply from July 31, 2023. Although Ares entities do not generally deal with consumers in the ordinary sense, the regime will apply to certain of our funds.
The U.K. has introduced an important and substantial regime, the Consumer Duty, designed to improve outcomes for retail investors, aspects of which became effective on July 31, 2023. Although Ares entities do not generally deal with consumers in the ordinary sense, the regime will apply to certain of our funds.
To foster this culture, we invest heavily in our human capital efforts, including: Talent Management: As of December 31, 2022, we had over 2,550 full-time employees, comprised of approximately 900 professionals in our investment groups and over 1,650 operations management professionals, located in over 30 offices in more than 15 countries.
To foster this culture, we invest heavily in our human capital efforts, including: Talent Management: As of December 31, 2023, we had over 2,850 full-time employees, comprised of approximately 1,000 professionals in our investment groups and over 1,850 operations management professionals, located in over 35 offices in more than 15 countries.
We pursue an ESG strategy that is designed to address the most material issues to our business, starting with our corporate sustainability program that focuses on how we lead by example through our own corporate operations and then scaling through a responsible investment program that focuses on how we amplify our impact through our investment platform. • In order to continuously improve our ESG integration processes, we have defined three tiers of roles and responsibilities for oversight and implementation: (i) Oversight Responsibility, (ii) Defining Implementation and (iii) Driving Implementation.
We pursue a strategy that is designed to address ESG issues most relevant to our business, starting with a corporate sustainability program focused on our corporate operations and then scaling through a responsible investment program that focuses on our investment platform. • In order to continuously improve our ESG integration processes, we have defined three tiers of roles and responsibilities for oversight and implementation: (i) Oversight Responsibility; (ii) Defining Implementation; and (iii) Driving Implementation.
As of December 31, 2022 , our U.S. direct lending team and its affiliates managed $98.3 billion of AUM in over 65 funds and investment vehicles. Our U.S. team manages corporate lending activities through our inaugural vehicle and publicly-traded business development company (“BDC”), ARCC, our non-traded BDC, ASIF, as well as private commingled funds and SMAs.
As of December 31, 2023 , our U.S. direct lending team and its affiliates managed $123.1 billion of AUM in approximately 55 funds and investment vehicles. Our U.S. team manages corporate lending activities through our inaugural vehicle and publicly-traded business development company (“BDC”), ARCC, our non-traded BDC, ASIF, as well as private commingled funds and SMAs.
Private Equity Secondaries : Our private equity secondaries team has an established track record of providing customized private equity transaction solutions to institutional limited partners and general partners. As of December 31, 2022, our private equity secondaries team of approximately 35 investment professionals managed $12.8 billion of AUM in over 35 funds and open-end accounts.
Private Equity Secondaries : Our private equity secondaries team has an established track record of providing customized private equity transaction solutions to institutional limited partners and general partners. As of December 31, 2023, our private equity secondaries team of more than 35 investment professionals managed $13.1 billion of AUM in approximately 35 funds and open-end accounts.
We also conduct anonymous firmwide surveys at least annually to evaluate employee morale, productivity and overall well-being. • Education Sponsorship Program: Employees are encouraged to participate in degree programs, business-related seminars, workshops, ad-hoc academic courses, continued education seminars to maintain job-related licenses and other outside training courses to facilitate professional development, the cost of which is reimbursed to the employee by Ares. • I nternal Training and Development Programs: We continue to foster an environment that cultivates company and employee growth through educational programs focused on professional development, mandated training and other 12 T a b l e o f C o n t e n t s learning opportunities.
We also conduct anonymous firmwide surveys at least annually to evaluate employee morale, productivity and overall well-being. • Education Sponsorship Program: Employees are encouraged to participate in degree programs, business-related seminars, workshops, ad-hoc academic courses, continued education seminars to maintain job-related licenses and other outside training courses to facilitate professional development, the cost of which is reimbursed to the employee by Ares. • Internal Training and Development Programs: We continue to foster an environment that cultivates company and employee growth through educational programs focused on professional development, mandated training and other learning opportunities that are offered in person or online.
Under IFPR, each of AML, AMUKL and AELM will have to make public disclosures on its website in relation to its: (i) own funds, own funds requirements and governance structures; (ii) risk management; and (iii) remuneration.
Under IFPR, each of AML, AMUKL and AELM have made public disclosures on their websites in relation to their: (i) own funds, own funds requirements and governance structures; (ii) risk management; and (iii) remuneration.
Real Estate Equity Real Estate Debt Infrastructure Debt European Real Estate Equity Infrastructure Opportunities Secondaries Group Our Secondaries Group invests in secondary markets across a range of alternative asset class strategies, including private equity, real estate and infrastructure, with $22.0 billion of AUM in over 65 funds as of December 31, 2022.
Real Estate Equity Real Estate Debt European Real Estate Equity Infrastructure Debt Infrastructure Opportunities Secondaries Group Our Secondaries Group invests in secondary markets across a range of alternative asset class strategies, including private equity, real estate, infrastructure and credit, with $24.7 billion of AUM in over 75 funds as of December 31, 2023.
Item 1. Business BUSINESS Overview Ares is a leading global alternative investment manager with $352.0 billion of assets under management and over 2,550 employees in over 30 o ffices in more than 15 countries .
Item 1. Business BUSINESS Overview Ares is a leading global alternative investment manager with $418.8 billion of assets under management and over 2,850 employees in over 35 o ffices in more than 15 countries .
We have successfully launched new business lines, integrated acquired businesses into the operations and created scale within the OMG to support a much larger platform in the future. 30 T a b l e o f C o n t e n t s Organizational Structure The simplified diagram below (which omits certain intermediate holding companies) depicts our legal organizational structure.
We have successfully launched new business lines, integrated acquired businesses into the operations and created scale within the OMG to support a much larger platform in the future. 30 Table of Contents Organizational Structure The simplified diagram below (which omits certain intermediate holding companies) depicts our legal organizational structure.
The Oversight Responsibility tier consists of our most-senior managers and decision-making bodies, including our Executive Management Committee and board of directors, to whom our Global Head of ESG periodically presents.
The Oversight Responsibility tier is led by our Global Head of ESG and consists of our most-senior managers and decision-making bodies, including our Executive Management Committee and board of directors.
We also have a strategic joint venture with Fidante Partners focused on expanding our presence in Australia. Our senior relationship management team maintains an active and transparent dialogue with an expansive list of investors.
We also have strategic initiatives focused on expanding our presence in Latin America and Australia. Our senior relationship management team maintains an active and transparent dialogue with an expansive list of investors.
We focus on evaluating individual credit opportunities related primarily to non-investment grade senior secured loans and primarily target first lien secured debt, with a secondary focus on second lien secured loans and subordinated and other unsecured loans.
The syndicated loans strategy focuses on evaluating individual credit opportunities related primarily to non-investment grade senior secured loans and primarily targets first lien senior secured loans, with a secondary focus on second lien senior secured loans and subordinated and other unsecured loans.
We offer our investors a range of investment strategies and seek to deliver attractive performance to an investor base that includes over 1,900 direct institutional relationships and a significant retail investor base across our public and sub-advised funds.
We offer our investors a range of investment strategies and seek to deliver attractive performance to an investor base that includes over 2,300 direct institutional relationships and a significant retail investor base across our publicly-traded funds, sub-advised accounts and non-traded vehicles.
In addition, as part of our growth strategy, we may from time to time engage in discussions with counterparties with respect to various potential strategic transactions, including potential investments in, and acquisitions of, other companies or assets.
In addition, as part of our growth strategy, we may from time to time engage in discussions with counterparties with respect to various potential strategic transactions, including investments in, and acquisitions of, other companies or assets. We may incur significant expenses for the evaluation, due diligence investigation and negotiation of potential strategic transactions.
Regulated Entities and our businesses generally could be adversely affected by Brexit. See “Item 1A. Risk Factors—Risks Related to Regulation—The U.K.’s exit from the EU (“Brexit”) could adversely affect our business and our operations.” Despite the U.K.’s departure from the EU, new and existing EU legislation is expected to continue to impact our business in the U.K.
Risk Factors—Risks Related to Regulation—The U.K.’s exit from the EU (“Brexit”) could adversely affect our business and our operations.” Despite the U.K.’s departure from the EU, new and existing EU legislation is expected to continue to impact our business in the U.K.
Infrastructure: Our long-tenured global infrastructure team utilizes deep local sourcing capabilities and extensive sector experience to seek to originate and manage diverse, high-quality investments in private infrastructure assets across the globe and, as of December 31, 2022 , managed $14.9 billion of AUM in over 15 investment vehicles. • Infrastructure Opportunities: Our infrastructure opportunities team consists of over 25 investment professionals and managed $5.2 billion of AUM in over 10 investment vehicles as of December 31, 2022 .
Infrastructure: Our long-tenured global infrastructure team utilizes deep local sourcing capabilities and extensive sector experience to seek to originate and manage diverse, high-quality investments in private infrastructure assets across the globe and, as of December 31, 2023 , managed $15.7 billion of AUM in over 15 investment vehicles. • Infrastructure Opportunities: Our infrastructure opportunities team consists of over 30 investment professionals and managed $6.3 billion of AUM in more than ten investment vehicles as of December 31, 2023 .
Today, we provide investors access to our real estate investment capabilities through several vehicles: U.S. and European real estate equity closed-end funds, diversified commingled funds, a U.S. real estate equity, open-end industrial-focused commingled fund, U.S. real estate debt open-end commingled funds, real estate equity and real estate debt SMAs, our non- 24 T a b l e o f C o n t e n t s traded REITs, Ares Real Estate Income Trust, Inc.
Today, we provide investors access to our real estate investment capabilities through several vehicles: closed-end U.S. and European diversified equity funds, an open-end U.S. industrial-focused equity fund, open-end U.S. and European debt funds, equity and debt SMAs, our non-traded REITs, Ares Real Estate Income Trust, Inc. (“AREIT”) and Ares Industrial Real Estate Income Trust, Inc.
To access these filings, go to the “Investor Resources” section of our website and then click on “SEC Filings.” In addition, these reports and the other documents we file with the SEC are available at a website maintained by the SEC at http://www.sec.gov. 38 T a b l e o f C o n t e n t s
To access these filings, go to the “Investor Resources” section of our website and then click on “SEC Filings.” In addition, these reports and the other documents we file with the SEC are available at a website maintained by the SEC at http://www.sec.gov. 37 Table of Contents
Generally, the 32 T a b l e o f C o n t e n t s material terms of our investment advisory agreements relate to the scope of services to be rendered by the investment adviser to the applicable vehicle, the calculation of management fees to be borne by investors in our investment vehicles and certain rights of termination with respect to our investment advisory agreements.
Generally, the material terms of our 32 Table of Contents investment advisory agreements relate to the scope of services to be rendered by the investment adviser to the applicable vehicle, the calculation of management fees to be borne by investors in our investment vehicles and certain rights of termination with respect to our investment advisory agreements.
Inclusive of Class A common stock held directly by Ares employees and assuming the full exchange of Ares Operating Group Units for shares of our Class A common stock, Ares employee ownership would represent 48.30% of all outstanding shares. 31 T a b l e o f C o n t e n t s Holding Company Structure Our common stockholders are entitled to vote on all matters on which stockholders of a corporation are generally entitled to vote under the Delaware General Corporation Law (the “DGCL”), including the election of our board of directors.
Inclusive of Class A common stock held directly by Ares employees and assuming the full exchange of AOG Units for shares of our Class A common stock, Ares employee ownership would represent 45.90% of all outstanding shares. 31 Table of Contents Holding Company Structure Our common stockholders are entitled to vote on all matters on which stockholders of a corporation are generally entitled to vote under the Delaware General Corporation Law (the “DGCL”), including the election of our board of directors.
Our capital deployment in drawdown funds comprised of the following ($ in billions): Credit Private Equity Real Assets Secondaries Strategic Initiatives 20 T a b l e o f C o n t e n t s Investment Groups Each of our investment groups employs a disciplined, credit-oriented investment philosophy and is managed by a seasoned leadership team of senior professionals with extensive experience investing in, advising and underwriting assets held by our funds.
Our capital deployment in drawdown funds was comprised of the following ($ in billions): Credit Private Equity Real Assets Secondaries 19 Table of Contents Investment Groups Each of our investment groups employs a disciplined, credit-oriented investment philosophy and is managed by a seasoned leadership team of senior professionals with extensive experience investing in, advising and underwriting assets held by our funds.
Corporate Private Equity: Our team consists of approximately 75 investment professionals based primarily in Los Angeles and London. Our flagship funds are private equity leaders in the North American and European middle market, where they focus on growth buyouts, with the ability to flex into distressed investing during periods of market volatility and dislocation.
Our private equity funds are leaders in the North American and European middle market, where they focus on growth buyouts, with the ability to flex into distressed investing during periods of market volatility and dislocation.
(1) Assuming the full exchange of Ares Operating Group Units for shares of our Class A common stock, as of December 31, 2022, Ares Owners Holdings L.P. would hold 44.48%, Sumitomo Mitsui Banking Corporation (“SMBC”) holds 5.72% and the public would hold 49.80% of AMC.
(1) Assuming the full exchange of AOG Units for shares of our Class A common stock, as of December 31, 2023, Ares Owners Holdings L.P. would hold 42.36%, Sumitomo Mitsui Banking Corporation (“SMBC”) would hold 5.48% and the public would hold 52.16% of AMC.
Ares SSG benefits from having an on-the-ground presence in offices across Asia-Pacific and a comprehensive range of local market licenses and entities to provide our clients with an extensive regional investment platform.
The team consists of approximately 70 investment professionals. APAC credit benefits from having an on-the-ground presence in offices across the APAC region and a comprehensive range of local market licenses and entities to provide our clients with an extensive regional investment platform.
AML and AMUKL are considered to be part of the same “prudential consolidation group”, and many of the 36 T a b l e o f C o n t e n t s requirements of IFPR (including but not limited to capital, liquidity and remuneration) will apply at the consolidated group level.
AML and AMUKL are considered to be part of the same “prudential consolidation group”, and many of the requirements of IFPR (including but not limited to capital, liquidity and remuneration) apply at the consolidated group level.
The following charts present the Private Equity Group’s AUM and FPAUM as of December 31, 2022 by investment strategy ($ in billions): AUM: $34.7 FPAUM: $18.5 Corporate Private Equity Special Opportunities Real Assets Group Our Real Assets Group manages comprehensive public and private equity and debt strategies with $66.1 billion of AUM in over 60 investment vehicles as of December 31, 2022.
The following charts present the Private Equity Group’s AUM and FPAUM as of December 31, 2023 by investment strategy ($ in billions): AUM: $39.1 FPAUM: $21.6 Corporate Private Equity Special Opportunities APAC Private Equity Other Real Assets Group Our Real Assets Group manages comprehensive public and private equity and debt strategies with $65.4 billion of AUM in over 65 investment vehicles as of December 31, 2023.
We have over 920 institutional investors and hundreds of thousands of retail investor accounts across our public vehicles. 29 T a b l e o f C o n t e n t s We believe that client relationships are fundamental to our business and that our performance across our investment groups coupled with our focus on client service has resulted in strong relationships with our investors.
We have over 945 institutional investors and hundreds of thousands of retail investor accounts across our retail vehicles. 29 Table of Contents We believe that client relationships are fundamental to our business and that our performance across our investment groups coupled with our focus on client service has resulted in strong relationships with our investors.
Real Estate Debt: Our real estate debt team, with over 30 professionals, primarily focuses on directly originating a wide range of financing opportunities in the U.S. and Europe. As of December 31, 2022, our real estate debt team managed $11.1 billion of AUM in five investment vehicles.
Real Estate Debt: Our real estate debt team, with over 35 professionals, primarily focuses on directly originating a wide range of financing opportunities in the U.S. and Europe. As of December 31, 2023, our real estate debt team managed $11.1 billion of AUM globally through open-end funds, SMAs and ACRE.
As a new regime, operating the relevant requirements may lead to additional operational and compliance complexity in the short to medium term and possibly higher regulatory capital requirements for the affected firms.
The requirements of this 36 Table of Contents regime may lead to additional operational and compliance complexity in the short to medium term and possibly higher regulatory capital requirements for the affected firms.
Our AUM has grown to $352.0 billion as of December 31, 2022 from $60.0 billion a decade earlier.
Our AUM has grown to $418.8 billion as of December 31, 2023 from $74.0 billion a decade earlier.
In line with our continued commitment to seek to provide an environment where all team members experience a genuine sense of belonging, we hold educational and employee engagement events in partnership with our seven ERGs that help to drive our DEI strategy and enhance the employee experience for historically underrepresented groups and diverse talent more broadly. • Business Processes and Investment Platform: We seek to embed DEI best practices into our business and investment diligence processes as both a reflection of our values and to drive innovation and returns.
In line with our continued commitment to seek to provide an environment where all team members experience a genuine sense of belonging, we hold educational trainings and employee engagement events, often in partnership with our eight ERGs that help to drive our DEI strategy and enhance the employee experience for underrepresented groups, allies and diverse talent more broadly.
We also have programs that seek to recognize significant team member contributions at the firm level. Environmental, Social and Governance: We believe that ESG is an integral part of what will drive long-term success for our investments, clients, shareholders, employees and other stakeholders.
We also have programs that seek to recognize significant team member contributions at the firm level. Environmental, Social and Governance: We believe that ESG is integral to driving long-term success for our business.
Our structuring experience helps enhance cash yield and reduce downside risks in a core asset class. 25 T a b l e o f C o n t e n t s The following charts present the Real Assets Group’s AUM and FPAUM as of December 31, 2022 by investment strategy ($ in billions): AUM: $66.1 FPAUM: $41.6 U.S.
Our structuring experience helps enhance cash yield and reduce downside risks in a core asset class. 25 Table of Contents The following charts present the Real Assets Group’s AUM and FPAUM as of December 31, 2023 by investment strategy ($ in billions): AUM: $65.4 FPAUM: $41.3 U.S.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe believe that the primary risks affecting our businesses and an investment in shares of our Class A common stock are: • we operate in a complex regulatory and tax environment involving rules and regulations (both domestic and foreign), some of which are outdated relative to today’s global financial activities and some of which are subject to political influence, which could restrict or require us to adjust our operations or the operations of our funds or portfolio companies and subject us to increased compliance costs and administrative burdens, as well as restrictions on our business activities; • inflation has adversely affected and may continue to adversely affect our business, results of operations and financial condition of our funds and their portfolio companies; • challenging market and political conditions in the U.S. and globally, including risks in respect of a failure to increase the U.S. debt ceiling and the conflict between Russia and Ukraine, may reduce the value or hamper the performance of the investments made by us and our funds or impair the ability of our funds to raise or deploy capital; • we are subject to risks related to COVID-19, which have affected and may continue to affect various aspects of our and our funds’ businesses; • if we are unable to raise capital from investors or deploy capital into investments, or if any of our management fees are waived or reduced, or if we fail to realize investments and generate carried interest or incentive fees, our revenues and cash flows would be materially reduced; • we are subject to risks related to our dependency on our members of the Executive Management Committee, senior professionals and other key personnel as well as attracting, retaining and developing human capital in a highly competitive talent market; • we may experience reputational harm if we fail to appropriately address conflicts of interest or if we, our employees, our funds or our portfolio companies fail (or are alleged to have failed) to comply with applicable regulations in an increasingly complex political and regulatory environment; • we face intense competition in the investment management business for investment opportunities; • our growth strategy contemplates acquisitions and entering new lines of business and expanding into new investment strategies, geographic markets and businesses, which subject us to numerous risks, expenses and uncertainties, including related to the integration of development opportunities, acquisitions or joint ventures; • we derive a significant portion of our management fees from ARCC; • economic U.S. and foreign sanction laws may prohibit us and our affiliates from transacting with certain countries, individuals and companies; • our international operations subject us to numerous regulatory, operational and reputational risks and expenses; • we are subject to operational risks and risks in using prime brokers, custodians, counterparties, administrators and other agents; • the increasing demands of fund investors, including the potential for fee compression and changes to other terms, could materially adversely affect our future revenues; • we and our third-party service providers may be subject to cybersecurity risks and our business could be adversely affected by changes to data protection laws and regulations; 39 T a b l e o f C o n t e n t s • we may be subject to litigation and reputational risks and related liabilities or risks related to employee misconduct, fraud and other deceptive practices; • the use of leverage by us and our funds exposes us to substantial risks, including related to the selection of a replacement for LIBOR; • asset valuation methodologies can be highly subjective and the value of assets may not be realized; • our funds may perform poorly due to market conditions, political actions or environments, monetary and fiscal policy or other conditions beyond our control; • third-party investors in our funds may not satisfy their contractual obligation to fund capital calls; • we are subject to risks relating to our contractual rights and obligations under our funds’ governing documents and investment management agreements; • a downturn in the global credit markets could adversely affect our CLO investments; • due to our and our funds’ investments in certain market sectors, such as power, infrastructure and energy, real estate and insurance, we are subject to risks and regulations inherent to those industries; • if we were deemed to be an “investment company” under the Investment Company Act, applicable restrictions could make it impractical for us to continue our businesses as contemplated; • due to the Holdco Members ownership and control of our shares of common stock, holders of our Class A common stock will generally have no influence over matters on which holders of our common stock vote and limited ability to influence decisions regarding our business; • we are subject to risks related to our categorization as a “controlled company” within the meaning of the NYSE listing standards; • potential conflicts of interest may arise among the holders of Class B and Class C common stock and the holders of our Class A common stock; • our holding company structure, Delaware law and contractual restrictions may limit our ability to pay dividends to the holders of our Class A and non-voting common stock; • other anti-takeover provisions in our charter documents could delay or prevent a change in control; and • we are subject to risks related to our tax receivable agreement. 40 T a b l e o f C o n t e n t s Risks Related to Our Businesses Difficult market and political conditions may adversely affect our businesses in many ways, including by reducing the value or hampering the performance of the investments made by our funds or reducing the ability of our funds to raise or deploy capital, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition.
Biggest changeWe believe that the primary risks affecting our businesses and an investment in shares of our Class A common stock are: • difficult market and political conditions may adversely affect our businesses in many ways, including by reducing the value or hampering the performance of the investments made by our funds or reducing the ability of our funds to raise or deploy capital; • we operate in a complex regulatory and tax environment involving rules and regulations (both domestic and foreign), some of which are outdated relative to today’s global financial activities and some of which are subject to political influence, which could restrict or require us to adjust our operations or the operations of our funds or portfolio companies and subject us to increased compliance costs and administrative burdens, as well as restrictions on our business activities; • inflation has adversely affected and may continue to adversely affect our business, results of operations and financial condition of our funds and their portfolio companies; • if we are unable to raise capital from investors or deploy capital into investments, or if any of our management fees are waived or reduced, or if we fail to realize investments and generate carried interest or incentive fees, our revenues and cash flows would be materially reduced; • we are subject to risks related to our dependence on members of the Executive Management Committee, senior professionals and other key personnel as well as attracting, retaining and developing human capital in a highly competitive talent market; • we may experience reputational harm if we fail to appropriately address conflicts of interest or if we, our employees, our funds or their portfolio companies fail (or are alleged to have failed) to comply with applicable regulations in an increasingly complex political and regulatory environment; • we face intense competition in the investment management business for investment opportunities; • our growth strategy contemplates acquisitions and entering new lines of business and expanding into new investment strategies, geographic markets and businesses, which subject us to numerous risks, expenses and uncertainties, including related to the integration of development opportunities, acquisitions or joint ventures; • we derive a significant portion of our management fees from ARCC; • economic U.S. and foreign sanction laws may prohibit us and our affiliates from transacting with certain countries, individuals and companies; • our international operations subject us to numerous regulatory, operational and reputational risks and expenses; • we are subject to operational risks and risks in using prime brokers, custodians, counterparties, administrators and other agents; • the increasing demands of fund investors, including the potential for fee compression and changes to other terms, could materially adversely affect our future revenues; • we and our third-party service providers may be subject to cybersecurity risks and our business could be adversely affected by changes to data protection laws and regulations; • we may be subject to litigation and reputational risks and related liabilities or risks related to employee misconduct, fraud and other deceptive practices; • increases in interest rates could negatively impact the values of certain assets or investments and the ability of our funds and their portfolio companies to access the debt markets on attractive terms, which could adversely impact investment and realization opportunities; • the use of leverage by us and our funds exposes us to substantial risks, including related to the selection of a replacement for London Interbank Offered Rate (“LIBOR”); 38 Table of Contents • asset valuation methodologies can be highly subjective and the value of assets may not be realized; • our funds may perform poorly due to market conditions, political actions or environments, monetary and fiscal policy or other conditions beyond our control; • third-party investors in our funds may not satisfy their contractual obligation to fund capital calls or may exercise redemption, termination or dissolution rights; • we are subject to risks relating to our contractual rights and obligations under our funds’ governing documents and investment management agreements; • a downturn in the global credit markets could adversely affect our CLO investments; • due to our and our funds’ investments in certain market sectors, such as power, infrastructure and energy, real estate and insurance, we are subject to risks and regulations inherent to those industries; • if we were deemed to be an “investment company” under the Investment Company Act, applicable restrictions could make it impractical for us to continue our businesses as contemplated; • due to the Holdco Members ownership and control of our shares of common stock, holders of our Class A common stock will generally have no influence over matters on which holders of our common stock vote and limited ability to influence decisions regarding our business; • we are subject to risks related to our categorization as a “controlled company” within the meaning of the NYSE listing standards; • potential conflicts of interest may arise among the holders of Class B and Class C common stock and the holders of our Class A common stock; • our holding company structure, Delaware law and contractual restrictions may limit our ability to pay dividends to the holders of our Class A and non-voting common stock; • other anti-takeover provisions in our charter documents could delay or prevent a change in control; and • we are subject to risks related to our tax receivable agreement (the “TRA”).
Co-investment arrangements may be structured through one or more of our investment vehicles, and in such circumstances, co-investors will generally bear the costs and expenses thereof (which may lead to conflicts of interest regarding the allocation of costs and expenses between such co-investors and investors in our other investment funds).
Co-investment arrangements may be structured through one or more of our investment vehicles, and in such circumstances, co-investors will generally bear the costs and expenses thereof (which may lead to conflicts of interest regarding the allocation of costs and expenses between such co-investors and investors in our other funds).
The investment management business is intensely competitive. The investment management business is intensely competitive, with competition based on a variety of factors, including investment performance, business relationships, quality of service provided to investors, investor liquidity and willingness to invest, fund terms (including fees), brand recognition and business reputation.
The investment management business is intensely competitive, with competition based on a variety of factors, including investment performance, business relationships, quality of service provided to investors, investor liquidity and willingness to invest, fund terms (including fees), brand recognition and business reputation.
In March 2020, the Federal Reserve began publishing 30-, 90- and 180-day tenor SOFR Averages and a SOFR Index and in July 2020, Bloomberg began publishing fall-backs that the International Swaps and Derivatives Association (“ISDA”) implemented in lieu of LIBOR with respect to swaps and derivatives.
In March 2020, the Federal Reserve began publishing 30-day, 90-day and 180-day tenor SOFR Averages and a SOFR Index and in July 2020, Bloomberg began publishing fall-backs that the International Swaps and Derivatives Association (“ISDA”) implemented in lieu of LIBOR with respect to swaps and derivatives.
Each of the regulatory bodies with jurisdiction over us has regulatory powers dealing with many aspects of financial services, including the authority to grant, and in specific circumstances to cancel, permissions to carry on particular activities.
Each of the regulatory bodies with jurisdiction over us has regulatory powers dealing with many aspects of financial services, including the authority to grant, and in specific circumstances to cancel, permissions to carry on particular activities.
Although the U.K. has now withdrawn from the EU, its rules implementing MiFID II continue to have effect and MiFIR has been on-shored into U.K. law (subject to certain amendments to ensure it operates properly in a U.K.-specific context).
MiFID II Although the U.K. has now withdrawn from the EU, its rules implementing MiFID II continue to have effect and MiFIR has been on-shored into U.K. law (subject to certain amendments to ensure it operates properly in a U.K.-specific context).
In addition, any downturn in Hong Kong’s economy could adversely affect the financial performance of the Company and our investments, or could have a significant impact on the industries in which the Company participates, and may adversely affect the operations of the Company, its investment funds and portfolio companies, including the retention of investment and other key professionals located in Hong Kong.
In addition, any downturn in Hong Kong’s economy could adversely affect the financial performance of the Company and our investments, or could have a significant impact on the industries in which the Company participates, and may adversely affect the operations of the Company, its funds and portfolio companies, including the retention of investment and other key professionals located in Hong Kong.
Our information systems and technology may not continue to be able to accommodate our growth, particularly our growth internationally, and the cost of maintaining the systems may increase from its current level.
Our information systems and technology may not continue to be able to accommodate our growth, particularly our growth internationally, and the cost of maintaining the information systems technology may increase from its current level.
On any date on which the Ares Ownership Condition is satisfied, the shares of our Class B common stock held by the Class B Stockholder entitles it to a number of votes, in the aggregate, equal to (x) four times the aggregate number of votes attributable to the shares of our Class A common stock minus (y) the aggregate number of votes attributable to the shares of our Class C common stock.
On any date on which the Ares Ownership Condition is satisfied, the shares of our Class B common stock held by the Class B Stockholder entitles it to a number of votes, in the aggregate, equal to (x) four times the aggregate number of votes attributable to the shares of our Class A common stock minus (y) the aggregate number of votes attributable to the shares of our Class C common stock.
On any date on which the Ares Ownership Condition is not satisfied, the shares of our Class B common stock held by the Class B Stockholder will not be entitled to vote on any matter submitted to a vote of our stockholders.
On any date on which the Ares Ownership Condition is not satisfied, the shares of our Class B common stock held by the Class B Stockholder will not be entitled to vote on any matter submitted to a vote of our stockholders.
In addition, the governing agreements of the Ares Operating Group entities authorize the direct subsidiaries of AMC which are the general partners of those entities to issue an unlimited number of additional units of the Ares Operating Group entity with such designations, preferences, rights, powers and duties that are different from, and may be senior to, those applicable to the AOG Units, and which may be exchangeable for shares of our Class A common stock.
In addition, the governing agreements of the AOG entities authorize the direct subsidiaries of AMC which are the general partners of those entities to issue an unlimited number of additional units of the Ares Operating Group entity with such designations, preferences, rights, powers and duties that are different from, and may be senior to, those applicable to the AOG Units, and which may be exchangeable for shares of our Class A common stock.
Our businesses are materially affected by conditions in the global financial markets and economic and political conditions throughout the world, such as interest rates, the availability and cost of credit, inflation rates, changes in laws (including laws relating to our taxation, taxation of our investors and the possibility of changes to regulations applicable to alternative asset managers), trade policies, commodity prices, tariffs, currency exchange rates and controls and national and international political circumstances (including wars and other forms of conflict, civil unrest, terrorist acts, and security operations), general economic uncertainty and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes, other adverse weather and climate conditions and pandemics.
Our businesses are materially affected by conditions in the global financial markets and economic and political conditions throughout the world, such as interest rates, the availability and cost of credit, persistent inflation, changes in laws (including laws relating to our taxation, taxation of our investors and the possibility of changes to regulations applicable to alternative asset managers), trade policies, commodity prices, tariffs, currency exchange rates and controls and national and international political circumstances (including wars and other forms of conflict, civil unrest, terrorist acts, and security operations), general economic uncertainty and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes, other adverse weather and climate conditions and pandemics.
For further information on the impact of poor fund performance, see “We may not be able to maintain our current fee structure as a result of industry pressure from fund investors to reduce fees, which could have an adverse effect on our profit margins and results of operations.” In addition, if any of our subsidiaries become the sponsor of any SPACs that are unable to successfully complete a business combination within the time limitation provided for such SPAC, we may lose the entirety of our investment.
For further information on the impact of poor fund performance, see “—We may not be able to maintain our current fee structure as a result of industry pressure from fund investors to reduce fees, which could have an adverse effect on our profit margins and results of operations.” In addition, if any of our subsidiaries become the sponsor of any SPACs that are unable to successfully complete a business combination within the time limitation provided for such SPAC, we may lose the entirety of our investment.
Employee misconduct could also include, among other things, binding us to transactions that exceed authorized limits or present unacceptable risks and other unauthorized activities or concealing unsuccessful investments (which, in either case, may result in unknown and unmanaged risks or losses), concealing or failing to disclose conflicts of interest with our funds or portfolio companies or otherwise charging (or seeking to charge) inappropriate expenses or inappropriate or unlawful behavior or actions directed towards other employees, or misappropriation of confidential or proprietary information relating to us or our portfolio companies.
Employee misconduct could also include, among other things, binding us to transactions that exceed authorized limits or present unacceptable risks and other unauthorized activities or concealing unsuccessful investments (which, in either case, may result in unknown and unmanaged risks or losses), concealing or failing to disclose conflicts of interest with our funds or portfolio companies or otherwise charging (or seeking to charge) inappropriate expenses or inappropriate or unlawful behavior or actions directed towards other employees, or misappropriation of confidential or proprietary information relating to us or our funds’ portfolio companies.
There is a risk that a significant reorientation in the market following the implementation of these and further measures could be adverse to our portfolio companies if they are perceived to be less valuable as a consequence of, among other things, their carbon footprint or “greenwashing.” There is also a risk that market expectations in relation to SFDR categorization of financial products could adversely affect our ability to raise capital from EEA investors.
A significant reorientation in the market following the implementation of these and further measures could be adverse to our funds’ portfolio companies if they are perceived to be less valuable as a consequence of, among other things, their carbon footprint or “greenwashing.” There is also a risk that market expectations in relation to SFDR categorization of financial products could adversely affect our ability to raise capital from EEA investors.
Investments in foreign securities involve certain factors not typically associated with investing in U.S. securities, including risks relating to: • our funds’ abilities to exchange local currencies for U.S. dollars and other currency exchange matters, including fluctuations in currency exchange rates and costs associated with conversion of investment principal and income from one currency into another; • controls on, and changes in controls on, foreign investment and limitations on repatriation of invested capital; • less developed or less efficient financial markets than exist in the U.S., which may lead to price volatility and relative illiquidity; • the absence of uniform accounting, auditing and financial reporting standards, practices and disclosure requirements and less government supervision and regulation; • changes in laws or clarifications to existing laws (and changes in administrative practices) that could impact our tax treaty positions, which could adversely impact the returns on our investments; • differences in legal and regulatory environments, particularly with respect to bankruptcy and reorganization, labor and employment laws, less developed corporate laws regarding fiduciary duties and the protection of investors and less reliable judicial systems to enforce contracts and applicable law; • political hostility to investments by foreign or private equity investors; • less publicly available information in respect of companies in foreign markets; • reliance on a more limited number of commodity inputs, service providers and/or distribution mechanisms; • higher rates of inflation; • higher transaction costs; • difficulty in enforcing contractual obligations; • fewer investor protections; • limitations on the deductibility of interest and other financing costs and expenses for income tax purposes in certain jurisdictions; • certain economic and political risks, including potential exchange control regulations and restrictions on our foreign investments and repatriation of capital, potential political, economic or social instability, the possibility of nationalization or expropriation or confiscatory taxation and adverse economic and political developments; and • the imposition of foreign taxes or withholding taxes on income and gains recognized with respect to such securities.
Investments in foreign securities involve certain factors not typically associated with investing in U.S. securities, including risks relating to: • our funds’ abilities to exchange local currencies for U.S. dollars and other currency exchange matters, including fluctuations in currency exchange rates and costs associated with conversion of investment principal and income from one currency into another; • controls on, and changes in controls on, foreign investment and limitations on repatriation of invested capital; • less developed or less efficient financial markets than exist in the U.S., which may lead to price volatility and relative illiquidity; • the absence of uniform accounting, auditing and financial reporting standards, practices and disclosure requirements and less government supervision and regulation; • changes in laws or clarifications to existing laws (and changes in administrative practices) that could impact our tax treaty positions, which could adversely impact the returns on our investments; • differences in legal and regulatory environments, particularly with respect to bankruptcy and reorganization, labor and employment laws, less developed corporate laws regarding fiduciary duties and the protection of investors and less reliable judicial systems to enforce contracts and applicable law; • political hostility to investments by foreign or private equity investors; • less publicly available information in respect of companies in foreign markets; 77 Table of Contents • reliance on a more limited number of commodity inputs, service providers and/or distribution mechanisms; • higher rates of inflation; • higher transaction costs; • difficulty in enforcing contractual obligations; • fewer investor protections; • limitations on the deductibility of interest and other financing costs and expenses for income tax purposes in certain jurisdictions; • certain economic and political risks, including potential exchange control regulations and restrictions on our foreign investments and repatriation of capital, potential political, economic or social instability, the possibility of nationalization or expropriation or confiscatory taxation and adverse economic and political developments; and • the imposition of foreign taxes or withholding taxes on income and gains recognized with respect to such securities.
Numerous factors increase our competitive risks, including, but not limited to: • a number of our competitors in some of our businesses have greater financial, technical, marketing and other resources and more personnel than we do; • some of our funds may not perform as well as competitors’ funds or other available investment products; • several of our competitors have raised significant amounts of capital, and many of them have similar investment objectives to ours, which may create additional competition for investment opportunities; • some of our competitors may have a lower cost of capital and access to funding sources that are not available to us, which may create competitive disadvantages for us with respect to our funds, particularly our funds that directly use leverage or rely on debt financing of their portfolio investments to generate superior investment returns; • some of our competitors may have higher risk tolerances, different risk assessments or lower return thresholds than us, which could allow them to consider a wider variety of investments and to bid more aggressively than us for investments that we want to make; • some of our competitors may be subject to less regulation and, accordingly, may have more flexibility to undertake and execute certain businesses or investments than we do and/or bear less compliance expense than we do; • some of our competitors may not have the same types of conflicts of interest as we do; • some of our competitors may have more flexibility than us in raising certain types of funds under the investment management contracts they have negotiated with their investors; • some of our competitors may have better expertise or be regarded by investors as having better expertise or reputation in a specific asset class or geographic region than we do; • our competitors that are corporate buyers may be able to achieve synergistic cost savings in respect of an investment, which may provide them with a competitive advantage in bidding for an investment; • our competitors have instituted or may institute low cost high speed financial applications and services based on artificial intelligence and new competitors may enter the asset management space using new investment platforms based on artificial intelligence; and • other industry participants may, from time to time, seek to recruit our investment professionals and other employees away from us.
Numerous factors increase our competitive risks, including, but not limited to: • a number of our competitors in some of our businesses have greater financial, technical, marketing and other resources and more personnel than we do; • some of our funds may not perform as well as competitors’ funds or other available investment products; • several of our competitors have raised significant amounts of capital, and many of them have similar investment objectives to ours, which may create additional competition for investment opportunities; • some of our competitors may have a lower cost of capital and access to funding sources that are not available to us, which may create competitive disadvantages for us with respect to our funds, particularly our funds that directly use leverage or rely on debt financing of their portfolio investments to generate superior investment returns; • some of our competitors may have higher risk tolerances, different risk assessments or lower return thresholds than us, which could allow them to consider a wider variety of investments and to bid more aggressively than us for investments that we want to make; • some of our competitors may be subject to less regulation and, accordingly, may have more flexibility to undertake and execute certain businesses or investments than we do and/or bear less compliance expense than we do; • some of our competitors may not have the same types of conflicts of interest as we do; • some of our competitors may have more flexibility than us in raising certain types of funds under the investment management contracts they have negotiated with their investors; • some of our competitors may have better expertise or be regarded by investors as having better expertise or reputation in a specific asset class or geographic region than we do; • our competitors that are corporate buyers may be able to achieve synergistic cost savings in respect of an investment, which may provide them with a competitive advantage in bidding for an investment; • our competitors have instituted or may institute low cost high speed financial applications and services based on artificial intelligence and new competitors may enter the asset management space using new investment platforms based on artificial intelligence; and 45 Table of Contents • other industry participants may, from time to time, seek to recruit our investment professionals and other employees away from us.
Escalation of tensions resulting from the National Security Law, including conflict between China and other countries, protests and other government measures, as well as other economic, social or political unrest in the future, could adversely impact the security and stability of the region and may have a material adverse effect on countries in which the Company, our investment funds and portfolio companies or any of their respective personnel or assets are located.
Escalation of tensions resulting from the National Security Law, including conflict between China and other countries, protests and other government measures, as well as other economic, social or political unrest in the future, could adversely impact the security and stability of the region and may have a material adverse effect on countries in which the Company, our funds and portfolio companies or any of their respective personnel or assets are located.
The market prices of debt instruments and publicly-traded securities held by some of our funds may be volatile and are likely to fluctuate due to a number of factors beyond our control, including actual or anticipated changes in the profitability of the issuers of such securities, general economic, social or political developments, changes in industry conditions, changes in government regulation, shortfalls in operating results from levels forecast by securities analysts, inflation and rapid fluctuations in inflation rates and the general state of the securities markets as described above under “Risks Related to Our Businesses—Difficult market and political conditions may adversely affect our businesses in many ways, including by reducing the value or hampering the performance of the investments made by our funds or reducing the ability of our funds to raise or deploy capital, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition,” and other material events, such as significant management changes, financings, re-financings, securities issuances, acquisitions and dispositions.
The market prices of debt instruments and publicly-traded securities held by some of our funds may be volatile and are likely to fluctuate due to a number of factors beyond our control, including actual or anticipated changes in the profitability of the issuers of such securities, general economic, social or political developments, changes in industry conditions, changes in government regulation, shortfalls in operating results from levels forecast by securities analysts, inflation and rapid fluctuations in inflation rates and the general state of the securities markets as described above under “—Risks Related to Our Businesses—Difficult market and political conditions may adversely affect our businesses in many ways, including by reducing the value or hampering the performance of the investments made by our funds or reducing the ability of our funds to raise or deploy capital, each of which could materially reduce our revenue, earnings and cash flow and adversely affect our financial prospects and condition,” and other material events, such as significant management changes, financings, re-financings, securities issuances, acquisitions and dispositions.
These and other conditions in the global financial markets and the global economy may result in adverse consequences for us and many of our funds, each of which could adversely affect the business of such funds, restrict such funds’ investment activities, impede such funds’ ability to effectively achieve their investment objectives and result in lower returns than we anticipated at the time certain of our investments were made.
These and other conditions in the global financial markets and the global economy may result in adverse consequences for us and our funds, each of which could adversely affect the business of such funds, restrict such funds’ investment activities, impede such funds’ ability to effectively achieve their investment objectives and result in lower returns than we anticipated at the time certain of our investments were made.
While we historically have and will continue to allocate the expenses of our funds in good faith and in accordance with the terms of the relevant fund agreements and our expense allocation policy in effect from time to time, due to increased regulatory scrutiny of expense allocation policies in the private investment funds realm, there is no guarantee that our policies and practices will not be challenged by our supervising regulatory bodies.
While we historically have and will continue to allocate the expenses of our funds in good faith and in accordance with the terms of the relevant fund agreements and our expense allocation policy in effect from time to time, due to increased regulatory scrutiny of expense allocation policies in the private funds realm, there is no guarantee that our policies and practices will not be challenged by our supervising regulatory bodies.
Certain losses of a catastrophic nature, such as losses arising as a result of wars, earthquakes, typhoons, terrorist attacks or other similar events, may be uninsurable or may only be insurable at rates that are so high that maintaining coverage would cause an adverse impact on our business, our investment funds and their portfolio companies.
Certain losses of a catastrophic nature, such as losses arising as a result of wars, earthquakes, typhoons, terrorist attacks or other similar events, may be uninsurable or may only be insurable at rates that are so high that maintaining coverage would cause an adverse impact on our business, our funds and their portfolio companies.
The lack of guidance may affect the expectations of public market analysts and could cause increased volatility in the price of shares of our Class A common stock. Fraud and other deceptive practices or other misconduct at our portfolio companies, properties or projects could similarly subject us to liability and reputational damage and also harm our businesses.
The lack of guidance may affect the expectations of public market analysts and could cause increased volatility in the price of shares of our Class A common stock. Fraud and other deceptive practices or other misconduct at our funds’ portfolio companies, properties or projects could similarly subject us to liability and reputational damage and also harm our businesses.
On May 29, 2017, the Council of the EU formally adopted the Council Directive amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries (commonly referred to as “ATAD II”), which came into force in member states on January 1, 2020 (subject to relevant derogations) and which contains a set of anti-hybrid rules.
In May 2017, the Council of the EU formally adopted the Council Directive amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries (commonly referred to as “ATAD II”), which came into force in member states on January 1, 2020 (subject to relevant derogations) and which contains a set of anti-hybrid rules.
Changes in regulations impacting the insurance industry could adversely impact our expansion into the insurance industry, the prospects of our Bermuda insurance company subsidiary Aspida Re and other investments we make in the insurance industry, both in the U.S. and abroad and limit our ability to raise capital for our funds from insurance companies, which could limit our ability to grow.
Changes in rules and regulations impacting the insurance industry could adversely impact our expansion into the insurance industry, the prospects of our Bermuda insurance company subsidiary Aspida Re and other investments we make in the insurance industry, both in the U.S. and abroad and limit our ability to raise capital for our funds from insurance companies, which could limit our ability to grow.
Our current and former employees and those of our portfolio companies may also become subject to allegations of sexual harassment, racial and gender discrimination or other similar misconduct, which, regardless of the ultimate outcome, may result in adverse publicity that could harm our and such portfolio company’s brand and reputation.
Our current and former employees and those of our funds’ portfolio companies may also become subject to allegations of sexual harassment, racial and gender discrimination or other similar misconduct, which, regardless of the ultimate outcome, may result in adverse publicity that could harm our and such portfolio company’s brand and reputation.
In addition, if the markets make it difficult or impossible to refinance debt that is maturing in the near term, some of our portfolio companies may be unable to repay such debt at maturity and may be forced to sell assets, undergo a recapitalization or seek bankruptcy protection.
In addition, if the markets make it difficult or impossible to refinance debt that is maturing in the near term, some of our funds’ portfolio companies may be unable to repay such debt at maturity and may be forced to sell assets, undergo a recapitalization or seek bankruptcy protection.
A failure of investors to honor a significant amount of capital calls for any particular fund or funds could have a material adverse effect on the operation and performance of those funds. Certain of our investment funds may utilize subscription lines of credit to fund investments prior to the receipt of capital contributions from the fund’s investors.
A failure of investors to honor a significant amount of capital calls for any particular fund or funds could have a material adverse effect on the operation and performance of those funds. Certain of our funds may utilize subscription lines of credit to fund investments prior to the receipt of capital contributions from the fund’s investors.
The terms of the contracts with these third-party service providers are often customized and complex, and many of these arrangements occur in markets or relate to products that are not subject to regulatory oversight, although the Dodd-Frank Act provides for new regulation of the derivatives market.
The terms of the contracts with these third-party service providers are often customized and complex, and many of these arrangements occur in markets or relate to products that are not subject to regulatory oversight, although the Dodd-Frank Act provides for regulation of the derivatives market.
If adopted in its current form, the proposal could result in additional reporting and disclosure obligations for investment funds and/or their subsidiaries (which may require the sharing with applicable taxing or other governmental authorities of information concerning investors) and/or additional tax being suffered by investors, investment funds or their subsidiaries.
If adopted in its current form, the proposal could result in additional reporting and disclosure obligations for funds and/or their subsidiaries (which may require the sharing with applicable taxing or other governmental authorities of information concerning investors) and/or additional tax being suffered by investors, funds or their subsidiaries.
In cases where valuations of existing investments fall and the pace of distributions slows, investors may be unable to make new commitments to third-party managed investment funds such as those advised by us using distributions they received from prior fund investments.
In cases where valuations of existing investments fall and the pace of distributions slows, investors may be unable to make new commitments to third-party managed funds such as those advised by us using distributions they received from prior fund investments.
Such a failure to accommodate growth, or an increase in costs related to the information systems, could have a material adverse effect on our business and results of operations. Furthermore, our headquarters and a substantial portion of our personnel are located in Los Angeles.
Such a failure to accommodate growth, or an increase in costs related to the information systems technology, could have a material adverse effect on our business and results of operations. Furthermore, our headquarters and a substantial portion of our personnel are located in Los Angeles.
Any interruption or deterioration in the performance of these third parties or the service providers of our counterparties or failures of their respective information systems and technology could impair the quality of our funds’ operations and could impact our reputation, adversely affect our businesses and limit our ability to grow.
Any interruption or deterioration in the performance of these third parties or the service providers of our counterparties or failures or vulnerabilities of their respective information systems or technology could impair the quality of our funds’ operations and could impact our reputation, adversely affect our businesses and limit our ability to grow.
See “—Risks Related to Regulation.” Similarly, to the extent we experience material litigation or employee misconduct, our businesses and our reputation could be adversely affected, and a loss of investor confidence could result, which could adversely impact our ability to raise future funds.
See “—Risks Related to Regulation.” Similarly, to the extent we experience material litigation, employee turnover or employee misconduct, our businesses and our reputation could be adversely affected, and a loss of investor confidence could result, which could adversely impact our ability to raise future funds.
Certain funds in different groups may invest alongside each other in the same security. ARCC and other registered closed-end management investment companies managed by us are permitted to co-invest in portfolio companies with each other and with affiliated investment funds pursuant to the Co-Investment Exemptive Order.
Certain funds in different groups may invest alongside each other in the same security. ARCC, ASIF and other registered closed-end management investment companies managed by us are permitted to co-invest in portfolio companies with each other and with affiliated funds pursuant to the Co-Investment Exemptive Order.
Negative financial results in our funds’ portfolio companies may reduce the value of our portfolio companies, the net asset value of our funds and the investment returns for our funds, which could have a material adverse effect on our operating results and cash flow.
Negative financial results in our funds’ portfolio companies may reduce the value of their portfolio companies, the net asset value of our funds and the investment returns for our funds, which could have a material adverse effect on our operating results and cash flow.
ARCC and other registered closed-end management investment companies managed by us are permitted to co-invest in portfolio companies with each other and with affiliated investment funds pursuant to an SEC order (the “Co-Investment Exemptive Order”).
ARCC, ASIF and other registered closed-end management investment companies managed by us are permitted to co-invest in portfolio companies with each other and with affiliated funds pursuant to an SEC order (the “Co-Investment Exemptive Order”).
Compliance with any new laws or regulations increases our regulatory burden and could make compliance more difficult and expensive, affect the manner in which we or our portfolio companies conduct our businesses and adversely affect our profitability.
Compliance with any new laws or regulations increases our regulatory burden and could make compliance more difficult and expensive, affect the manner in which we or our funds’ portfolio companies conduct our businesses and adversely affect our profitability.
See “—Risks Related to Taxation—Applicable U.S. and foreign tax law, regulations, or treaties, and changes in such tax laws, regulations or treaties or an adverse interpretation of these items by tax authorities could adversely affect our effective tax rate, tax liability, financial condition and results, ability to raise funds from certain foreign investors, increase our compliance or withholding tax costs and conflict with our contractual obligations” and “Risks Related to Regulation—Extensive regulation affects our activities, increases the cost of doing business and creates the potential for significant liabilities and penalties that could adversely affect our businesses and results of operations.” The likelihood of occurrence and the effect of any such change is highly uncertain and could have an adverse impact on us, our portfolio companies and our fund investors.
See “—Risks Related to Taxation—Applicable U.S. and foreign tax law, regulations, or treaties, and changes in such tax laws, regulations or treaties or an adverse interpretation of these items by tax authorities could adversely affect our effective tax rate, tax liability, financial condition and results, ability to raise funds from certain foreign investors, increase our compliance or withholding tax costs and conflict with our contractual obligations” and “—Risks Related to Regulation—Extensive regulation affects our activities, increases the cost of doing business and creates the potential for significant liabilities and penalties that could adversely affect our businesses and results of operations.” The likelihood of occurrence and the effect of any such change is highly uncertain and could have an adverse impact on us, our funds and their portfolio companies.
Our ability to make cash dividends to holders of our Class A and non-voting common stock depends on a number of factors, including among other things, general economic and business conditions, our strategic plans and prospects, our businesses and investment opportunities, our financial condition and operating results, working capital requirements and other anticipated cash needs, contractual restrictions and obligations, including fulfilling our current and future capital commitments, legal, tax and regulatory restrictions, restrictions and other implications on the payment of dividends by us to our common stockholders or by our subsidiaries to us, payments required to be made pursuant to the tax receivable agreement and such other factors as our board of directors may deem relevant.
Our ability to make cash dividends to holders of our Class A and non-voting common stock depends on a number of factors, including among other things, general economic and business conditions, our strategic plans and prospects, our businesses and investment opportunities, our financial condition and operating results, working capital requirements and other anticipated cash needs, contractual restrictions and obligations, including fulfilling our current and future capital commitments, legal, tax and regulatory restrictions, restrictions and other implications on the payment of dividends by us to our common stockholders or by our subsidiaries to us, payments required to be made pursuant to the TRA and such other factors as our board of directors may deem relevant.
In addition, the tax receivable agreement provides that, upon a change of control, or if, at any time, we elect an early termination of the tax receivable agreement, our obligations under the tax receivable agreement with respect to exchanged or acquired shares of our Class A common stock (whether exchanged or acquired before or after such change of control) would be based on certain assumptions, including that we would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement and, in the case of an early termination election, that any AOG Units that have not been exchanged are deemed exchanged for the market value of shares of our Class A common stock at the time of termination.
In addition, the TRA provides that, upon a change of control, or if, at any time, we elect an early termination of the TRA, our obligations under the TRA with respect to exchanged or acquired shares of our Class A common stock (whether exchanged or acquired before or after such change of control) would be based on certain assumptions, including that we would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the TRA and, in the case of an early termination election, that any AOG Units that have not been exchanged are deemed exchanged for the market value of shares of our Class A common stock at the time of termination.
In the latter half of 2021, the SEC brought three charges, sanctioning eight companies, all of which were registered as broker dealers, investment advisory firms or both, for deficient cybersecurity policies and procedures, and settled charges in two separate actions against public companies for deficient disclosure controls and procedures violations related to a cybersecurity vulnerabilities that exposed sensitive customer information.
In the latter half of 2021, the SEC brought three charges, sanctioning eight companies, all of which were registered as broker dealers, investment advisory firms or both, for deficient cybersecurity policies and procedures, and settled charges in two separate actions against public companies for deficient disclosure controls and procedures violations related to a cybersecurity vulnerability that exposed sensitive customer information.
The power, infrastructure and energy companies in which certain of our funds invest have been and may be negatively impacted by material declines in power and energy related commodity prices and are subject to other risks, including among others, supply and demand risk, operational risk, regulatory risk, depletion risk, reserve risk, reputational risk, severe weather, climate change and catastrophic event risk.
The power, infrastructure and energy companies in which certain of our funds invest have been and may be negatively impacted by material declines in power and energy related commodity prices and are subject to other risks, including among others, supply and demand risk, operational risk, regulatory risk, depletion risk, reserve risk, reputational risk, severe weather, climate change and catastrophic event risk (including of cyber-attacks).
If anything were to happen that would cause us to be deemed to be an investment company under the Investment Company Act, requirements imposed by the Investment Company Act, including limitations on capital structure, the ability to transact business with affiliates and the ability to compensate senior employees, could make it impractical for us to continue our businesses as currently conducted, impair the agreements and arrangements between and among the Ares Operating Group, us, our funds and our senior management, or any combination thereof, and have a material adverse effect on our businesses, financial condition and results of operations.
If anything were to happen that would cause us to be deemed to be an investment company under the Investment Company Act, requirements imposed by the Investment Company Act, including limitations on capital structure, the ability to transact business with affiliates and the ability to compensate senior employees, could make it impractical for us to continue our businesses as currently conducted, impair the agreements and arrangements 85 Table of Contents between and among the Ares Operating Group, us, our funds and our senior management, or any combination thereof, and have a material adverse effect on our businesses, financial condition and results of operations.
We have entered into a tax receivable agreement with certain direct and indirect holders of AOG Units (the “TRA Recipients”) that provides for the payment by us to the TRA Recipients of 85% of the amount of cash tax savings, if any, in U.S. federal, state, local and foreign income tax or franchise tax that we actually realize (or are deemed to realize in the case of an early termination payment by us or a change of control, as discussed below) as a result of increases in tax basis and certain other tax benefits related to our entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement.
We have entered into a TRA with certain direct and indirect holders of AOG Units (the “TRA Recipients”) that provides for the payment (“Tax Receivable Payment”) by us to the TRA Recipients of 85% of the amount of cash tax savings, if any, in U.S. federal, state, local and foreign income tax or franchise tax that we actually realize (or are deemed to realize in the case of an early termination payment by us or a change of control, as discussed below) as a result of increases in tax basis and certain other tax benefits related to our entering into the TRA, including tax benefits attributable to payments under the TRA.
We may pursue growth through acquisitions of other investment management companies, acquisitions of critical business partners, acquisition of companies, or other strategic initiatives (including through our Strategic Initiatives Group), which may include entering into new lines of business. In addition, consistent with our past experience, we expect opportunities will arise to acquire other alternative or traditional asset managers.
We may pursue growth through acquisitions of other investment management companies, acquisitions of critical business partners, acquisition of companies, or other strategic initiatives (including through our other businesses), which may include entering into new lines of business. In addition, consistent with our past experience, we expect opportunities will arise to acquire other alternative or traditional asset managers.
The draft proposed a number of amendments to AIFMD, including more onerous delegation requirements which may require a review of AM Lux’s existing arrangements, enhanced substance requirements, additional liquidity management provisions for AIFMs to the extent that they manage open-ended AIFs, and revised regulatory reporting and investor disclosures requirements.
The draft contains a number of amendments to AIFMD, including more onerous delegation requirements which may require a review of AM Lux’s existing arrangements, enhanced substance requirements, additional liquidity management provisions for AIFMs to the extent that they manage open-ended AIFs, and revised regulatory reporting and investor disclosures requirements.
We may need to use or reserve cash to repay such contingent repayment obligations instead of using the cash for other purposes. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations, Commitments and Contingencies and Other Arrangements,” “Note 2. Summary of Significant Accounting Policies,” and “Note 9.
We may need to use or reserve cash to repay such contingent repayment obligations instead of using the cash for other purposes. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations, Commitments and Contingencies and Other Arrangements,” “Note 2. Summary of Significant Accounting Policies,” and “Note 8.
Decisions made with respect to an acceleration or deferral of income or the sale or disposition of assets with unrealized built-in tax gains may also influence the timing and amount of payments that are received by the TRA Recipients (including, among others, the Holdco Members and other executive officers) under the tax receivable agreement.
Decisions made with respect to an acceleration or deferral of income or the sale or disposition of assets with unrealized built-in tax gains may also influence the timing and amount of payments that are received by the TRA Recipients (including, among others, the Holdco Members and other executive officers) under the TRA.
This obligation is known as a “clawback” or contingent repayment obligation. Due to the fact that our carried interest is generally determined on a liquidation basis, as of December 31, 2022, if the funds were liquidated at their fair values at that date, there would have been no contingent repayment obligation or liability.
This obligation is known as a “clawback” or contingent repayment obligation. Due to the fact that our carried interest is generally determined on a liquidation basis, as of December 31, 2023, if the funds were liquidated at their fair values at that date, there would have been no contingent repayment obligation or liability.
Ares Voting LLC, as the initial holder of the shares of our Class C common stock (in such capacity, the “Class C Stockholder”), is generally entitled to a number of votes equal to the number of AOG Units held of record by each limited partner of the Ares Operating Group entities (other than us and our subsidiaries).
Ares Voting LLC, as the initial holder of the shares of our Class C common stock (in such capacity, the “Class C Stockholder”), is generally entitled to a number of votes equal to the number of AOG Units held of record by each limited partner of the AOG entities (other than us and our subsidiaries).
The different investment objectives or terms of such funds may result in a potential conflict of interest, including in connection with the allocation of investments between the funds made pursuant to the Co-Investment Exemptive Order; • conflicts of interest may exist in the valuation of our investments and regarding decisions about the allocation of specific investment opportunities among us and our funds and the allocation of fees and costs among us, our funds and their portfolio companies; and • fund investors may perceive conflicts of interest regarding investment decisions for funds in which our investment professionals, who have made and may continue to make significant personal investments, are personally invested.
The different investment objectives or terms of such funds may result in a potential conflict of interest, including in connection with the allocation of investments between the funds made pursuant to the Co-Investment Exemptive Order; • conflicts of interest may exist in the valuation of our investments (which can affect fees and carried interest) and regarding decisions about the allocation of specific investment opportunities among us and our funds and the allocation of fees and costs among us, our funds and their portfolio companies; and • fund investors may perceive conflicts of interest regarding investment decisions for funds in which our investment professionals, who have made and may continue to make significant personal investments, are personally invested.
During periods of difficult market conditions or slowdowns (which may be across one or more industries, sectors or geographies), companies in which we invest may experience decreased revenues, financial losses, credit rating downgrades, difficulty in obtaining access to financing and increased funding costs.
During periods of difficult market conditions or slowdowns (which may be across one or more industries, sectors or geographies), companies in which we and our funds invest may experience decreased revenues, financial losses, credit rating downgrades, difficulty in obtaining access to financing and increased funding costs.
Some jurisdictions have also enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data.
Some jurisdictions have also enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal information.
Breaches in security could potentially jeopardize our, our employees’ or our fund investors’ or counterparties’ confidential or other information processed and stored in, or transmitted through, our computer systems and networks (or those of our third-party vendors), or otherwise cause interruptions or malfunctions in our, our employees’, our fund investors’, our counterparties’ or third parties’ operations, which could result in significant losses, increased costs, disruption of our business, liability to our fund investors and other counterparties, fines or penalties, litigation, regulatory intervention or reputational damage, which could also lead to loss of investors or clients.
Breaches in security could potentially jeopardize our, our employees’ or our fund investors’ or counterparties’ confidential or other information processed and stored in, or transmitted through, our computer systems and networks (or those of our third-party service providers), or otherwise cause interruptions or malfunctions in our, our employees’, our fund investors’, our counterparties’ or third parties’ operations, which could result in significant losses, increased costs, disruption of our business, liability to our fund investors and other counterparties, fines or penalties, litigation, regulatory intervention or reputational damage, which could also lead to loss of investors or clients.
On June 30, 2020, the National People’s Congress of China passed a national security law (the “National Security Law”), which criminalizes certain offenses including secession, subversion of the Chinese government, terrorism and collusion with foreign entities. The National Security Law also applies to non-permanent residents.
Hong Kong Security Law On June 30, 2020, the National People’s Congress of China passed a national security law (the “National Security Law”), which criminalizes certain offenses including secession, subversion of the Chinese government, terrorism and collusion with foreign entities. The National Security Law also applies to non-permanent residents.
The President thereafter is required to initiate an investigation and, within 180 days of initiating such an investigation, determine whether sanctions should be imposed. As of December 31, 2022, no sanctions have been imposed on us as a result of our disclosures of these activities.
The President thereafter is required to initiate an investigation and, within 180 days of initiating such an investigation, determine whether sanctions should be imposed. As of December 31, 2023, no sanctions have been imposed on us as a result of our disclosures of these activities.
Under Pillar One, multinational enterprises (MNEs) with total group revenues exceeding EUR 20 billion (or equivalent) in a given period and pre-tax profitability exceeding 10% calculated using an averaging mechanism will be subject to rules allocating 25% of profits in excess of a 10% profit margin to the jurisdictions within which they carry on business (subject to threshold rules).
Under Amount A of Pillar One, multinational enterprises (“MNEs”) with total group revenues exceeding EUR 20 billion (or equivalent) in a given period and pre-tax profitability exceeding 10% calculated using an averaging mechanism will be subject to rules allocating 25% of profits in excess of a 10% profit margin to the jurisdictions within which they carry on business (subject to threshold rules).
Specified classes of entities which are typically exempt from tax are outside the scope of Pillar Two, including investment funds and real estate investment vehicles (as respectively defined) which are the ultimate parent entity of the MNE group (and certain holding vehicles of such entities).
Specified classes of entities which are typically exempt from tax are outside the scope of the Pillar Two GloBE Rules, including investment funds and real estate investment vehicles (as respectively defined) which are the ultimate parent entity of the MNE group (and certain holding vehicles of such entities).
During such periods, these companies may also have difficulty in expanding their businesses and operations and be unable to meet their debt service obligations or other expenses as they become due, including expenses payable to us.
During such periods, these companies may also have difficulty in expanding their businesses and operations and be unable to meet their debt service obligations or other expenses as they become due, including expenses payable to us and our funds.
Additionally, Section 219 of the ITRA amended the Exchange Act to require companies subject to SEC reporting obligations under Section 13 of the Exchange Act to disclose in their periodic reports specified dealings or transactions involving Iran or other individuals and entities targeted by certain OFAC sanctions engaged in by the reporting company or any of its affiliates during the period covered by the relevant periodic report.
Additionally, Section 219 of the ITRA amended the Exchange Act to require companies subject to SEC reporting obligations under Section 13 of the Exchange Act to disclose in their periodic reports specified dealings or 62 Table of Contents transactions involving Iran or other individuals and entities targeted by certain OFAC sanctions engaged in by the reporting company or any of its affiliates during the period covered by the relevant periodic report.
The efficient operation of our business is dependent on computer hardware and software systems, as well as data processing systems and the secure processing, storage and transmission of information, all of which are potentially vulnerable to security breaches and cyber incidents or other data security breaches, which may include intentional attacks or accidental losses that result in unauthorized access to, or corruption of, our hardware, software, or data processing systems, or to our confidential, personal, or other sensitive information.
The efficient operation of our business is dependent on computer hardware and software systems, as well as data processing systems and the secure processing, storage and transmission of information, all of which are potentially vulnerable to security breaches and cyber-attacks or other security breaches, which may include intentional attacks or accidental losses, either of which may result in unauthorized access to, or corruption of, our hardware, software, or data processing systems, or to our confidential, personal, or other sensitive information.
Operational risks could increase as vendors increasingly offer mobile and cloud-based software services rather than software services that can be operated within our own data centers, as certain aspects of the security of such technologies may be complex, unpredictable or beyond our control, and any failure by mobile technology and cloud service providers to adequately safeguard their systems and prevent cyber-attacks, could disrupt our operations and result in misappropriation, corruption or loss of confidential or proprietary information.
Operational risks could increase as third-party service providers increasingly offer mobile and cloud-based software services rather than software services that can be operated within our own data centers, as certain aspects of the security of such technologies may be complex, unpredictable or beyond our control, and any failure by mobile technology or cloud service providers to adequately safeguard their systems and prevent cyber-attacks could disrupt our operations and result in misappropriation, corruption or loss of confidential, proprietary or personal information.
Further, Ares may determine at any point that it is not feasible or practical to implement or complete certain of its ESG initiatives, policies and procedures based on cost, timing or other considerations. Additionally, new regulatory initiatives related to ESG that are applicable to us, our funds and their portfolio companies could adversely affect our business.
Further, Ares may determine at any point that it is not feasible or practical to implement or complete certain of its ESG initiatives, policies and procedures based on cost, timing or other considerations. Additionally, certain regulations related to ESG that are applicable to us, our funds and their portfolio companies could adversely affect our business.
The actual increase in tax basis (and our ability to achieve the corresponding tax benefits), as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including the timing of exchanges, the price of a share of our Class A common stock at the time of the exchange, the extent to which such changes are taxable and the amount and timing of our income.
The actual increase in tax basis (and our ability to achieve the corresponding tax benefits), as well as the amount and timing of any payments under the TRA, will vary depending upon a number of factors, including the timing of exchanges, the price of a share of our Class A common stock at the time of the exchange, the extent to which such changes are taxable and the amount and timing of our income.
Although we believe the U.S. economy has largely recovered from the economic crisis induced by the COVID-19 pandemic, there remain many obstacles to continued growth in the economy such as global geopolitical events, risks of inflation or deflation, rising interest rates and high debt levels, both public and private.
Although we believe the U.S. economy has largely recovered from the economic crisis induced by the COVID-19 pandemic, there remain many obstacles to continued growth in the economy such as global geopolitical events, persistent inflation or deflation, rising interest rates and high debt levels, both public and private.
With respect to our funds that are not exempt from registration under the Investment Company Act, each fund’s investment management agreement must be approved annually by (a) such fund’s board of directors or by the vote of a majority of such fund’s stockholders, and (b) the majority of the independent members of such fund’s board of directors and, in certain cases, by its stockholders, as required by law.
With respect to our funds that are not exempt from registration under the Investment Company Act, each fund’s investment management agreement must be approved annually by (i) such fund’s board of directors or by the vote of a majority of such fund’s stockholders, and (ii) the majority of the independent members of such fund’s board of directors and, in certain cases, by its stockholders, as required by law.
Although the affirmative vote of a majority of our directors (which, so long as the Ares Ownership Condition is satisfied, must include the Class I director) is required for any action to be taken by our board of directors, certain specified actions will also require the approval of the Class B Stockholder, which is controlled by the Holdco Members.
Although the affirmative vote of a majority of our directors (which, so long as the Ares Ownership Condition is satisfied, must include the Class I director) is required for any action to be taken by our board of directors, certain specified 87 Table of Contents actions will also require the approval of the Class B Stockholder, which is controlled by the Holdco Members.
Because as a U.S. corporation we will be subject to entity-level corporate income taxes and may be obligated to make payments under the tax receivable agreement, the amount of dividends ultimately paid by us to holders of our Class A and non-voting common stock are generally expected to be less, on a per share basis, than the amounts distributed by the Ares Operating Group to the holders of AOG Units (including us) in respect of their or our AOG Units.
Because as a U.S. corporation we will be subject to entity-level corporate income taxes and may be obligated to make payments under the TRA, the amount of dividends ultimately paid by us to holders of our Class A and non-voting common stock are generally expected to be less, on a per share basis, than the amounts distributed by the Ares Operating Group to the holders of AOG Units (including us) in respect of their or our AOG Units.
We may also experience fluctuations in our results from quarter to quarter and year to year due to a number of other factors, including changes in the values of our funds’ investments, changes in the amount of distributions, dividends or interest paid in respect of investments, changes in our operating expenses, the degree to which we encounter competition and general economic and market conditions.
We may also experience fluctuations in our results from quarter to quarter and year to year due to a number of other factors, including changes in the values of our funds’ investments, changes in the amount of distributions, dividends or interest paid in respect of investments, changes in our operating expenses, the degree to 64 Table of Contents which we encounter competition and general economic and market conditions.
Although we have no policy governing the maturities of our investments, under current market conditions we expect that we will invest in a portfolio of debt generally having maturities of up to 10 years. Trading prices for debt that pays a fixed rate of return tend to fall as interest rates rise.
Although we have no policy governing the maturities of our investments, under current market conditions we expect that we will invest in a portfolio of debt generally having maturities of up to 10 years. Trading prices for debt that pays a fixed rate of return tend to fall as interest rates 66 Table of Contents rise.
We do not currently expect that the IRA will have a material impact on our income tax liability for 2023. The impact on taxable years thereafter will depend on the facts and circumstances of such years.
We do not currently expect that the IRA will have a material impact on our income tax liability for 2024. The impact on taxable years thereafter will depend on the facts and circumstances of such years.
In addition, with respect to our funds that are subject to the Investment Company Act, each fund’s investment management agreement must be approved annually (a) by such fund’s board of directors or by a vote of the majority of such fund’s stockholders, and (b) by the independent members of such fund’s board of directors and, in certain cases, by its stockholders, as required by law.
In addition, with respect to our funds that are subject to the Investment Company Act, each fund’s investment management agreement must be approved annually (i) by such fund’s board of directors or by a vote of the majority of such fund’s stockholders, and (ii) by the independent members of such fund’s board of directors and, in certain cases, by its stockholders, as required by law.
In general, we anticipate that disposition of assets with unrealized built-in tax gains following an exchange will tend to accelerate such payments and increase the present value of payments under the tax receivable agreement, and disposition of assets with unrealized built-in tax gains in a tax year before an exchange generally will increase an exchanging holder’s tax liability without giving rise to any rights to any payments under the tax receivable agreement.
In general, we anticipate that disposition of assets with unrealized built-in tax gains following an exchange will tend to accelerate such payments and increase the present value of payments under the TRA, and disposition of assets with unrealized built-in tax gains in a tax year before an exchange generally will increase an exchanging holder’s tax liability without giving rise to any rights to any payments under the TRA.
The IRA introduces a 15% minimum tax for corporations whose average annual adjusted financial statement income for any consecutive three-tax-year period preceding the tax year exceeds $1 billion and a 1% excise tax on the fair market value of stock repurchased by certain corporations after December 31, 2022.
The IRA introduces a 15% minimum tax for corporations whose average annual adjusted financial statement income for any consecutive 93 Table of Contents three-tax-year period preceding the tax year exceeds $1 billion and a 1% excise tax on the fair market value of stock repurchased by certain corporations after December 31, 2022.
If we were designated as such, it would result in increased regulation of our businesses, including the imposition of capital, leverage, liquidity and risk management standards, credit exposure reporting and concentration limits, restrictions on acquisitions and annual stress tests by the Federal Reserve.
If we were designated as such, it would result in increased regulation of our businesses, including the imposition of capital, leverage, liquidity and risk management standards, credit exposure reporting and concentration limits, enhanced public disclosures, restrictions on acquisitions and annual stress tests by the Federal Reserve.
Borrowings under the Credit Facility will mature in March 2027, our tranches of senior notes mature in October 2024, June 2030 and February 2052, respectively, and our subordinated notes mature in June 2051.
Borrowings under the Credit Facility will mature in March 2027, our tranches of senior notes mature in October 2024, November 2028, June 2030 and February 2052, respectively, and our subordinated notes mature in June 2051.
As a business development company registered under the Investment Company Act, ARCC may issue debt securities or preferred stock and borrow money from banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the Investment Company Act.
As business development companies registered under the Investment Company Act, ARCC and ASIF may issue debt securities or preferred stock and borrow money from banks or other financial institutions, which we refer to collectively as “senior securities,” up to the maximum amount permitted by the Investment Company Act.
As a result, the general partners of our funds may have interests that are not entirely aligned with our stockholders and thus, subject to their fiduciary duties to fund investors, may be incentivized to seek investment opportunities that maximize favorable tax treatment to the general partners.
As a result, the general partners of our funds may 91 Table of Contents have interests that are not entirely aligned with our stockholders and thus, subject to their fiduciary duties to fund investors, may be incentivized to seek investment opportunities that maximize favorable tax treatment to the general partners.
For example, in 2013 the SEC amended Rule 506 of Regulation D under the Securities Act to impose “bad actor” disqualification provisions that ban an issuer from offering or selling securities pursuant to the safe harbor in Rule 506 if the issuer, or any other “covered person,” is the subject of a criminal, regulatory or court order or other “disqualifying event” under the rule which has not been waived by the SEC.
For example, the “bad actor” disqualification provisions of Rule 506 of Regulation D under the Securities Act ban an issuer from offering or selling securities pursuant to the safe harbor in Rule 506 if the issuer, or any other “covered person,” is the subject of a criminal, regulatory or court order or other “disqualifying event” under the rule which has not been waived by the SEC.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our principal executive offices are located in leased office space at 2000 Avenue of the Stars, 12 th Floor, Los Angeles, California. We also lease office space in Culver City, New York, London and other cities around the world. Substantially all of the Company’s real property is leased.
Biggest changeItem 2. Properties Our principal executive offices are located in leased office space at 2000 Avenue of the Stars, 12 th Floor, Los Angeles, California. We also lease office space in Culver City, New York, London and other cities around the world. We do not own any real property.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOur businesses are also subject to extensive regulation, which may result in regulatory proceedings or investigations against us or our funds and their investment advisers, respectively.
Biggest changeWe and our funds and their investment advisers are also subject to extensive regulation, which, from time to time, results in requests for information from us or our funds and their investment advisers or regulatory proceedings or investigations against us or our funds and their investment advisers, respectively.
Removed
Item 3. Legal Proceedings From time to time we are involved in various legal proceedings, lawsuits and claims incidental to the conduct of our business, some of which may be material. As of December 31, 2022 and 2021, we were not subject to any material pending legal proceedings.
Added
Legal Proceedings From time to time, we, our executive officers, directors and our funds and their investment advisers, and their respective affiliates and/or any of their respective principals and employees are subject to legal proceedings in the ordinary course of business, including those arising from our management of such funds, and may, as a result, incur significant costs and expenses in connection with such legal proceedings.
Removed
While the outcome of any such future legal or regulatory proceedings cannot be predicted with certainty, neither we nor our funds or their investment advisers expect that any such future proceedings will have a material effect upon our financial condition or results of operations.
Added
Legal proceedings may increase to the extent we find it necessary to foreclose or otherwise enforce remedies with respect to loans that are in default, which borrowers may seek to resist by asserting counterclaims and defenses against us. As of December 31, 2023, we were not subject to any material pending legal proceedings.
Added
We may incur significant costs and expenses in connection with any such information requests, proceedings or investigations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRepurchases under the program depend on the prevailing market conditions and other factors. Dividend Policy for Class A and Non-Voting Common Stock During 2021, we declared a dividend each quarter of $0.47 (totaling $1.88 annually) per share to Class A common stockholders and non-voting common stockholders, or approximately $309.9 million.
Biggest changeTotal Return Performance Table 102 Table of Contents Issuer Purchases of Equity Securities None. Dividend Policy for Class A and Non-Voting Common Stock During 2022, we declared a dividend each quarter of $0.61 (totaling $2.44 annually) per share to Class A common stockholders and non-voting common stockholders, or approximately $429.1 million.
If the Ares Operating Group entities make such distributions, the partners of the Ares Operating Group entities will be entitled to receive equivalent distributions based on their partnership units in the Ares Operating Group (except as set forth in the following paragraph); • second, we cause AMC’s direct subsidiaries to distribute to AMC their share of such distributions, net of any taxes and amounts payable under the tax receivable agreement by such direct subsidiaries; and • third, AMC pays such distributions to our holders of our Class A and non-voting common stock, net of any taxes and amounts payable under the tax receivable agreement, on a pro rata basis.
If the AOG entities make such distributions, the partners of the AOG entities will be entitled to receive equivalent distributions based on their partnership units in the Ares Operating Group (except as set forth in the following paragraph); • second, we cause AMC’s direct subsidiaries to distribute to AMC their share of such distributions, net of any taxes and amounts payable under the tax receivable agreement by such direct subsidiaries; and • third, AMC pays such distributions to our holders of our Class A and non-voting common stock, net of any taxes and amounts payable under the tax receivable agreement, on a pro rata basis.
Because we and our direct subsidiaries that are corporations for U.S. federal income tax purposes may be required to pay corporate income and franchise taxes and make payments under the tax receivable agreement, the dividend amounts ultimately paid by us to holders of our Class A and non-voting common stock are expected to be generally less, on a per share basis, than the amounts distributed by the Ares Operating Group entities to their respective partners in respect of their AOG Units.
Because we and our direct subsidiaries that are corporations for U.S. federal income tax purposes may be required to pay corporate income and franchise taxes and make payments under the tax receivable agreement, the dividend amounts ultimately paid by us to holders of our Class A and non-voting common stock are expected to be generally less, on a per share basis, than the amounts distributed by the AOG entities to their respective partners in respect of their AOG Units.
Generally, these tax distributions are computed based on our estimate of the net taxable income of the entity multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for an individual or corporate resident in Los Angeles, California or New York, New York, whichever is higher (taking into account the non-deductibility of certain expenses and the character of our income).
Generally, these tax distributions are computed based on our 103 Table of Contents estimate of the net taxable income of the entity multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for an individual or corporate resident in Los Angeles, California or New York, New York, whichever is higher (taking into account the non-deductibility of certain expenses and the character of our income).
We intend to provide a steady quarterly dividend for each calendar year that will be based on our expected fee related earnings after an allocation of current taxes paid, with future potential changes based on the level and growth of the metric.
We intend to provide a fixed quarterly dividend for each calendar year that will be based on our expected fee related earnings after an allocation of current taxes paid, with future potential changes based on the level and growth of the metric.
Because AMC is a holding company and has no material assets other than its indirect ownership of AOG Units, we fund dividends by AMC on shares of our Class A and non-voting common stock, if any, in three steps: • first, we cause the Ares Operating Group entities to make distributions to their partners, including AMC and its direct subsidiaries.
Because AMC is a holding company and has no material assets other than its indirect ownership of AOG Units, we fund dividends by AMC on shares of our Class A and non-voting common stock, if any, in three steps: • first, we cause the AOG entities to make distributions to their partners, including AMC and its direct subsidiaries.
The graph assumes $100 invested on December 31, 2017 and dividends received reinvested in the security or index. The performance graph is not intended to be indicative of future performance.
The graph assumes $100 invested on December 31, 2018 and dividends received reinvested in the security or index. The performance graph is not intended to be indicative of future performance.
Subject to the approval of our board of directors, we intend to pay a dividend of $0.77 per share of our Class A and non-voting common stock per quarter in 2023. Our fixed dividend will be reassessed each year based upon the level and growth of our fee related earnings after an allocation of current taxes paid.
Subject to the approval of our board of directors, we intend to pay a dividend of $0.93 per share of our Class A and non-voting common stock per quarter in 2024. Our fixed dividend will be reassessed each year based upon the level and growth of our fee related earnings after an allocation of current taxes paid.
Stock Performance Graph The following graph depicts the total return to holders of our Class A common stock from the closing price on December 31, 2017 through December 31, 2022, relative to the performance of the S&P 500 Index and the Dow Jones U.S. Asset Managers Index.
Stock Performance Graph The following graph depicts the total return to holders of our Class A common stock from the closing price on December 31, 2018 through December 31, 2023, relative to the performance of the S&P 500 Index and the Dow Jones U.S. Asset Managers Index.
In addition, governing agreements of the Ares Operating Group entities provide for cash distributions, which we refer to as “tax distributions,” to the partners of such entities if the general partners of the Ares Operating Group entities determine that the taxable income of the Ares Operating Group entities gives rise to taxable income for its partners.
In addition, governing agreements of the AOG entities provide for cash distributions, which we refer to as “tax distributions,” to the partners of such entities if the general partners of the AOG entities determine that the taxable income of the AOG entities gives rise to taxable income for its partners.
The number of holders of record of our Class A common stock as of February 17, 2023 was 17, which does not include the number of shareholders that hold shares in “street name” through banks or broker-dealers.
The number of holders of record of our Class A common stock as of February 20, 2024 was 19, which does not include the number of shareholders that hold shares in “street name” through banks or broker-dealers.
In February 2023 , the Company’s board of directors declared a quarterly dividend of $0.77 per share of Class A and non-voting common stock with respect to the first quarter of 2023 payable on March 31, 2023 to common stockholders of record at the close of business on March 17, 2023.
In February 2024 , the Company’s board of directors declared a quarterly dividend of $0.93 per share of Class A and non-voting common stock with respect to the first quarter of 2024 payable on March 29, 2024 to common stockholders of record at the close of business on March 15, 2024.
As fee related earnings reflect the core earnings of our business and consist of management fee and fee related performance revenues less compensation and general and administrative expenses, having our recurring dividend based on this amount removes volatility from our dividend and provides more predictability to investors on an annual basis 99 T a b l e o f C o n t e n t s Our dividend policy reflects our intention to retain net performance income, which excludes our fee related performance revenues.
As fee related earnings reflect the core earnings of our business and consist of management fee and fee related performance revenues less compensation and general and administrative expenses, having our dividend based on this amount removes volatility from our dividend and provides more predictability to investors on an annual basis Our dividend policy reflects our intention to retain net performance income, which excludes our fee related performance revenues.
Because U.S. corporations are taxed on their own taxable income, and because owners of such entities are taxed on any dividends paid from such entities, there are two levels of potential tax upon income earned by such entities.
Because U.S. corporations are taxed on their own taxable income, and because owners of such entities are taxed on any dividends paid from such entities, there are two levels of potential tax upon income earned by such entities. Unregistered Sales of Equity Securities and Purchases of Equity Securities None. Item 6. [Reserved]
During 2022, we declared a dividend each quarter of $0.61 (totaling $2.44 annually) per share to Class A and non-voting common stockholders at the close of business on March 17, 2022, June 16, 2022, September 16, 2022, and December 16, 2022, respectively , or approximately $429.1 million.
During 2023, we declared a dividend each quarter of $0.77 (totaling $3.08 annually) per share to Class A and non-voting common stockholders at the close of business on March 17, 2023, June 16, 2023, September 15, 2023, and December 15, 2023, respectively , or approximately $571.9 million.
Removed
Total Return Performance Table 98 T a b l e o f C o n t e n t s Issuer Purchases of Equity Securities The table below presents purchases made by or on behalf of AMC or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) of shares of our Class A common stock during each of the indicated periods ($ in thousands; except share data): Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs (1) October 1, 2022 - October 31, 2022 — $ — — $ 150,000 November 1, 2022 - November 30, 2022 — — — 150,000 December 1, 2022 - December 31, 2022 — — — 150,000 Total — — (1) In February 2022, our board of directors approved the renewal of our stock repurchase program that authorizes the repurchase of up to $150 million of shares of our Class A common stock.
Removed
Under this stock repurchase program, shares may be repurchased from time to time in open market purchases, privately negotiated transactions or otherwise, including in reliance on Rule 10b5-1 of the Securities Act. In February 2023, our board of directors approved the renewal of the program and it is scheduled to expire in March 2024.
Removed
In addition, the cash flow from operations of the Ares Operating Group entities may be insufficient to enable them to make required minimum tax distributions to their partners, in which case the Ares Operating Group may have to borrow funds or sell assets, which could have a material adverse effect on our liquidity and financial condition.
Removed
Furthermore, by paying cash dividends rather than investing that cash in our businesses, we might risk slowing the pace of our growth, or not having a sufficient amount of cash to fund our operations, new investments or unanticipated capital expenditures, should the need arise.
Removed
Unregistered Sales of Equity Securities and Purchases of Equity Securities None. 100 T a b l e o f C o n t e n t s Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeRealized net investment loss for the year ended December 31, 2021 also included a realized loss recognized in connection with an Asian corporate private equity fund’s sale of its investment in a dairy farm company, partially offset by realized gains from the sale of various assets in a fund within our special opportunities strategy. 134 T a b l e o f C o n t e n t s 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): As of December 31, 2022 As of December 31, 2021 Accrued Performance Income Accrued Performance Compensation Accrued Net Performance Income Accrued Performance Income Accrued Performance Compensation Accrued Net Performance Income ACOF III $ 16,488 $ 13,190 $ 3,298 $ 43,510 $ 34,808 $ 8,702 ACOF IV 282,624 226,099 56,525 387,901 310,321 77,580 ACOF V 742,962 594,369 148,593 666,074 532,859 133,215 ACOF VI 147,185 117,748 29,437 73,261 58,608 14,653 ASOF 326,471 228,529 97,942 338,857 237,200 101,657 Other funds 92,509 62,393 30,116 33,526 21,787 11,739 Total Private Equity Group $ 1,608,239 $ 1,242,328 $ 365,911 $ 1,543,129 $ 1,195,583 $ 347,546 The following table presents the change in accrued carried interest for the Private Equity Group ($ in thousands): As of December 31, 2021 Activity during the period As of December 31, 2022 Waterfall Type Accrued Carried Interest Change in Unrealized Realized Other Adjustments Accrued Carried Interest ACOF III American $ 43,510 $ (27,022) $ — $ — $ 16,488 ACOF IV American 387,901 (62,380) (42,897) — 282,624 ACOF V American 666,074 76,888 — — 742,962 ACOF VI American 73,261 73,924 — — 147,185 ASOF European 338,857 68,523 (80,909) — 326,471 Other funds European 30,784 62,973 — (1,248) 92,509 Other funds American 2,742 (5,463) — 2,721 — Total Private Equity Group $ 1,543,129 $ 187,443 $ (123,806) $ 1,473 $ 1,608,239 135 T a b l e o f C o n t e n t s Private Equity Group—Assets Under Management The tables below present rollforwards of AUM for the Private Equity Group ($ in millions): Corporate Private Equity Special Opportunities Total Private Equity Group Balance at 12/31/2021 $ 21,639 $ 11,765 $ 33,404 Net new par/equity commitments — 2,202 2,202 Capital reductions (8) (200) (208) Distributions (1,065) (268) (1,333) Change in fund value 463 221 684 Balance at 12/31/2022 $ 21,029 $ 13,720 $ 34,749 Corporate Private Equity Special Opportunities Total Private Equity Group Balance at 12/31/2020 $ 18,233 $ 5,721 $ 23,954 Net new par/equity commitments 1,554 4,876 6,430 Net new debt commitments — 200 200 Capital reductions (9) — (9) Distributions (3,613) (670) (4,283) Change in fund value 5,474 1,638 7,112 Balance at 12/31/2021 $ 21,639 $ 11,765 $ 33,404 The components of our AUM for the Private Equity Group are presented below ($ in billions): AUM: $34.7 AUM: $33.4 FPAUM Non-fee paying (1) AUM not yet paying fees (1) Includes $1.3 billion and $1.4 billion of non-fee paying AUM based on our general partner commitment as of December 31, 2022 and 2021, respectively. 136 T a b l e o f C o n t e n t s Private Equity Group—Fee Paying AUM The tables below present rollforwards of fee paying AUM for the Private Equity Group ($ in millions): Corporate Private Equity Special Opportunities Total Private Equity Group Balance at 12/31/2021 $ 12,473 $ 4,216 $ 16,689 Deployment/subscriptions/increase in leverage 36 4,453 4,489 Distributions (399) (1,503) (1,902) Change in fund value (4) — (4) Change in fee basis (825) — (825) Balance at 12/31/2022 $ 11,281 $ 7,166 $ 18,447 Corporate Private Equity Special Opportunities Total Private Equity Group Balance at 12/31/2020 $ 14,770 $ 2,723 $ 17,493 Commitments 1,579 — 1,579 Deployment/subscriptions/increase in leverage 556 1,849 2,405 Distributions (1,623) (356) (1,979) Change in fund value 6 — 6 Change in fee basis (2,815) — (2,815) Balance at 12/31/2021 $ 12,473 $ 4,216 $ 16,689 The charts below present FPAUM for the Private Equity Group by its fee bases ($ in billions): FPAUM: $18.5 FPAUM: $16.7 Invested capital Capital commitments 137 T a b l e o f C o n t e n t s Private Equity Group—Fund Performance Metrics as of December 31, 2022 Four significant funds, ACOF V, ASOF, ACOF VI and ASOF II, collectively contributed approximately 84% of the Private Equity Group’s management fees for the year ended December 31, 2022.
Biggest changeThe activity for the year ended December 31, 2023 was partially offset by dividend income from SSF IV and realized gains from the partial sale of ACOF IV’s investment in AZEK. 137 Table of Contents Private Equity Group—Performance Income The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Private Equity Group ($ in thousands): 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 — — — 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 The following table presents the change in accrued carried interest for the Private Equity Group ($ in thousands): 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) $ — $ 181,317 ACOF V American 742,962 (268,084) — — 474,878 ACOF VI American 147,185 189,957 — — 337,142 ASOF I European 326,471 82,728 (52,183) — 357,016 ASOF II European — 80,926 — — 80,926 Other funds European 92,509 82,079 — 8,479 183,067 Other funds American 16,488 (7,149) (239) — 9,100 Total Private Equity Group $ 1,608,239 $ 124,627 $ (117,899) $ 8,479 $ 1,623,446 Private Equity Group—Assets Under Management The tables below present rollforwards of AUM for the Private Equity Group ($ in millions): Corporate Private Equity Special Opportunities APAC Private Equity Other (1) Total Private Equity Group Balance at 12/31/2022 $ 20,939 $ 13,720 $ 90 $ — $ 34,749 Acquisitions — — 3,697 — 3,697 Net new par/equity commitments 1,482 — — 139 1,621 Capital reductions (9) — — — (9) Distributions (1,794) (499) (16) — (2,309) Change in fund value 380 1,333 (357) — 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 $ — $ 33,404 Net new par/equity commitments — 2,202 — — 2,202 Capital reductions (8) (200) — — (208) Distributions (1,009) (268) (56) — (1,333) Change in fund value 453 221 10 — 684 Balance at 12/31/2022 $ 20,938 $ 13,720 $ 91 $ — $ 34,749 (1) Activity within Other represents equity commitments to the platform that have not yet been allocated to an investment strategy. 138 Table of Contents The components of our AUM for the Private Equity Group are presented below ($ in billions): AUM: $39.1 AUM: $34.7 FPAUM Non-fee paying (1) AUM not yet paying fees (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.
We continually seek to create avenues to meet our investors’ evolving needs by offering an expansive range of investment funds, developing new products and creating managed accounts and other investment vehicles tailored to our investors’ goals.
We continually seek to create avenues to meet our investors’ evolving needs by offering an expansive range of funds, developing new products and creating managed accounts and other investment vehicles tailored to our investors’ goals.
We offer a variety of investment strategies depending upon investors’ risk tolerance and expected returns. • Our disciplined investment approach and successful deployment of capital. Our ability to maintain and grow our revenue base is dependent upon our ability to successfully deploy the capital that our investors have committed to our investment funds.
We offer a variety of investment strategies depending upon investors’ risk tolerance and expected returns. • Our disciplined investment approach and successful deployment of capital. Our ability to maintain and grow our revenue base is dependent upon our ability to successfully deploy the capital that our investors have committed to our funds.
Accordingly, the amount of carried interest recognized as carried interest allocation reflects our share of the fair value gains and losses of the associated funds’ underlying investments measured at their then-current fair values relative to the fair values as of the end of the prior period. Investment returns of one fund are not offset between or among funds.
Accordingly, the amount recognized as carried interest allocation reflects our share of the fair value gains and losses of the associated funds’ underlying investments measured at their then-current fair values relative to the fair values as of the end of the prior period. Investment returns of one fund are not offset between or among funds.
AMC is a corporation for U.S. federal income tax purposes and is subject to U.S. federal, state and local corporate income taxes at the entity level on its share of net taxable income.
Income Taxes AMC is a corporation for U.S. federal income tax purposes and is subject to U.S. federal, state and local corporate income taxes at the entity level on its share of net taxable income.
The impact of the Consolidated Funds also typically will decrease management fees, carried interest allocation and incentive fees reported under GAAP to the extent these amounts are eliminated upon consolidation. The assets and liabilities of our Consolidated Funds are held within separate legal entities and, as a result, the liabilities of our Consolidated Funds are typically non-recourse to us.
The impact of consolidation also typically will decrease management fees, carried interest allocation and incentive fees reported under GAAP to the extent these amounts are eliminated upon consolidation. The assets and liabilities of our Consolidated Funds are held within separate legal entities and, as a result, the liabilities of our Consolidated Funds are typically non-recourse to us.
Net income attributable to non-controlling interests in AOG entities is generally allocated based on the weighted average daily ownership of the other AOG unitholders, except for income (loss) generated from certain joint venture partnerships.
Net income (loss) attributable to non-controlling interests in AOG entities is generally allocated based on the weighted average daily ownership of the other AOG unitholders, except for income (loss) generated from certain joint venture partnerships.
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.
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.
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.
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.
(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.
(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.
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.
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.
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.
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.
(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.
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, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes.
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.
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.
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.
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.
(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.
(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.
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 results attributable to the non-controlling interests of joint ventures have been excluded by us.
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.
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 and performance related income), would give us a controlling financial interest. This analysis requires judgment.
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.
Our significant funds are commingled funds that either contributed at least 1% of our total management fees or represented at least 1% of the Company’s total FPAUM for the past two consecutive quarters. In addition to management fees, each of our significant funds may generate carried interest and incentive fees upon the achievement of performance hurdles.
Our significant funds are commingled funds that either contributed at least 1% of our total management fees or represented at least 1% of the Company’s total FPAUM for the past two consecutive quarters. In addition to management fees, each of our significant funds may generate carried interest or incentive fees upon the achievement of performance hurdles.
Fund Performance Metrics Fund performance information for our investment funds considered to be “significant funds” is included throughout this discussion with analysis to facilitate an understanding of our results of operations for the periods presented.
Fund Performance Metrics Fund performance information for our funds considered to be “significant funds” is included throughout this discussion with analysis to facilitate an understanding of our results of operations for the periods presented.
(5) The gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the fund’s residual value at the end of the measurement period.
(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.
Other income (expense), net consists of transaction gains (losses) on the revaluation of assets and liabilities denominated in non-functional currencies and other non-operating and non-investment related activities, such as bargain purchase gain, change in fair value of contingent obligations, loss on disposal of assets, among other items. Net Realized and Unrealized Gains (Losses) on Investments of Consolidated Funds.
Other income (expense), net consists of transaction gains (losses) on the revaluation of assets and liabilities denominated in non-functional currencies and of other non-operating and non-investment related activities, such as bargain purchase gain, changes in fair value of contingent obligations, loss on disposal of assets, among other items. Net Realized and Unrealized Gains (Losses) on Investments of Consolidated Funds.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021. Amounts and percentages presented throughout our discussion and analysis of financial condition and results of operations may reflect rounded results in thousands (unless otherwise indicated) and consequently, totals may not appear to sum.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022. Amounts and percentages presented throughout our discussion and analysis of financial condition and results of operations may reflect rounded results in thousands (unless otherwise indicated) and consequently, totals may not appear to sum.
The activity for the year ended December 31, 2022 was primarily composed of market appreciation of certain infrastructure opportunities investments, dividend income from various investments in a 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.
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.
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 15. Segment Reporting” within our consolidated financial statements included in this Annual Report on Form 10-K.
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.
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.
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”).
This section of the Annual Report on Form 10-K discusses activity as of and for the years ended December 31, 2022 and 2021. For discussion on activity for the year ended December 31, 2020 and period-over-period analysis on results for the year ended December 31, 2021 to 2020, refer to Part II, “Item 7.
This section of the Annual Report on Form 10-K discusses activity as of and for the years ended December 31, 2023 and 2022. For discussion on activity for the year ended December 31, 2021 and period-over-period analysis on results for the year ended December 31, 2022 to 2021, refer to Part II, “Item 7.
Commitments and Contingencies,” within our consolidated financial statements and “Item 1A. Risk Factors—We may need to pay “clawback” or “contingent repayment” obligations if and when they are triggered under the governing agreements with our funds” included in this Annual Report on Form 10-K. Principal Investment Income (Loss).
Commitments and Contingencies,” within our consolidated financial statements and “Item 1A. Risk Factors—Risks Related to Our Funds—We may need to pay “clawback” or “contingent repayment” obligations if and when they are triggered under the governing agreements with our funds” included in this Annual Report on Form 10-K. Principal Investment Income (Loss).
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.
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.
Trends Affecting Our Business We believe that our disciplined investment philosophy across our distinct but complementary investment groups contributes to the stability of our performance throughout market cycles. For the year ended December 31, 2022, approximately 95% of our management fees were derived from perpetual capital vehicles and other long-dated funds.
Trends Affecting Our Business We believe that our disciplined investment philosophy across our distinct but complementary investment groups contributes to the stability of our performance throughout market cycles. For the year ended December 31, 2023, approximately 95% of our management fees were derived from perpetual capital vehicles and long-dated funds.
Our estimates for future cash flows are based on historical data, various internal estimates and certain external sources, and are based on assumptions that are consistent with the plans and estimates we are using to manage the underlying assets acquired.
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.
Summary of Significant Accounting Policies,” within our consolidated financial statements included in this Annual Report on Form 10-K. 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.
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.
Net income (loss) attributable to redeemable and non-controlling interests in AOG entities represents results attributable to the holders of AOG Units and other ownership interests that are not held by AMC.
Net income (loss) attributable to redeemable and non-controlling interests in AOG entities represents results attributable to the owners of AOG Units and other ownership interests that are not held by AMC.
Real Estate Equity European Direct Lending U.S. Direct Lending Real Estate Debt Private Equity Secondaries (1) Fee related performance revenues by strategy is presented net of the associated fee related performance compensation.
Direct Lending European Direct Lending Alternative Credit Private Equity Secondaries U.S. Real Estate Equity Real Estate Debt (1) Fee related performance revenues by strategy is presented net of the associated fee related performance compensation.
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.
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.
Unanticipated events and circumstances may occur that could affect the accuracy or validity of such assumptions, estimates or actual results. 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.
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.
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 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.
For both the years ended December 31, 2022 and 2021, 95% of management fees were earned from perpetual capital or long-dated funds.
For both the years ended December 31, 2023 and 2022, 95% of management fees were earned from perpetual capital or long-dated funds.
Unrealized gains (losses) on investments result from appreciation (depreciation) in the fair value of our investments, as well as reversals of previously recorded unrealized appreciation (depreciation) at the time the gain (loss) on an investment becomes realized. Administrative, Transaction and Other Fees.
Unrealized gains (losses) on investments result from appreciation (depreciation) in the fair value of our investments, as well as reversals of previously recorded unrealized appreciation (depreciation) at the time the gain (loss) on an investment becomes realized. 115 Table of Contents Administrative, Transaction and Other Fees.
Although changes in performance related compensation are directly correlated with changes in carried interest allocation and performance revenues reported within our segment results, this correlation does not always exist when our results are reported on a fully consolidated basis in accordance with GAAP.
Although changes in performance related compensation are directly correlated with changes in carried interest allocation and incentive fees reported within our segment results, this correlation does not always exist when our results are reported on a fully consolidated basis in accordance with GAAP.
Part I Fees increased for the year ended December 31, 2022 compared to the year ended December 31, 2021 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 as well as the impact of rising interest rates, given their primarily floating-rate loan portfolios.
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.
Interest expense includes interest related to our Credit Facility, which has a variable interest rate based upon SOFR plus a credit spread that is adjusted with changes to corporate credit ratings and with the achievement of certain environmental, social and governance-related targets, and to our senior and subordinated notes, each of which have fixed coupon rates. Other Income (Expense), Net.
Interest expense includes interest related to our Credit Facility, which has a variable interest rate based upon SOFR plus a credit spread that is adjusted with changes to corporate credit ratings and with the achievement of certain ESG-related targets, and to our senior and subordinated notes, each of which have fixed coupon rates. Other Income (Expense), Net.
The interest expense of the Consolidated CLOs is solely the responsibility of such CLOs and there is no recourse to us if the CLO is unable to make interest payments. Income Taxes.
The interest expense of the Consolidated CLOs is solely the responsibility of such CLOs and there is no recourse to us if the CLO is unable to make interest payments.
As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions. As of December 31, 2022, we were required to maintain approximately $51.9 million in net assets within these subsidiaries to meet regulatory net capital and capital adequacy requirements. We remain in compliance with all regulatory requirements.
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.
We may also engage in off-balance sheet arrangements, including transactions in derivatives, guarantees, capital commitments to funds, indemnifications and potential contingent repayment obligations.
We may also engage in off-balance sheet arrangements, including guarantees, capital commitments to funds, indemnifications and potential contingent repayment obligations.
Our effective tax rate is impacted by AMC’s net taxable income and the applicable U.S. federal, state and local income taxes as well as, in some cases, foreign income taxes. Net taxable income is based on AMC’s ownership of the AOG entities.
Our effective tax rate is the result of AMC’s net taxable income and the applicable U.S. federal, state and local income taxes as well as, in some cases, foreign income taxes. Net taxable income is based on AMC’s ownership of the AOG entities.
Direct Lending CADC (3) 2017 4,138 N/A (1.6) N/A 5.1 U.S. Direct Lending (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.
Direct Lending CADC (3) 2017 5,030 N/A 13.8 N/A 6.4 U.S. Direct Lending (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.
The net MoICs are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the net MoIC would be 1.4x for ACOF V and 1.1x for ACOF VI. The funds may utilize a credit facility during the investment period and for general cash management purposes.
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.
As of December 31, 2022, we had $84.6 billion of capital available for investment compared to $90.4 billion as of December 31, 2021. • Our ability to invest capital and generate returns through market cycles. The strength of our investment performance affects investors’ willingness to commit capital to our funds.
As of December 31, 2023, we had $111.4 billion of capital available for investment compared to $84.6 billion as of December 31, 2022. • Our ability to invest capital and generate returns through market cycles. The strength of our investment performance affects investors’ willingness to commit capital to our funds.
The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period of the change. 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.
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.
Depending on the nature of each fund, the performance related compensation generally represents 60% to 80% of the carried interest allocation and performance revenues recognized by us before giving effect to payroll related taxes. We have an obligation to pay our professionals a portion of the carried interest allocation or performance revenues earned from certain funds.
Depending on the nature of each fund, the performance related compensation generally represents 60% to 80% of the carried interest allocation and aforementioned incentive fees recognized by us before giving effect to payroll related taxes. We have an obligation to pay our professionals a portion of the carried interest allocation earned from certain funds.
Following the expiration or termination of the investment period the basis on which management fees are earned for certain closed-end funds, managed accounts and co-investment vehicles in this strategy changes from committed capital to invested capital with no change in the management fee rate. (8) Fee range represents typical range during the investment period.
Following the expiration or termination of the investment period the basis on which management fees are earned for certain closed-end funds, managed accounts and co-investment vehicles in this strategy changes from committed capital to invested capital with no change in the management fee rate.
As of December 31, 2022, AUM not yet paying fees includes $41.8 billion of AUM available for future deployment which could generate approximately $410.9 million in potential incremental annual management fees.
As of December 31, 2022, AUM Not Yet Paying Fees included $41.8 billion of AUM available for future deployment that could generate approximately $410.9 million in potential incremental annual management fees.
As of December 31, 2022, we consolidated 25 CLOs, 10 private funds and one SPAC, and as of December 31, 2021, we consolidated 23 CLOs, 10 private funds and one SPAC. The activity of the Consolidated Funds is reflected within the consolidated financial statement line items indicated by reference thereto.
As of December 31, 2023, we consolidated 28 CLOs, 10 private funds and one SPAC, and as of December 31, 2022, we consolidated 25 CLOs, 10 private funds and one SPAC. The activity of the Consolidated Funds is reflected within the consolidated financial statement line items indicated by reference thereto.
This discrepancy is caused when carried interest allocation and incentive fees earned from our Consolidated Funds is eliminated upon consolidation and performance related compensation is not. General, Administrative and Other Expenses.
This discrepancy is caused when carried interest allocation 116 Table of Contents and incentive fees earned from our Consolidated Funds is eliminated upon consolidation and performance related compensation is not. General, Administrative and Other Expenses.
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 tax expenses and performance allocations to charitable organizations as part of our philanthropic initiatives. General, Administrative and Other Expenses.
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.
The gross and net MoIC for the Yen hedged parallel fund are 1.2x and 1.1x, respectively. The gross and net IRR for the single investor U.S. Dollar parallel fund are 6.6% and 4.6%, 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.
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.
During the year ended December 31, 2022, we deployed $79.8 billion of gross capital across our investment groups compared to $79.7 billion deployed in 2021. We believe we continue to be well-positioned to invest our assets opportunistically.
During the year ended December 31, 2023, we deployed $68.1 billion of gross capital across our investment groups compared to $79.8 billion deployed in 2022. We believe we continue to be well-positioned to invest our assets opportunistically.
General and administrative expenses include costs primarily related to occupancy, professional services, travel, information services and information technology costs, placement fees, depreciation, amortization of intangibles and other general operating items. Expenses of Consolidated Funds.
General and administrative expenses include costs primarily related to occupancy, professional services, travel, information services and information technology costs, placement fees, depreciation, amortization of intangibles, supplemental distribution fees and other general operating items.
The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Secondaries Group.
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.
These judgments include: (1) determining whether the equity investment at risk is sufficient to permit the entity to finance its activities without additional subordinated financial support, (2) evaluating whether the equity holders, as a group, can make decisions that have a significant effect on the success of the entity, (3) determining whether two or more parties’ equity interests should be aggregated, (4) determining whether the equity investors have proportionate voting rights to their obligations to absorb losses or rights to receive returns from an entity and (5) 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.
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.
We receive management fees in accordance with the investment advisory and management agreements with the publicly-traded vehicles and non-traded funds that must be reviewed or approved annually by their independent boards of directors.
We receive management fees in accordance with the investment advisory and management agreements of our retail vehicles, including both our publicly-traded and non-traded vehicles, that must be reviewed or approved annually by their independent boards of directors.
The funds in this strategy are comprised of closed-end funds, with investment period termination or management contract termination dates. The funds also include co-investment accounts with fees ranging from 0.50% to 1.50%, which generally do not include investment period termination or management contract termination dates.
The funds in this strategy are comprised of closed-end funds, with investment period termination or management contract termination dates. The funds also include co-investment accounts with fees ranging from 0.50% to 1.50%, which generally do not include investment period termination or management contract termination dates. (5) Fee range represents typical range during the investment period.
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 9.9% and 7.1%, respectively. The gross and net MoIC for ACE IV (G) Unlevered are 1.3x and 1.2x, respectively.
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 following table presents the performance data for our significant funds that are not drawdown funds in the Real Assets Group as of December 31, 2022 ($ in millions): Returns(%) Year of Inception AUM Year-To-Date Since Inception (1) Primary Investment Strategy Fund Gross Net Gross Net AREIT (2) 2012 $ 5,132 N/A 12.7 N/A 7.9 U.S.
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): 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.
Funds generally follow either an American-style waterfall or European-style waterfall. For American-style waterfalls, the general partner is entitled to receive carried interest after a fund investment is realized if the investors in the fund have received distributions in excess of the capital contributed for such investment and all prior realized investments (plus allocable expenses), as well as the preferred return.
For American-style waterfalls, the general partner is entitled to receive carried interest after a fund investment is realized if the investors in the fund have received distributions in excess of the capital contributed for such investment and all prior realized investments (plus allocable expenses), as well as the preferred return.
(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. (5) Represents commitments to fund certain investments.
(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.
Higher average interest rates, driven by rising SOFR rates, and a higher average outstanding balance of the Credit Facility in 2022 also contributed to an increase in interest expense of $7.5 million for the year ended December 31, 2022 compared to the prior year.
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.
Sources and Uses of Liquidity Our sources of liquidity are (1) cash on hand, (2) net working capital, (3) 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, (4) fund distributions related to our investments that are unpredictable as to amount and timing and (5) net borrowing from the Credit Facility.
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.
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 7.5% and 5.2%, respectively. The gross and net MoIC for the U.S. Dollar unhedged parallel fund are 1.1x and 1.1x, respectively.
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 8.6% and 6.3%, 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 7.1% and 4.9%, 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.
These fees are generally based on the net appreciation per annum of the applicable fund, subject to certain net loss carry-forward provisions, high-watermarks and/or preferred returns. Such performance-based fees may also be based on a fund’s cumulative net appreciation to date, in some cases subject to a high-watermark or a preferred return.
These fees are generally based on the annual investment returns of the applicable fund, subject to certain net loss carry-forward provisions, high-watermarks and/or preferred returns. Such performance-based fees may also be based on a fund’s cumulative net investment returns for the measurement period, in some cases subject to a high-watermark or a preferred return.
We may receive performance income from our funds that may be either performance revenue, which is a component of incentive fees described above, or a special allocation of income, which we refer to as carried interest. Performance income is recorded by us when specified investment returns are achieved by the fund.
We may receive performance income from our funds that may be either incentive fees earned from funds with stated investment periods as described above, or a special allocation of income, which we refer to as carried interest. Performance income is recognized when specified investment returns are achieved by the fund. Carried Interest Allocation.
Real assets funds 199.4 Incentive fees generated from U.S. real estate equity funds, including $140.5 million from AIREIT, $31.6 million from an industrial real estate fund and $23.7 million from AREIT. 164.7 Incentive fees generated from U.S. real estate equity funds, including $63.3 million from an industrial real estate fund, $15.3 million from AREIT and $81.2 million from AIREIT.
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 $23.7 million from AREIT.
The following table presents the performance data for our significant funds that are not drawdown funds in the Credit Group as of December 31, 2022 ($ in millions): Returns(%) Year of Inception AUM Year-To-Date Since Inception (1) Primary Investment Strategy Fund Gross Net Gross Net ARCC (2) 2004 $ 25,774 N/A 7.1 N/A 11.8 U.S.
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): 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.
In connection with the SSG Acquisition, the former owners of SSG retained an ownership interest in a subsidiary of an AOG entity that is reflected as redeemable interest in AOG entities. Net loss attributable to redeemable interest in AOG entities is allocated based on the ownership percentage for periods presented.
In connection with our acquisition of SSG in July 2020, the former owners of SSG retained a 20% ownership interest in a subsidiary of an AOG entity that is reflected as redeemable interest in AOG entities. Net income (loss) attributable to redeemable interest in AOG entities is allocated based on the ownership percentage attributable to the redeemable interest.
The investment adviser of our funds generally receives an annual management fee based on a percentage of the fund’s capital commitments, contributed capital, net asset value or invested capital during the investment period, which may then change at the end of the investment period, and for certain of our SMAs, we receive an annual management fee based on a percentage of invested capital, contributed capital or net asset value throughout the term of the SMA.
The investment adviser of our funds generally receives an annual management fee based on a percentage of the fund’s capital commitments, contributed capital, net asset value or invested capital during the investment period, which may then change at the end of the investment period.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs such, a hypothetical 10% decrease in fair value of our managed funds’ investments as of December 31, 2022 would not have a material impact on our management fees. Effect on Carried Interest and Incentive Fees We earn carried interest and incentive fees from certain of our funds when such funds achieve specified performance criteria.
Biggest changeFor the year ended December 31, 2023, management fees from funds that are impacted by changes in market value and have underlying investments held in liquid strategies were approximately 3%. As such, a hypothetical 10% decrease in fair value of our managed funds’ investments as of December 31, 2023 would not have a material impact on our management fees.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our primary exposure to market risk is related to our role as general partner or investment adviser to our investment funds and the sensitivity to movements in the fair value of their investments, including the effect on management fees, carried interest, incentive fees and investment income.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our primary exposure to market risk is related to our role as general partner or investment adviser to our funds and the sensitivity to movements in the fair value of their investments, including the effect on management fees, carried interest, incentive fees and investment income.
The overall impact of a short-term change in market value may be mitigated by a number of factors including, but not limited to, fee definitions that are not based on market value including invested capital and committed capital, market value definitions that exclude the impact of realized and/or unrealized gains and losses, market value definitions based on beginning of the period values or a form of average market value including daily, monthly or quarterly averages as well monthly or quarterly payment terms.
The overall impact of a short-term change in market value may be mitigated by a number of factors including, but not limited to, fee definitions that are not based on market value including invested capital and capital commitments, market value definitions that exclude the impact of realized and/or unrealized gains and losses, market value definitions based on beginning of the period values or a form of average market value including daily, monthly or quarterly averages as well monthly or quarterly payment terms.
We estimate that as of December 31, 2022 a hypothetical 10% decline in the rate of exchange of all foreign currencies against the U.S. dollar would not result in a material change to management fees, carried interest, incentive fees or investments for the year ended December 31, 2022, and would be largely offset by the currency conversions of the expenses denominated in foreign currencies.
We estimate that as of December 31, 2023 a hypothetical 10% decline in the rate of exchange of all foreign currencies against the U.S. dollar would not result in a material change to management fees, carried interest, incentive fees or investments for the year ended December 31, 2023, and would be largely offset by the currency conversions of the expenses denominated in foreign currencies.
Effect on Management Fees Management fees are generally based on a defined percentage of fair value of assets, total commitments, invested capital, net asset value, net investment income, total assets or par value of the investment portfolios we manage. Management fees calculated based on fair value of assets or net investment income are affected by short-term changes in market values.
Effect on Management Fees Management fees are generally based on a defined percentage of fair value of assets, capital commitments, invested capital, NAV, net investment income, total assets or par value of the investment portfolios we manage. Management fees calculated based on fair value of assets or net investment income are affected by short-term changes in market values.
Additionally, as a large percentage of our carried interest and incentive fees are paid to employees as performance related compensation, the overall net impact to our income would be mitigated by lower compensation payments. See “Note 9.
Additionally, as a large percentage of our carried interest and incentive fees are paid to employees as performance related compensation, the overall net impact to our income would be mitigated by lower compensation payments. 161 Table of Contents See “Note 8.
In the cases where our funds pay management fees based on NAV, we would expect our segment management fees to experience a change in direction and magnitude corresponding to that experienced by the underlying portfolios. 165 T a b l e o f C o n t e n t s Credit Risk We are party to agreements providing for various financial services and transactions that contain an element of risk in the event that the counterparties are unable to meet the terms of such agreements.
In the cases where our funds pay management fees based on NAV, we would expect our segment management fees to experience a change in direction and magnitude corresponding to that experienced by the underlying portfolios. 162 Table of Contents Credit Risk We are party to agreements providing for various financial services and transactions that contain an element of risk in the event that the counterparties are unable to meet the terms of such agreements.
Interest Rate Risk Our Credit Facility provides a $1.325 billion revolving line of credit with the ability to upsize to $1.65 billion (subject to obtaining commitments for any such additional borrowing capacity) with a maturity date of March 31, 2027.
Interest Rate Risk Our Credit Facility provides a $1.325 billion revolving line of credit with the ability to upsize to $1.65 billion (subject to obtaining commitments for any such additional borrowing capacity) with a maturity date of March 31, 2027. As of December 31, 2023, we had $895.0 million borrowings outstanding under the Credit Facility.
As of December 31, 2022, we had $700.0 million borrowings outstanding under the Credit Facility. We estimate that in the event of a 100 basis point increase in interest rates, to the extent there is an outstanding revolver balance, we would be subject to the variable rate and would expect our interest expense to increase commensurately.
We estimate that in the event of a 100 basis point increase in interest rates, to the extent there is an outstanding revolver balance, we would be subject to the variable rate and would expect our interest expense to increase commensurately.
A hypothetical incremental 10% decrease in the fair value of our investments as of December 31, 2022 would result in declines in principal investment income and unrealized gains on investments of $91.4 million and $42.6 million, respectively.
Changes in the fair values of our funds’ investments directly impact unrealized principal investment income and unrealized gains on investments. A hypothetical incremental 10% decrease in the fair value of our investments as of December 31, 2023 would result in declines in principal investment income and unrealized gains on investments of $124.5 million and $79.1 million, respectively.
Unrealized investment gain (loss) results from changes in the fair value of the underlying investment as well as the reversal of unrealized appreciation (depreciation) at the time an investment is realized. Changes in the fair values of our funds’ investments directly impact unrealized principal investment income and unrealized gains on investments.
Effect on Investment Income An investment gain (loss) is realized when all or a portion of our investment is returned to us. Unrealized investment gain (loss) results from changes in the fair value of the underlying investment as well as the reversal of unrealized appreciation (depreciation) at the time an investment is realized.
Commitments and Contingencies,” within our consolidated financial statements included in this Annual Report on Form 10-K for discussion on amount of carried interest, net of tax distributions, subject to contingent repayment if we assumed all existing investments were worthless. 164 T a b l e o f C o n t e n t s Effect on Investment Income An investment gain (loss) is realized when we redeem all or a portion of our investment or when we receive cash income, such as interest or dividends.
Commitments and Contingencies,” within our consolidated financial statements included in this Annual Report on Form 10-K for discussion on amount of carried interest, net of tax distributions, subject to contingent repayment if we assumed all existing investments were worthless.
Our carried interest and incentive fees will be impacted by changes in market risk factors.
Effect on Carried Interest and Incentive Fees We earn carried interest and incentive fees from certain of our funds when such funds achieve specified performance criteria. Our carried interest and incentive fees will be impacted by changes in market risk factors.
Removed
For the year ended December 31, 2022, the fund management fees that were recognized from open-ended funds in liquid credit strategies with fees subject to change based upon fluctuations in market values were approximately 3%.
Added
For a further discussion of our Credit Facility, see “Note 6. Debt,” within our consolidated financial statements included in this Annual Report on Form 10-K.
Removed
The Credit Facility has a variable interest rate based on SOFR or a base rate plus an applicable margin, which is subject to adjustment based on the achievement of certain environmental, social and governance-related targets, with an unused commitment fee paid quarterly, which is subject to change with the Company’s underlying credit agency rating.
Removed
As of December 31, 2022, base rate loans bear interest calculated based on the base rate and the SOFR loans bear interest calculated based on SOFR plus 1.00%. The unused commitment fee is 0.10% per annum. There is a base rate and SOFR floor of zero.

Other ARES 10-K year-over-year comparisons