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Ares Management
ARES
#597
Rank
$39.92 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$121.87
Share price
-11.19%
Change (1 day)
-34.80%
Change (1 year)
๐Ÿ’ณ Financial services Asset Management
Categories
  1. Ares Management
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2022 Q3

Ares Management - 10-Q quarterly report FY2022 Q3


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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to            
Commission File No. 001-36429
ares-20220930_g1.jpg
ARES MANAGEMENT CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware80-0962035
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification Number)
2000 Avenue of the Stars, 12th Floor, Los Angeles, CA 90067
(Address of principal executive office) (Zip Code)
(310) 201-4100
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, par value $0.01 per shareARESNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x  No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x  No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company.” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
 x
Accelerated Filer☐Non-Accelerated Filer☐Smaller Reporting Company☐Emerging Growth Company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No x
As of October 31, 2022 there were 173,420,074 of the registrant’s shares of Class A common stock outstanding, 3,489,911 of the registrant’s shares of non-voting common stock outstanding, 1,000 shares of the registrant's Class B common stock outstanding, and 117,275,157 of the registrant's Class C common stock outstanding.

TABLE OF CONTENTS
Page
PART I—FINANCIAL INFORMATION
Item 1. Financial Information - Unaudited
9
Condensed Consolidated Statements of Financial Condition as of September 30, 2022 and December 31, 2021
9
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021
10
Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and 2021
11
Condensed Consolidated Statements of Changes in Equity for the three and nine months ended September 30, 2022 and for the year ended December 31, 2021
12
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021
14
Notes to the Condensed Consolidated Financial Statements
15
Item 2.  Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
60
Item 3. Quantitative and Qualitative Disclosures about Market Risk
126
Item 4.  Controls And Procedures
127
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
128
Item 1A.  Risk Factors
128
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
128
Item 3. Defaults Upon Senior Securities
128
Item 4. Mine Safety Disclosure
128
Item 5. Other Information
128
Item 6. Exhibits
129
Signatures
130
2
Cautionary Note Regarding Forward-Looking Statements
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which reflect our current views with respect to, among other things, future events, operations and financial performance. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “foresees” or negative versions of those words, other comparable words or other statements that do not relate to historical or factual matters. The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity. Some of these factors are described in this report and in our Annual Report on Form 10-K for the year ended December 31, 2021, under the headings “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 1A. Risk Factors.” These factors should not be construed as exhaustive and should be read in conjunction with the risk factors and other cautionary statements that are included in this report and in our other periodic filings. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from those indicated in these forward-looking statements. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Therefore, you should not place undue reliance on these forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. We do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

References in this Quarterly Report on Form 10-Q to the “Ares Operating Group” refer to Ares Holdings L.P. (“Ares Holdings”). References in this Quarterly Report on Form 10-Q to an “Ares Operating Group Unit” or an “AOG Unit” refers to, collectively, a partnership unit in the Ares Operating Group entity.

The use of any defined term in this report to mean more than one entities, persons, securities or other items collectively is solely for convenience of reference and in no way implies that such entities, persons, securities or other items are one indistinguishable group. For example, notwithstanding the use of the defined terms “Ares,” “we” and “our” in this report to refer to Ares Management Corporation and its subsidiaries, each subsidiary of Ares Management Corporation is a standalone legal entity that is separate and distinct from Ares Management Corporation and any of its other subsidiaries.

Under generally accepted accounting principles in the United States (“GAAP”), we are required to consolidate (a) entities other than limited partnerships and entities similar to limited partnerships in which we hold a majority voting interest or have majority ownership and control over the operational, financial and investing decisions of that entity, including Ares-affiliates and affiliated funds and co-investment entities, for which we are presumed to have controlling financial interests, and (b) entities that we concluded are variable interest entities (“VIEs”), including limited partnerships and collateralized loan obligations, for which we are deemed to be the primary beneficiary. When an entity is consolidated, we reflect the assets, liabilities, revenues, expenses and cash flows of the entity in our consolidated financial statements on a gross basis, subject to eliminations from consolidation, including the elimination of the management fees, carried interest, incentive fees and other fees that we earn from the entity. However, the presentation of performance related compensation and other expenses associated with generating such revenues is not affected by the consolidation process. In addition, as a result of the consolidation process, the net income attributable to third-party investors in consolidated entities is presented as net income attributable to non-controlling interests in Consolidated Funds in our Condensed Consolidated Statements of Operations. We also consolidate joint ventures that we have established with third-party investors for strategic distribution and expansion purposes. The results of these entities are reflected on a gross basis in the consolidated financial statements, subject to eliminations from consolidation, and net income attributable to third-party investors in the consolidated joint ventures is presented within net income attributable to redeemable interest and non-controlling interests in Ares Operating Group entities.

In this Quarterly Report on Form 10-Q, in addition to presenting our results on a consolidated basis in accordance with GAAP, we present revenues, expenses and other results on a (i) “segment basis,” which deconsolidates the consolidated funds and removes the proportional results attributable to third-party investors in the consolidated joint ventures, and therefore shows the results of our reportable segments without giving effect to the consolidation of these entities and (ii) “unconsolidated reporting basis,” which shows the results of our reportable segments on a combined segment basis together with our Operations Management Group. In addition to our reportable segments, we have an Operations Management Group (the “OMG”). The OMG consists of shared resource groups to support our reportable segments by providing infrastructure and administrative support in the areas of accounting/finance, operations, information technology, legal, compliance, human resources, strategy and relationship management and distribution. The OMG includes Ares Wealth Management Solutions, LLC (“AWMS”) that facilitates the product development, distribution, marketing and client management activities for investment offerings in the
3
global wealth management channel. Additionally, the OMG provides services to certain of the Company’s managed funds and vehicles, which reimburse the OMG for expenses equal to the costs of services provided. The OMG’s revenues and expenses are not allocated to our reportable segments but we consider the cost structure of the OMG when evaluating our financial performance. This information constitutes non-GAAP financial information within the meaning of Regulation G, as promulgated by the SEC. Our management uses this information to assess the performance of our reportable segments and the OMG, and we believe that this information enhances the ability of shareholders to analyze our performance. For more information, see “Note 15. Segment Reporting,” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
4
Glossary

When used in this report, unless the context otherwise requires:

•“American-style waterfall” generally refers to carried interest that the general partner is entitled to receive after a fund investment is realized and the investors in the fund have received distributions in excess of the capital contributed for that investment and all prior realized investments (including allocable expenses) plus a preferred return;

•“ARCC Part II Fees” refers to fees from Ares Capital Corporation (NASDAQ: ARCC) (“ARCC”) that are paid in arrears as of the end of each calendar year when the cumulative aggregate realized capital gains exceed the cumulative aggregate realized capital losses and aggregate unrealized capital depreciation, less the aggregate amount of ARCC Part II Fees paid in all prior years since inception;

•“Ares”, the “Company”, “AMC”, “we”, “us” and “our” refer to Ares Management Corporation and its subsidiaries;

•“Ares Operating Group Unit” or an “AOG Unit” refers to, collectively, a partnership unit in the Ares Operating Group entities including Ares Holdings and any future entity designated by our board of directors in its sole discretion as an Ares Operating Group entity;

•“assets under management” or “AUM” generally refers to the assets we manage. For our funds other than CLOs, our AUM represents the sum of the net asset value (“NAV”) of such funds, the drawn and undrawn debt (at the fund-level including amounts subject to restrictions) and uncalled committed capital (including commitments to funds that have yet to commence their investment periods). NAV refers to the fair value of the assets of a fund less the fair value of the liabilities of the fund. For the CLOs we manage, our AUM is equal to initial principal amounts adjusted for paydowns. AUM also includes the proceeds raised in the initial public offering of a special purpose acquisition company (“SPAC”) sponsored by us;

•“AUM not yet paying fees” (also referred to as “shadow AUM”) refers to AUM that is not currently paying fees and is eligible to earn management fees upon deployment;

•“available capital” (also referred to as “dry powder”) is comprised of uncalled committed capital and undrawn amounts under credit facilities and may include AUM that may be canceled or not otherwise available to invest;

•“catch-up fees” refers to management fees that are one-time in nature and represents management fees charged to fund investors in subsequent closings of a fund that apply to the time period between the fee initiation date and the subsequent closing date;

•“CLOs” refers to “our funds” that are structured as collateralized loan obligations;

•“Consolidated Funds” refers collectively to certain Ares funds, co-investment entities, CLOs and SPACs that are required under GAAP to be consolidated in our consolidated financial statements;

•“Credit Facility” refers to the revolving credit facility of the Ares Operating Group;

•“effective management fee rate” represents the annualized fees divided by the average fee paying AUM for the period, excluding the impact of one-time catch-up fees;

•“European-style waterfall” generally refers to carried interest that the general partner is entitled to receive after the investors in a fund have received distributions in an amount equal to all prior capital contributions plus a preferred return;

•“fee paying AUM” or “FPAUM” refers to the AUM from which we directly earn management fees. FPAUM is equal to the sum of all the individual fee bases of our funds that directly contribute to our management fees. For
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our funds other than CLOs, our FPAUM represents the amount of limited partner capital commitments for certain closed-end funds within the reinvestment period, the amount of limited partner invested capital for the aforementioned closed-end funds beyond the reinvestment period and the portfolio value, gross asset value or NAV. For the CLOs we manage, our FPAUM is equal to the gross amount of aggregate collateral balance, at par, adjusted for defaulted or discounted collateral;

•“fee related earnings” or “FRE”, a non-GAAP measure, is used to assess core operating performance by determining whether recurring revenue, primarily consisting of management fees and fee related performance revenues, is sufficient to cover operating expenses and to generate profits. FRE differs from income before taxes computed in accordance with GAAP as FRE excludes net performance income, investment income from our funds and certain other items that we believe are not indicative of our core operating performance. Fee related performance revenues, together with fee related performance compensation, is presented within FRE because it represents incentive fees from perpetual capital vehicles that are measured and received on a recurring basis and are not dependent on realization events from the underlying investments. Fee related performance revenues and fee related performance compensation were previously included within realized net performance income;

•“fee related performance revenues” refers to incentive fees from perpetual capital vehicles that are (i) measured and expected to be received on a recurring basis and (ii) not dependent on realization events from the underlying investments. Certain vehicles are subject to hold back provisions that limits the amount paid in a particular year. Such hold back amounts may be paid in subsequent years, subject to their extended performance conditions;

•“GAAP” refers to accounting principles generally accepted in the United States of America;

•“Holdco Members” refers to Michael Arougheti, David Kaplan, Antony Ressler, Bennett Rosenthal, Ryan Berry and R. Kipp deVeer;

•“Incentive eligible AUM” or “IEAUM” generally refers to the AUM of our funds and other entities from which carried interest and incentive fees may be generated, regardless of whether or not they are currently generating carried interest and incentive fees. It generally represents the NAV plus uncalled equity or total assets plus uncalled debt, as applicable, of our funds for which we are entitled to receive carried interest and incentive fees, excluding capital committed by us and our professionals (from which we generally do not earn carried interest and incentive fees), as well as proceeds raised in the initial public offering of a SPAC sponsored by us. With respect to ARCC's AUM, only ARCC Part II Fees may be generated from IEAUM;

•“Incentive generating AUM” or “IGAUM” refers to the AUM of our funds and other entities that are currently generating carried interest and incentive fees on a realized or unrealized basis. It generally represents the NAV or total assets of our funds, as applicable, for which we are entitled to receive carried interest and incentive fees, excluding capital committed by us and our professionals (from which we generally do not earn carried interest and incentive fees). ARCC is only included in IGAUM when ARCC Part II Fees are being generated;

•“management fees” refers to fees we earn for advisory services provided to our funds, which 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 managed by us. Management fees include Part I Fees, a quarterly fee based on the net investment income of certain funds;    

•“net inflows of capital” refers to net new commitments during the period, including equity and debt commitments and gross inflows into our open-ended managed accounts and sub-advised accounts, as well as new debt and equity issuances by our publicly-traded vehicles minus redemptions from our open-ended funds, managed accounts and sub-advised accounts;

•“net performance income” refers to performance income net of related compensation that is typically payable to our professionals;

6
•“our funds” refers to the funds, alternative asset companies, trusts, co-investment vehicles and other entities and accounts that are managed or co-managed by the Ares Operating Group, and which are structured to pay fees. It also includes funds managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of ARCC and an SEC-registered investment adviser;

•“Part I Fees” refers to a quarterly fee on the net investment income of ARCC and CION Ares Diversified Credit Fund (“CADC”). Such fees are classified as management fees as they are predictable and recurring in nature, not subject to contingent repayment and generally cash-settled each quarter, unless subject to a payment deferral;

•“performance income” refers to income we earn based on the performance of a fund that is generally based on certain specific hurdle rates as defined in the fund’s investment management or partnership agreements and may be either performance revenue or carried interest, but in all cases excludes fee related performance revenues;

•“performance revenue” refers to all incentive fees other than those presented as fee related performance revenues;

•“perpetual capital” refers to the AUM of (i) ARCC, Ares Commercial Real Estate Corporation (NYSE: ACRE) (“ACRE”), Ares Private Markets Fund (“APMF”), Ares Dynamic Credit Allocation Fund, Inc. (NYSE: ARDC) (“ARDC”) and CADC, (ii) our non-traded Real Estate Investment Trusts (“REITs”), (iii) Aspida Holdings Ltd. (together with its subsidiaries, “Aspida”), and (iv) certain other commingled funds and managed accounts that have an indefinite term, are not in liquidation, and for which there is no immediate requirement to return invested capital to investors upon the realization of investments. Perpetual Capital - Commingled Funds refers to commingled funds that meet the Perpetual Capital criteria. Perpetual Capital - Managed Accounts refers to managed accounts for single investors primarily in illiquid strategies that meet the Perpetual Capital criteria. Perpetual Capital may be withdrawn by investors under certain conditions, including through an election to redeem an investor’s fund investment or to terminate the investment management agreement, which in certain cases may be terminated on 30 days’ prior written notice. In addition, the investment management or advisory agreements of certain of our publicly-traded and non-traded vehicles have one year terms, which are subject to annual renewal by such vehicles;

•“realized income” or “RI”, a non-GAAP measure, is an operating metric used by management to evaluate performance of the business based on operating performance and the contribution of each of the business segments to that performance, while removing the fluctuations of unrealized income and losses, which may or may not be eventually realized at the levels presented and whose realizations depend more on future outcomes than current business operations. RI differs from income before taxes by excluding (i) operating results of our Consolidated Funds, (ii) depreciation and amortization expense, (iii) the effects of changes arising from corporate actions, (iv) unrealized gains and losses related to carried interest, incentive fees and investment performance and (v) certain other items that we believe are not indicative of our operating performance. Changes arising from corporate actions include equity-based compensation expenses, the amortization of intangible assets, transaction costs associated with mergers, acquisitions and capital activities, underwriting costs and expenses incurred in connection with corporate reorganization. RI is reduced by deferred placement fees, which represent the portion of placement fees that are deferred and amortized over the expected life of each fund's life for segment purposes but have been expensed up front in accordance with GAAP. For periods in which the amortization of placement fees for segment purposes is higher than the GAAP expense, a placement fee adjustment is presented as a reduction to RI;

•“SEC” refers to the Securities and Exchange Commission;

•“Series A Preferred Stock” refers to the preferred stock, $0.01 par value per share, of the Company designated as 7.00% Series A Preferred Stock. The Series A Preferred Stock was redeemed in full on June 30, 2021;

•“2024 Senior Notes” refers to senior notes issued by a wholly owned subsidiary of Ares Holdings in October 2014 with a maturity in October 2024;

7
•“2030 Senior Notes” refers to senior notes issued by a wholly owned subsidiary of Ares Holdings in June 2020 with a maturity in June 2030;

•“2051 Subordinated Notes” refers to subordinated notes issued by a wholly owned subsidiary of Ares Holdings in June 2021 with a maturity in June 2051; and

•“2052 Senior Notes” refers to senior notes issued by a wholly owned subsidiary of Ares Holdings in January 2022 with a maturity in February 2052.

Many of the terms used in this report, including AUM, FPAUM, FRE and RI, may not be comparable to similarly titled measures used by other companies. In addition, our definitions of AUM and FPAUM are not based on any definition of AUM or FPAUM that is set forth in the agreements governing the investment funds that we manage and may differ from definitions of AUM or FPAUM set forth in other agreements to which we are a party or definitions used by the SEC or other regulatory bodies. Further, FRE and RI are not measures of performance calculated in accordance with GAAP. We use FRE and RI as measures of operating performance, not as measures of liquidity. FRE and RI should not be considered in isolation or as substitutes for operating income, net income, operating cash flows, or other income or cash flow statement data prepared in accordance with GAAP. The use of FRE and RI without consideration of related GAAP measures is not adequate due to the adjustments described above. Our management compensates for these limitations by using FRE and RI as supplemental measures to our GAAP results. We present these measures to provide a more complete understanding of our performance as our management measures it.

Amounts and percentages throughout this report may reflect rounding adjustments and consequently totals may not appear to sum.
8
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
Ares Management Corporation 
Condensed Consolidated Statements of Financial Condition 
(Amounts in Thousands, Except Share Data)
As of
 September 30, 2022December 31, 2021
(unaudited)
Assets 
Cash and cash equivalents$361,500 $343,655 
Investments (includes accrued carried interest of $3,290,381 and $2,998,421 at September 30, 2022 and December 31, 2021, respectively)
4,112,393 3,684,264 
Due from affiliates561,503 670,383 
Other assets275,189 334,755 
Right-of-use operating lease assets159,686 167,652 
Intangible assets, net1,238,108 1,422,818 
Goodwill996,740 787,972 
Assets of Consolidated Funds:
Cash and cash equivalents683,976 1,049,191 
U.S. Treasury securities, at fair value1,005,094 1,000,285 
Investments, at fair value11,569,191 11,816,393 
Due from affiliates7,736 7,234 
Receivable for securities sold189,823 281,132 
Other assets45,387 39,430 
Total assets$21,206,326 $21,605,164 
Liabilities  
Accounts payable, accrued expenses and other liabilities$305,131 $279,673 
Accrued compensation595,330 310,222 
Due to affiliates122,307 198,553 
Performance related compensation payable2,402,019 2,190,352 
Debt obligations2,018,462 1,503,709 
Operating lease liabilities193,180 205,075 
Liabilities of Consolidated Funds:
Accounts payable, accrued expenses and other liabilities121,994 103,258 
Payable for securities purchased419,726 1,118,456 
CLO loan obligations, at fair value10,313,881 10,657,661 
Fund borrowings149,546 127,771 
Total liabilities16,641,576 16,694,730 
Commitments and contingencies
Redeemable interest in Consolidated Funds1,004,994 1,000,000 
Redeemable interest in Ares Operating Group entities92,108 96,008 
Non-controlling interests in Consolidated Funds834,710 591,452 
Non-controlling interests in Ares Operating Group entities1,121,277 1,397,747 
Stockholders' Equity
Class A common stock, $0.01 par value, 1,500,000,000 shares authorized (172,402,437 shares and 168,351,305 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively)
1,724 1,684 
Non-voting common stock, $0.01 par value, 500,000,000 shares authorized (3,489,911 shares issued and outstanding at September 30, 2022 and December 31, 2021)
35 35 
Class B common stock, $0.01 par value, 1,000 shares authorized (1,000 shares issued and outstanding at September 30, 2022 and December 31, 2021)
— — 
Class C common stock, $0.01 par value, 499,999,000 shares authorized (118,275,157 shares and 118,609,332 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively)
1,183 1,186 
Additional paid-in-capital1,911,736 1,913,559 
Accumulated deficit(374,198)(89,382)
Accumulated other comprehensive loss, net of tax(28,819)(1,855)
Total stockholders' equity1,511,661 1,825,227 
Total equity3,467,648 3,814,426 
Total liabilities, redeemable interest, non-controlling interests and equity$21,206,326 $21,605,164 

See accompanying notes to the unaudited condensed consolidated financial statements.
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Ares Management Corporation
Condensed Consolidated Statements of Operations
(Amounts in Thousands, Except Share Data)
(unaudited)
 Three months ended September 30,Nine months ended September 30,
 2022202120222021
Revenues
Management fees$548,458 $448,262 $1,546,350 $1,135,821 
Carried interest allocation192,186 460,651 417,779 1,610,707 
Incentive fees8,882 696 29,979 19,420 
Principal investment income11,582 14,250 15,521 86,477 
Administrative, transaction and other fees40,182 24,860 108,090 49,501 
Total revenues801,290 948,719 2,117,719 2,901,926 
Expenses
Compensation and benefits425,419 335,569 1,155,031 837,108 
Performance related compensation142,934 331,141 316,818 1,208,954 
General, administrative and other expenses319,352 134,453 562,441 285,471 
Expenses of Consolidated Funds10,397 12,104 28,364 31,575 
Total expenses898,102 813,267 2,062,654 2,363,108 
Other income (expense)
Net realized and unrealized gains on investments4,431 8,334 10,765 18,744 
Interest and dividend income2,086 1,376 5,064 6,818 
Interest expense(18,307)(11,523)(51,174)(25,125)
Other income, net2,601 36,654 10,194 30,686 
Net realized and unrealized gains (losses) on investments of Consolidated Funds(30)34,245 8,031 44,720 
Interest and other income of Consolidated Funds158,415 104,028 396,080 333,745 
Interest expense of Consolidated Funds(112,762)(61,578)(266,028)(191,577)
Total other income, net36,434 111,536 112,932 218,011 
Income (loss) before taxes(60,378)246,988 167,997 756,829 
Income tax expense (benefit)(11,599)30,275 22,272 104,487 
Net income (loss)(48,779)216,713 145,725 652,342 
Less: Net income attributable to non-controlling interests in Consolidated Funds16,340 47,370 48,700 102,255 
Net income (loss) attributable to Ares Operating Group entities(65,119)169,343 97,025 550,087 
Less: Net income attributable to redeemable interest in Ares Operating Group entities93 324 35 693 
Less: Net income (loss) attributable to non-controlling interests in Ares Operating Group entities(29,666)84,293 46,942 264,646 
Net income (loss) attributable to Ares Management Corporation(35,546)84,726 50,048 284,748 
Less: Series A Preferred Stock dividends paid— — — 10,850 
Less: Series A Preferred Stock redemption premium— — — 11,239 
Net income (loss) attributable to Ares Management Corporation Class A and non-voting common stockholders$(35,546)$84,726 $50,048 $262,659 
Net income (loss) per share of Class A and non-voting common stock:
Basic$(0.22)$0.49 $0.23 $1.55 
Diluted$(0.22)$0.45 $0.23 $1.48 
Weighted-average shares of Class A and non-voting common stock:
Basic175,631,144 168,931,621 175,010,241 161,071,151 
Diluted175,631,144 186,522,157 175,010,241 177,143,438 

Substantially all revenue is earned from affiliated funds of the Company.
See accompanying notes to the unaudited condensed consolidated financial statements.
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Ares Management Corporation
Condensed Consolidated Statements of Comprehensive Income
(Amounts in Thousands)
(unaudited)
Three months ended September 30,Nine months ended September 30,
 2022202120222021
Net income (loss)$(48,779)$216,713 $145,725 $652,342 
Other comprehensive income (loss):  
Foreign currency translation adjustments, net of tax(29,611)(11,324)(71,648)(18,439)
Total comprehensive income (loss)(78,390)205,389 74,077 633,903 
Less: Comprehensive income attributable to non-controlling interests in Consolidated Funds7,141 42,015 24,506 89,784 
Less: Comprehensive loss attributable to redeemable interest in Ares Operating Group entities(840)(32)(2,225)(67)
Less: Comprehensive income (loss) attributable to non-controlling interests in Ares Operating Group entities(37,518)81,947 28,712 262,492 
Comprehensive income (loss) attributable to Ares Management Corporation$(47,173)$81,459 $23,084 $281,694 
 
See accompanying notes to the unaudited condensed consolidated financial statements.
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Ares Management Corporation
Condensed Consolidated Statements of Changes in Equity 
(Amounts in Thousands)
(unaudited)
Series A Preferred StockClass A Common StockNon-voting Common StockClass C Common StockAdditional Paid-in-CapitalAccumulated deficitAccumulated Other Comprehensive Income (loss)Non-Controlling Interest in Ares Operating Group EntitiesNon-Controlling Interest in Consolidated FundsTotal Equity
Balance at December 31, 2021$— $1,684 $35 $1,186 $1,913,559 $(89,382)$(1,855)$1,397,747 $591,452 $3,814,426 
Changes in ownership interests and related tax benefits— 28 — (1)(110,577)— — (90,843)19,202 (182,191)
Issuances of common stock— 1 — — 12,834 — — — — 12,835 
Capital contributions— — — — — — — 1,079 82,930 84,009 
Dividends/Distributions— — — — — (111,406)— (100,480)(34,958)(246,844)
Net income— — — — — 45,863 — 47,254 47,382 140,499 
Currency translation adjustment, net of tax— — — — — — (4,164)(2,803)(5,095)(12,062)
Equity compensation— — — — 31,896 — — 21,706 — 53,602 
Stock option exercises— 2 — — 3,345 — — — — 3,347 
Balance at March 31, 2022— 1,715 35 1,185 1,851,057 (154,925)(6,019)1,273,660 700,913 3,667,621 
Changes in ownership interests and related tax benefits— — — (1)(5,599)— — (3,135)5,815 (2,920)
Capital contributions— — — — — — — 969 135,350 136,319 
Dividends/Distributions— — — — — (111,506)— (82,958)(18,680)(213,144)
Net income (loss)— — — — — 39,731 — 29,354 (15,022)54,063 
Currency translation adjustment, net of tax— — — — — — (11,173)(7,575)(9,900)(28,648)
Equity compensation— — — — 29,569 — — 19,990 — 49,559 
Stock option exercises— 3 — — 5,294 — — — — 5,297 
Balance at June 30, 2022— 1,718 35 1,184 1,880,321 (226,700)(17,192)1,230,305 798,476 3,668,147 
Changes in ownership interests and related tax benefits— 3 — (1)(3,173)— — (4,354)(479)(8,004)
Capital contributions— — — — — — — 1,549 80,366 81,915 
Dividends/Distributions— — — — — (111,952)— (88,041)(50,794)(250,787)
Net income (loss)— — — — — (35,546)— (29,666)16,340 (48,872)
Currency translation adjustment, net of tax— — — — — — (11,627)(7,852)(9,199)(28,678)
Equity compensation— — — — 28,704 — — 19,336 — 48,040 
Stock option exercises— 3 — — 5,884 — — — — 5,887 
Balance at September 30, 2022$— $1,724 $35 $1,183 $1,911,736 $(374,198)$(28,819)$1,121,277 $834,710 $3,467,648 

See accompanying notes to the unaudited condensed consolidated financial statements.
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Ares Management Corporation
Condensed Consolidated Statements of Changes in Equity 
(Amounts in Thousands)
(unaudited)
Series A Preferred StockClass A Common StockNon-voting Common StockClass C Common StockAdditional Paid-in-CapitalAccumulated deficitAccumulated Other Comprehensive Income (loss)Non-Controlling Interest in Ares Operating Group EntitiesNon-Controlling Interest in Consolidated FundsTotal Equity
Balance at December 31, 2020$298,761 $1,472 $— $1,124 $1,043,669 $(151,824)$483 $738,369 $539,720 $2,471,774 
Changes in ownership interests and related tax benefits— 26 — (2)(41,686)— — (44,477)— (86,139)
Capital contributions— — — — — — — — 11,011 11,011 
Dividends/Distributions(5,425)— — — — (74,684)— (67,084)(38,829)(186,022)
Net income5,425 — — — — 52,953 — 56,042 49,858 164,278 
Currency translation adjustment, net of tax— — — — — — (545)(366)(9,072)(9,983)
Equity compensation— — — — 31,752 — — 23,897 — 55,649 
Balance at March 31, 2021298,761 1,498 — 1,122 1,033,735 (173,555)(62)706,381 552,688 2,420,568 
Changes in ownership interests and related tax benefits— 3 — — (165,886)— — 143,867 — (22,016)
Issuances of common stock— 122 35 — 827,273 — — — — 827,430 
Capital contributions— — — 54 — — — 317,595 34,994 352,643 
Redemption of preferred stock(310,000)— — — — — — — — (310,000)
Dividends/Distributions(5,425)— — — — (82,825)— (63,585)(33,460)(185,295)
Net income16,664 — — — — 124,980 — 124,311 5,027 270,982 
Currency translation adjustment, net of tax— — — — — — 758 558 1,956 3,272 
Equity compensation— — — — 41,003 — — 28,501 — 69,504 
Stock option exercises— 8 — — 14,019 — — — — 14,027 
Balance at June 30, 2021— 1,631 35 1,176 1,750,144 (131,400)696 1,257,628 561,205 3,441,115 
Changes in ownership interests and related tax benefits— 38 — (21)79,787 — — (187,454)— (107,650)
Capital contributions— — — 33 — — — 211,444 (126,339)85,138 
Dividends/Distributions— — — — — (82,307)— (68,083)(12,481)(162,871)
Net income— — — — — 84,726 — 84,293 47,370 216,389 
Currency translation adjustment, net of tax— — — — — — (3,267)(2,346)(5,355)(10,968)
Equity compensation— — — — 38,607 — — 27,384 — 65,991 
Stock option exercises— 7 — — 13,375 — — — — 13,382 
Balance at September 30, 2021— 1,676 35 1,188 1,881,913 (128,981)(2,571)1,322,866 464,400 3,540,526 
Changes in ownership interests and related tax benefits— 3 — (2)(5,504)— — (9,671)13,487 (1,687)
Capital contributions— — — — — — — 9,981 113,978 123,959 
Dividends/Distributions— — — — — (84,490)— (70,448)(14,127)(169,065)
Net income— — — — — 124,089 — 125,794 18,114 267,997 
Currency translation adjustment, net of tax— — — — — — 716 526 (4,400)(3,158)
Equity compensation— — — — 27,348 — — 18,699 — 46,047 
Stock option exercises— 5 — — 9,802 — — — — 9,807 
Balance at December 31, 2021$— $1,684 $35 $1,186 $1,913,559 $(89,382)$(1,855)$1,397,747 $591,452 $3,814,426 

See accompanying notes to the unaudited condensed consolidated financial statements.
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Ares Management Corporation
Condensed Consolidated Statements of Cash Flows
(Amounts in Thousands)
(unaudited)
 Nine months ended September 30,
 20222021
Cash flows from operating activities:  
Net income$145,725 $652,342 
Adjustments to reconcile net income to net cash used in operating activities320,950 71,133 
Adjustments to reconcile net income to net cash used in operating activities allocable to non-controlling interests in Consolidated Funds(1,128,425)(1,688,085)
Cash flows due to changes in operating assets and liabilities313,649 (149,438)
Cash flows due to changes in operating assets and liabilities allocable to redeemable and non-controlling interest in Consolidated Funds(195,504)(729,703)
Net cash used in operating activities(543,605)(1,843,751)
Cash flows from investing activities:  
Purchase of furniture, equipment and leasehold improvements, net of disposals(28,388)(15,152)
Acquisitions, net of cash acquired(301,658)(1,057,426)
Net cash used in investing activities(330,046)(1,072,578)
Cash flows from financing activities:  
Net proceeds from issuance of Class A and non-voting common stock— 827,430 
Proceeds from Credit Facility940,000 468,000 
Proceeds from issuance of senior and subordinated notes488,915 450,000 
Repayments of Credit Facility(910,000)(318,000)
Dividends and distributions (608,220)(438,568)
Series A Preferred Stock dividends— (10,850)
Redemption of Series A Preferred Stock— (310,000)
Stock option exercises14,531 27,409 
Taxes paid related to net share settlement of equity awards(194,223)(221,287)
Other financing activities2,457 1,976 
Allocable to redeemable and non-controlling interests in Consolidated Funds:
Contributions from redeemable and non-controlling interests in Consolidated Funds298,646 919,666 
Distributions to non-controlling interests in Consolidated Funds(104,432)(84,770)
Borrowings under loan obligations by Consolidated Funds1,120,680 1,456,887 
Repayments under loan obligations by Consolidated Funds(121,273)(74,909)
Net cash provided by financing activities927,081 2,692,984 
Effect of exchange rate changes(35,585)(20,763)
Net change in cash and cash equivalents17,845 (244,108)
Cash and cash equivalents, beginning of period343,655 539,812 
Cash and cash equivalents, end of period$361,500 $295,704 
Supplemental disclosure of non-cash financing activities:
Issuance of AOG Units and Class A common stock in connection with acquisitions$12,835 $511,069 
    
See accompanying notes to the unaudited condensed consolidated financial statements.
14
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
1. ORGANIZATION
Ares Management Corporation (the “Company”), a Delaware corporation, together with its subsidiaries, is a leading global alternative investment manager operating integrated groups across Credit, Private Equity, Real Assets, Secondaries and Strategic Initiatives. Information about segments should be read together with “Note 15. Segment Reporting.” Subsidiaries of the Company serve as the general partners and/or investment managers to various investment funds and managed accounts within each investment group (the “Ares Funds”). These subsidiaries provide investment advisory services to the Ares Funds in exchange for management fees.

The accompanying unaudited financial statements include the condensed consolidated results of the Company and its subsidiaries. In this Quarterly Report, Ares Holdings L.P. (“Ares Holdings”) is a subsidiary that is referred to as the “Ares Operating Group” or “AOG”. The Company, indirectly through its wholly owned subsidiary, Ares Holdco LLC, is the general partner of the Ares Operating Group entity. The Company operates and controls all of the businesses and affairs of and conducts all of its material business activities through the Ares Operating Group.

The Company and its wholly owned subsidiaries manages or controls certain entities that have been consolidated in the accompanying financial statements as described in “Note 2. Summary of Significant Accounting Policies.” These entities include Ares funds, co-investment vehicles, collateralized loan obligations or funds (collectively “CLOs”) and a special purpose acquisition company (“SPAC”) (collectively, the “Consolidated Funds”).

Including the results of the Consolidated Funds significantly increases the reported amounts of the assets, liabilities, revenues, expenses and cash flows in the accompanying consolidated financial statements. However, the Consolidated Funds results included herein have no direct effect on the net income attributable to Ares Management Corporation or to Stockholders' Equity, except where a reallocation of ownership occurs based on specific terms of a profit sharing agreement, such as a redemption or liquidation preference. Instead, economic ownership interests of the investors in the Consolidated Funds are reflected as redeemable and non-controlling interests in Consolidated Funds. Further, cash flows allocable to redeemable and non-controlling interest in Consolidated Funds are specifically identifiable in the Condensed Consolidated Statements of Cash Flows.

Redeemable Interest and Non-Controlling Interests in Ares Operating Group Entities

The non-controlling interests in AOG entities represent a component of equity and net income attributable to the owners of the Ares Operating Group Units (“AOG Units”) that are not held directly or indirectly by the Company. These owners consist predominantly of Ares Owners Holdings L.P. but also include other strategic distribution partnerships with whom the Company has established joint ventures and other non-controlling strategic investors. Non-controlling interests in AOG entities are adjusted for contributions to and distributions from AOG during the reporting period and are allocated income from the AOG entities either based on their historical ownership percentage for the proportional number of days in the reporting period or based on the activity associated with certain membership interests.

On July 1, 2020, the Company completed its acquisition of a majority interest in SSG Capital Holdings Limited and its operating subsidiaries (“SSG”) (“SSG Acquisition”). In connection with the SSG Acquisition, the former owners of SSG retained an ownership interest in the operations acquired by the Company. In certain circumstances, the Company may acquire full ownership of SSG pursuant to a contractual arrangement that may be initiated by the Company or by the former owners of SSG. Since the acquisition of the remaining interest in SSG is not within the Company's sole discretion, the ownership interest held by the former owners of SSG is classified as a redeemable interest and represents mezzanine equity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying condensed consolidated financial statements are prepared in accordance with the generally accepted accounting principles in the United States (“GAAP”) for interim financial information and instructions to the Quarterly Report on Form 10-Q. The condensed consolidated financial statements, including these notes, are unaudited and exclude some of the disclosures required in annual financial statements. Management believes it has made all necessary adjustments so that the condensed consolidated financial statements are presented fairly and that estimates made in preparing its condensed consolidated financial statements are reasonable and prudent, and that all such adjustments are of a normal recurring
15
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”).
The unaudited condensed consolidated financial statements include the accounts and activities of the AOG entities, their consolidated subsidiaries and certain Consolidated Funds. All intercompany balances and transactions have been eliminated upon consolidation.
The Company has reclassified certain prior period amounts to conform to the current year presentation.

Recent Accounting Pronouncements
The Company considers the applicability and impact of all accounting standard updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”). ASUs not listed below were assessed and either determined to be not applicable or expected to have minimal impact on its unaudited condensed consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). The amendments in this update provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. An entity may elect to adopt the amendments in ASU 2020-04 and ASU 2021-01 at any time after March 12, 2020 but no later than December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications and hedging relationships entered into or evaluated after December 31, 2022, except for hedging transactions as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company has concluded this guidance will not have a material impact on its unaudited condensed consolidated financial statements.

16
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
3. BUSINESS COMBINATIONS
Acquisition of Landmark Partners, LLC (collectively with its subsidiaries, “Landmark”)
On June 2, 2021, a subsidiary of the Company completed the acquisition of 100% of the equity interests of Landmark, a subsidiary of BrightSphere Investment Group Inc. (NYSE: BSIG) and Landmark Investment Holdings L.P., in accordance with the purchase agreement entered into on March 30, 2021 (the “Landmark Acquisition”). As a result of the Landmark Acquisition, the Company expanded into the secondaries market with Landmark’s focus of managing private equity, real estate and infrastructure secondaries funds. Following the completion of the Landmark Acquisition, the results of Landmark are included in a newly created Secondaries Group segment.

The acquisition date fair value of the consideration transferred totaled $1.1 billion, which consisted of the following:

Cash$803,309 
Equity(1)
299,420 
Total$1,102,729 
(1)5,415,278 AOG Units were issued in connection with the Landmark Acquisition and increased Ares Owners Holdings L.P.’s ownership interest in the AOG entities.

The following is a summary of the fair values of assets acquired and liabilities assumed for the Landmark Acquisition as of June 2, 2021, based upon third party valuations of certain intangible assets. The fair value of assets acquired and liabilities assumed are estimated to be:

Cash$25,645 
Other tangible assets23,403 
Intangible assets:
Management contracts425,880 
Client relationships197,160 
Trade name86,200 
Total intangible assets709,240 
Total identifiable assets acquired758,288 
Accounts payable, accrued expenses and other liabilities73,216 
Net identifiable assets acquired685,072 
Goodwill417,657 
Net assets acquired$1,102,729 

The carrying value of goodwill associated with Landmark was $417.7 million as of the acquisition date and is entirely allocated to the Secondaries Group segment. The goodwill is attributable primarily to expected synergies and the assembled workforce of Landmark.
In connection with the Landmark Acquisition, the Company allocated $425.9 million, $197.2 million and $86.2 million of the purchase price to the fair value of the management contracts, client relationships and trade name, respectively. The acquired management contracts and client relationships had a weighted average amortization period as of the acquisition date of 7.4 years and 11.8 years, respectively. At the acquisition date, the trade name was determined to have an indefinite useful life and was not subject to amortization as the Company intended to operate under its brand name into perpetuity. During the three months ended September 30, 2022, the Company recognized non-cash impairment charges on certain of the intangible assets from the Landmark Acquisition. See “Note 4. Goodwill and Intangible Assets” for further discussion.

17
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
Supplemental information of the Company’s consolidated results on an unaudited pro forma basis, as if the Landmark Acquisition had been consummated as of January 1, 2020, is as follows:
Three months ended September 30,
Nine months ended September 30,
20212021
Total revenues$948,719 $2,966,540 
Net income attributable to Ares Management Corporation Class A and non-voting common stockholders$87,542 $257,361 
The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable. These results are not necessarily indicative of the Company’s consolidated financial condition or statements of operations in future periods or the results that actually would have been realized had the Company and Landmark been a combined entity during the periods presented. These pro forma amounts have been calculated after applying the following adjustments that were directly attributable to the Landmark Acquisition:
•adjustments to include the impact of the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied on January 1, 2020, together with the consequential tax effects;
•adjustments to include the AOG Units issued as consideration for the Landmark Acquisition, as if they were issued on January 1, 2020, and the resulting change in ownership attributable to Ares Management Corporation;
•adjustments to reflect the pro-rata economic ownership attributable to Ares Management Corporation;
•adjustments to reflect the tax effects of the Landmark Acquisition and the related adjustments as if Landmark had been included in the Company’s results as of January 1, 2020; and
•adjustments to include Landmark Acquisition related transaction costs in earnings in 2020.
Acquisition of Black Creek Group

On July 1, 2021, a subsidiary of the Company completed the acquisition of 100% of the equity interests of Black Creek Group’s U.S. real estate investment advisory and distribution business (“Black Creek”) in accordance with the purchase agreement entered into on May 20, 2021 (the “Black Creek Acquisition”). Black Creek is a leading real estate investment management firm that operates in core and core-plus real estate strategies across two non-traded Real Estate Investment Trusts (“REITs”) and various institutional fund vehicles. Following the completion of the Black Creek Acquisition, the results of Black Creek are included within the Real Assets Group segment.

Acquisition of AMP Capital’s Infrastructure Debt Platform (“Infrastructure Debt Acquisition”)

On February 10, 2022, a subsidiary of the Company completed the acquisition of AMP Capital’s Infrastructure Debt platform in accordance with the purchase agreement entered into on December 23, 2021 (the “Infrastructure Debt Acquisition”). The Infrastructure Debt Acquisition adds complementary investment capabilities to Ares’ current activities in the rapidly growing infrastructure asset class. Following the completion of the Infrastructure Debt Acquisition, the results of the infrastructure debt platform are presented within the Real Assets Group. See “Note 15. Segment Reporting” for further discussion on the Company’s change in segment composition during the first quarter of 2022.

The acquisition date fair value of the consideration transferred totaled $328.6 million, consisting of $315.8 million in cash and $12.8 million of restricted units of Class A common stock that were granted and vested on the acquisition close date.

18
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
4. GOODWILL AND INTANGIBLE ASSETS
Intangible Assets, Net
The following table summarizes the carrying value, net of accumulated amortization, of the Company's intangible assets:
Weighted Average Amortization Period as of September 30, 2022 In YearsAs of September 30,As of December 31,
20222021
Management contracts5.2$586,077 $641,737 
Client relationships9.9262,301 229,501 
Trade name7.811,079 11,079 
Other2.1500 500 
Finite-lived intangible assets859,957 882,817 
Foreign currency translation(2,972)1,792 
Total finite-lived intangible assets856,985 884,609 
Less: accumulated amortization(186,677)(115,791)
Finite-lived intangible assets, net670,308 768,818 
Management contracts567,800 567,800 
Trade name— 86,200 
Indefinite-lived intangible assets567,800 654,000 
Intangible assets, net$1,238,108 $1,422,818 
In connection with the Infrastructure Debt Acquisition, the Company allocated $68.7 million and $32.8 million of the purchase price to the fair value of the acquired management contracts and client relationships, respectively. The acquired management contracts and client relationships had a weighted average amortization period from the date of acquisition of 5.2 years and 8.4 years, respectively.
During the three months ended September 30, 2022, the Company decided to rebrand its secondaries group as Ares Secondaries and to discontinue the ongoing use of the Landmark trade name. As a result, the Company recorded an impairment charge equal to the Landmark trade name’s carrying value of $86.2 million.
Separately, in connection with lower than expected fundraising for an acquired Landmark private equity secondaries fund, the Company recorded a non-cash impairment charge of $88.4 million to the fair value of a management contract during the three months ended September 30, 2022. The primary indicator of impairment was lower fee paying assets under management from the acquired Landmark private equity secondaries fund. Also connected to the lower fundraising projections associated with the acquired Landmark private equity secondaries fund, the Company reversed all previously recorded expenses associated with the Landmark management incentive plan. See “Note 9. Commitments and Contingencies” for further discussion. In addition, the Company recorded non-cash impairment charges of $3.7 million, $3.1 million, and $0.2 million to the fair value of management contracts acquired in connection with the Landmark Acquisition, the Black Creek Acquisition and the SSG Acquisition, respectively. The primary indicator of impairment was the shorter expected lives of certain funds as a result of returning capital to fund investors sooner than initially planned. The impairment charges for the intangible assets acquired in connection with the Landmark Acquisition, the Black Creek Acquisition and the SSG Acquisition are included within the Secondaries Group, the Real Assets Group and Strategic Initiatives, respectively.
The Company expects lower future cash flows to be generated by these management contracts over the remaining useful lives of the funds. The Company determined that the carrying value of the intangible assets exceeded the expected undiscounted future cash flows and recorded impairment charges equal to the difference between its carrying value of each asset and the asset’s estimated fair value, which was calculated using a discounted cash flow methodology.
The non-cash impairment charges represents an acceleration of amortization expense and totaled $181.6 million for the three and nine months ended September 30, 2022. Amortization expense associated with intangible assets, excluding the accelerated amortization from the non-cash impairment charges described above, was $32.7 million and $32.8 million for the three months ended September 30, 2022 and 2021, respectively, and $101.5 million and $60.7 million for the nine months ended September 30, 2022 and 2021, respectively. Amortization expense is presented within general, administrative and other
19
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
expenses in the Condensed Consolidated Statements of Operations. During the nine months ended September 30, 2022, the Company removed $210.6 million of impaired and fully amortized intangible assets.

Goodwill

The following table summarizes the carrying value of the Company’s goodwill:
Credit GroupPrivate
Equity Group		Real
Assets Group
Secondaries Group
Strategic Initiatives
Total
Balance as of December 31, 2021$32,196 $58,600 $53,339 $417,738 $226,099 $787,972 
Acquisitions— — 213,424 (96)— 213,328 
Reallocation— (10,530)10,530 — — — 
Foreign currency translation— — — (35)(4,525)(4,560)
Balance as of September 30, 2022$32,196 $48,070 $277,293 $417,607 $221,574 $996,740 

In connection with the Infrastructure Debt Acquisition, the Company allocated $213.4 million of the purchase price to goodwill.

In connection with the establishment of the Real Assets Group described in “Note 15. Segment Reporting,” the Company had an associated change in its reporting units and reallocated goodwill of $10.5 million from the Private Equity Group to the Real Assets Group using a relative fair value allocation approach. The former Real Estate Group has been transferred in its entirety to the Real Assets Group and the total goodwill of $53.3 million has been reallocated from the former Real Estate Group to the Real Assets Group accordingly.

There was no impairment of goodwill recorded during the nine months ended September 30, 2022 and 2021. The impact of foreign currency translation is reflected within other comprehensive income (loss).

5. INVESTMENTS

The Company’s investments are comprised of the following:
Percentage of total investments
September 30,December 31,September 30,December 31,
2022202120222021
Equity method investments:
Equity method - carried interest
$3,290,381 $2,998,421 80.0 %81.4 %
Equity method private investment partnership interests - principal526,110 473,887 12.8 12.9 
Equity method private investment partnership interests and other (held at fair value)125,499 117,539 3.0 3.2 
Equity method private investment partnership interests and other47,564 40,580 1.2 1.1 
Total equity method investments3,989,554 3,630,427 97.0 98.6 
Collateralized loan obligations24,243 30,815 0.6 0.8 
Other fixed income21,582 21,582 0.4 0.5 
Collateralized loan obligations and other fixed income, at fair value45,825 52,397 1.0 1.3 
Common stock, at fair value77,014 1,440 2.0 0.1 
Total investments$4,112,393 $3,684,264 

Equity Method Investments

The Company’s equity method investments include investments that are not consolidated but over which the Company exerts significant influence. The Company evaluates each of its equity method investments to determine if any were significant as defined by guidance from the SEC. As of and for the three and nine months ended September 30, 2022 and 2021, no individual equity method investment held by the Company met the significance criteria.
20
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
The Company recognized net gains related to its equity method investments of $16.2 million and $18.9 million for the three months ended September 30, 2022 and 2021, respectively, and net gains of $25.1 million and $99.3 million for the nine months ended September 30, 2022 and 2021, respectively. The net gains were included within principal investment income, net realized and unrealized gains on investments, and interest and dividend income in the Condensed Consolidated Statements of Operations.
With respect to the Company's equity method investments, the material assets are expected to generate either long-term capital appreciation and/or interest income, the material liabilities are debt instruments collateralized by, or related to, the financing of the assets and net income is materially comprised of the changes in fair value of these net assets.
Investments of the Consolidated Funds

Investments held in the Consolidated Funds are summarized below:

Fair Value atPercentage of total investments as of
September 30,December 31,September 30,December 31,
2022202120222021
Fixed income investments:
Bonds$751,385 $857,125 6.0 %6.7%
Loans8,986,386 9,910,689 71.4 77.3
U.S. Treasury securities1,005,094 1,000,285 8.0 7.8
Total fixed income investments10,742,865 11,768,099 85.4 91.8
Equity securities698,236 340,272 5.6 2.7
Partnership interests1,133,184 708,307 9.0 5.5
Total investments, at fair value$12,574,285 $12,816,678 

As of September 30, 2022 and December 31, 2021, no single issuer or investment, including derivative instruments and underlying portfolio investments of the Consolidated Funds, had a fair value that exceeded 5.0% of the Company’s total assets.

6. FAIR VALUE
Fair Value Measurements
GAAP establishes a hierarchical disclosure framework that prioritizes the inputs used in measuring financial instruments at fair value into three levels based on their market price observability. Market price observability is affected by a number of factors, including the type of instrument and the characteristics specific to the instrument. Financial instruments with readily available quoted prices from an active market or for which fair value can be measured based on actively quoted prices generally have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value.
Financial assets and liabilities measured and reported at fair value are classified as follows:
•Level I—Quoted prices in active markets for identical instruments.
•Level II—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in inactive markets; and model-derived valuations with directly or indirectly observable significant inputs. Level II inputs include prices in markets with few transactions, non-current prices, prices for which little public information exists or prices that vary substantially over time or among brokered market makers. Other inputs include interest rate, yield curve, volatility, prepayment risk, loss severity, credit risk and default rate.
•Level III—Valuations that rely on one or more significant unobservable inputs. These inputs reflect the Company’s assessment of the assumptions that market participants would use to value the instrument based on the best information available.
21
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
In some instances, an instrument may fall into more than one level of the fair value hierarchy. In such instances, the instrument’s level within the fair value hierarchy is based on the lowest of the three levels (with Level III being the lowest) that is significant to the fair value measurement. The Company’s assessment of the significance of an input requires judgment and considers factors specific to the instrument. The Company accounts for the transfer of assets into or out of each fair value hierarchy level as of the beginning of the reporting period.

Fair Value of Financial Instruments Held by the Company and Consolidated Funds

The following tables summarize the financial assets and financial liabilities measured at fair value for the Company and the Consolidated Funds as of September 30, 2022:
Financial Instruments of the CompanyLevel I Level II Level III Investments
Measured
at NAV		Total 
Assets, at fair value
Investments:
Collateralized loan obligations and other fixed income
$— $— $45,825 $— $45,825 
Common stock and other equity securities— 77,014 117,272 — 194,286 
Partnership interests— — 2,575 5,652 8,227 
Total investments, at fair value— 77,014 165,672 5,652 248,338 
Derivatives-foreign currency forward contracts— 9,247 — — 9,247 
Total assets, at fair value$— $86,261 $165,672 $5,652 $257,585 
Liabilities, at fair value
Derivatives-foreign currency forward contracts$— $(6,581)$— $— $(6,581)
Contingent consideration— — (11,000)— (11,000)
Total liabilities, at fair value$— $(6,581)$(11,000)$— $(17,581)

Financial Instruments of the Consolidated FundsLevel I Level II Level III 
Investments
Measured
at NAV
Total 
Assets, at fair value
Investments:
Fixed income investments:
Bonds$— $495,501 $255,884 $— $751,385 
Loans— 8,321,661 664,725 — 8,986,386 
U.S. Treasury securities1,005,094 — — — 1,005,094 
Total fixed income investments1,005,094 8,817,162 920,609 — 10,742,865 
Equity securities646 — 526,051 171,539 698,236 
Partnership interests— — 252,634 880,550 1,133,184 
Total investments, at fair value1,005,740 8,817,162 1,699,294 1,052,089 12,574,285 
Derivatives:
Derivatives-foreign exchange contracts— 536 — — 536 
Total derivative assets, at fair value— 536 — — 536 
Total assets, at fair value$1,005,740 $8,817,698 $1,699,294 $1,052,089 $12,574,821 
Liabilities, at fair value
Derivatives:
Warrants$(2,000)$— $— $— $(2,000)
Forward foreign currency contracts — (496)— — (496)
Asset swaps— — (3,353)— (3,353)
Total derivative liabilities, at fair value(2,000)(496)(3,353)— (5,849)
Loan obligations of CLOs— (10,313,881)— — (10,313,881)
Total liabilities, at fair value$(2,000)$(10,314,377)$(3,353)$— $(10,319,730)
22
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
The following tables summarize the financial assets and financial liabilities measured at fair value for the Company and the Consolidated Funds as of December 31, 2021:
Financial Instruments of the CompanyLevel I Level II Level III Investments
Measured
at NAV		Total 
Assets, at fair value
Investments:
Collateralized loan obligations and other fixed income
$— $— $52,397 $— $52,397 
Common stock and other equity securities— 1,440 108,949 — 110,389 
Partnership interests— — 2,575 6,016 8,591 
Total investments, at fair value— 1,440 163,921 6,016 171,377 
Derivatives-foreign currency forward contracts— 5,682 — — 5,682 
Total assets, at fair value$— $7,122 $163,921 $6,016 $177,059 
Liabilities, at fair value
Derivatives-foreign currency forward contracts$— $(328)$— $— $(328)
Contingent consideration— — (57,435)— (57,435)
Total liabilities, at fair value$— $(328)$(57,435)$— $(57,763)

Financial Instruments of the Consolidated FundsLevel ILevel IILevel IIIInvestments Measured
at NAV		Total
Assets, at fair value
Investments:
Fixed income investments:
Bonds$— $525,393 $331,732 $— $857,125 
Loans— 9,499,469 411,220 — 9,910,689 
U. S. Treasury Securities1,000,285 — — — 1,000,285 
Total fixed income investments1,000,285 10,024,862 742,952 — 11,768,099 
Equity securities956 133 339,183 — 340,272 
Partnership interests— — 238,673 469,634 708,307 
Total assets, at fair value$1,001,241 $10,024,995 $1,320,808 $469,634 $12,816,678 
Liabilities, at fair value
Derivatives:
Derivatives-foreign exchange contracts$(17,822)$— $— $— $(17,822)
Asset swaps— — (3,105)— (3,105)
Total derivative liabilities, at fair value(17,822)— (3,105)— (20,927)
Loan obligations of CLOs— (10,657,661)— — (10,657,661)
Total liabilities, at fair value$(17,822)$(10,657,661)$(3,105)$— $(10,678,588)
23
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
The following tables set forth a summary of changes in the fair value of the Level III measurements for the three months ended September 30, 2022:
Level III Assets and Liabilities of the Company
Equity 
Securities
Fixed IncomePartnership InterestsContingent ConsiderationTotal
Balance, beginning of period$113,881 $46,356 $2,575 $(10,748)$152,064 
Purchases(1)
894 — — — 894 
Change in fair value— — — (252)(252)
Sales/settlements(2)
(1,179)(505)— — (1,684)
Realized and unrealized appreciation(depreciation), net3,676 (26)— — 3,650 
Balance, end of period$117,272 $45,825 $2,575 $(11,000)$154,672 
Change in net unrealized appreciation/depreciation included in earnings related to financial assets and liabilities still held at the reporting date$7,111 $(26)$— $(252)$6,833 
Level III Net Assets of Consolidated Funds
Equity 
Securities
Fixed 
Income
Partnership
Interests		Derivatives, NetTotal
Balance, beginning of period$480,914 $1,076,254 $250,123 $(3,035)$1,804,256 
Transfer in— 171,687 — — 171,687 
Transfer out— (350,079)— — (350,079)
Purchases(1)
49,024 173,253 31,258 — 253,535 
Sales/settlements(2)
(64)(132,226)(22,328)— (154,618)
Amortized discounts/premiums— 521 — — 521 
Realized and unrealized appreciation(depreciation), net(3,823)(18,801)(6,419)(318)(29,361)
Balance, end of period$526,051 $920,609 $252,634 $(3,353)$1,695,941 
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date$(3,836)$(9,067)$5,421 $(447)$(7,929)
(1)Purchases include paid-in-kind interest and securities received in connection with restructurings.
(2)Sales/settlements include distributions, principal redemptions and securities disposed of in connection with restructurings.

24
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
The following tables set forth a summary of changes in the fair value of the Level III measurements for the three months ended September 30, 2021:
Level III Assets and Liabilities of the Company
Equity 
Securities
Fixed IncomePartnership InterestsContingent ConsiderationTotal
Balance, beginning of period$107,240 $55,840 $2,575 $— $165,655 
Established in connection with acquisition— — — (34,200)(34,200)
Purchases(1)
— 708 — — 708 
Sales/settlements(2)
— (2,904)— — (2,904)
Realized and unrealized appreciation (depreciation), net1,157 663 — (7,213)(5,393)
Balance, end of period$108,397 $54,307 $2,575 $(41,413)$123,866 
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date$1,157 $675 $— $(7,213)$(5,381)

Level III Net Assets of Consolidated Funds
Equity 
Securities
Fixed 
Income
Partnership InterestsDerivatives, NetTotal
Balance, beginning of period$229,300 $455,426 $255,278 $(1,658)$938,346 
Transfer in— 18,792 — — 18,792 
Transfer out— (209,282)— — (209,282)
Purchases(1)
27,346 219,180 — — 246,526 
Sales/settlements(2)
(313)(88,584)(30,000)625 (118,272)
Amortized discounts/premiums— 394 — — 394 
Realized and unrealized appreciation (depreciation), net2,913 6,750 12,280 (155)21,788 
Balance, end of period$259,246 $402,676 $237,558 $(1,188)$898,292 
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date$2,912 $1,607 $12,280 $(63)$16,736 

(1)Purchases include paid-in-kind interest and securities received in connection with restructurings.
(2)Sales/settlements include distributions, principal redemptions and securities disposed of in connection with restructurings.


25
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
The following tables set forth a summary of changes in the fair value of the Level III measurements for the nine months ended September 30, 2022:
Level III Assets and Liabilities of the CompanyEquity 
Securities		Fixed IncomePartnership InterestsContingent ConsiderationTotal
Balance, beginning of period$108,949 $52,397 $2,575 $(57,435)$106,486 
Transfer in due to changes in consolidation1,491 — — — 1,491 
Purchases(1)
894 — — — 894 
Sales/settlements(2)
(2,326)(2,383)— 47,873 43,164 
Change in fair value— — — (1,438)(1,438)
Realized and unrealized appreciation (depreciation), net8,264 (4,189)— — 4,075 
Balance, end of period$117,272 $45,825 $2,575 $(11,000)$154,672 
Change in net unrealized appreciation/depreciation and fair value included in earnings related to financial assets and liabilities still held at the reporting date$10,330 $(4,189)$— $(1,438)$4,703 

Level III Net Assets of Consolidated FundsEquity 
Securities		Fixed 
Income		Partnership
Interests		Derivatives, NetTotal
Balance, beginning of period$339,183 $742,952 $238,673 $(3,105)$1,317,703 
Transfer in— 321,939 — — 321,939 
Transfer out— (213,658)— — (213,658)
Purchases(1)
166,667 551,408 58,258 — 776,333 
Sales/settlements(2)
(28,444)(405,904)(52,828)— (487,176)
Amortized discounts/premiums— 1,274 — — 1,274 
Realized and unrealized appreciation (depreciation), net48,645 (77,402)8,531 (248)(20,474)
Balance, end of period$526,051 $920,609 $252,634 $(3,353)$1,695,941 
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date$22,304 $(69,982)$344 $(643)$(47,977)

(1)Purchases include paid-in-kind interest and securities received in connection with restructurings.
(2)Sales/settlements include distributions, principal redemptions and securities disposed of in connection with restructurings.
26
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
The following tables set forth a summary of changes in the fair value of the Level III measurements for the nine months ended September 30, 2021:
Level III Assets of the CompanyEquity 
Securities		Fixed IncomePartnership InterestsContingent ConsiderationTotal
Balance, beginning of period$88,412 $53,349 $2,575 $— $144,336 
Transfer in due to changes in consolidation— 7,623 — — 7,623 
Established in connection with acquisition— — — (34,200)(34,200)
Purchases(1)
19,278 1,689 — — 20,967 
Sales/settlements(2)
— (12,120)— — (12,120)
Realized and unrealized appreciation (depreciation), net707 3,766 — (7,213)(2,740)
Balance, end of period$108,397 $54,307 $2,575 $(41,413)$123,866 
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date$707 $2,315 $— $(7,213)$(4,191)
Level III Net Assets of Consolidated FundsEquity 
Securities		Fixed 
Income		Partnership InterestsDerivatives, NetTotal
Balance, beginning of period$221,043 $542,305 $231,857 $1,060 $996,265 
Transfer out due to changes in consolidation(157)(49,326)— — (49,483)
Transfer in2,195 47,818 — — 50,013 
Transfer out(33)(216,177)— — (216,210)
Purchases(1)
36,201 437,426 13,000 — 486,627 
Sales/settlements(2)
(876)(371,006)(32,000)301 (403,581)
Amortized discounts/premiums1 1,464 — — 1,465 
Realized and unrealized appreciation (depreciation), net872 10,172 24,701 (2,549)33,196 
Balance, end of period$259,246 $402,676 $237,558 $(1,188)$898,292 
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date$790 $2,700 $24,701 $(1,670)$26,521 
(1)Purchases include paid-in-kind interest and securities received in connection with restructurings.
(2)Sales/settlements include distributions, principal redemptions and securities disposed of in connection with restructurings.


Transfers out of Level III were generally attributable to certain investments that experienced a more significant level of market activity during the period and thus were valued using observable inputs either from independent pricing services or multiple brokers. Transfers into Level III were generally attributable to certain investments that experienced a less significant level of market activity during the period and thus were only able to obtain one or fewer quotes from a broker or independent pricing service.

27
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
The following tables summarize the quantitative inputs and assumptions used for the Company’s and the Consolidated Funds' Level III measurements as of September 30, 2022:
Level III Measurements of the CompanyFair ValueValuation Technique(s)Significant Unobservable Input(s)RangeWeighted Average
Assets
Equity securities
$15,504 
Transaction price(1)
N/AN/AN/A
56,154 Discounted cash flowDiscount rate
16.0%
16.0%
45,614 Market approachMultiple of book value
1.4x
1.4x
Partnership interests2,575 OtherN/AN/AN/A
Collateralized loan obligations24,243 Broker quotes and/or 3rd party pricing servicesN/AN/AN/A
Other fixed income21,582 OtherN/AN/AN/A
Total assets$165,672 
Liabilities
Contingent consideration$(11,000)OtherN/AN/AN/A
Total liabilities$(11,000)

Level III Measurements of the Consolidated FundsFair ValueValuation Technique(s)Significant Unobservable Input(s)RangeWeighted Average
Assets
Equity securities
$2,168 Market approach
EBITDA multiples(2)
9.3x - 55.9x
12.8x
216,820 Market approachMultiple of book values
1.0x - 27.5x
5.5x
199,536 Discounted cash flowDiscount rate20.0%20.0%
551 OtherN/AN/AN/A
19 Yield analysisYields
12.5% - 15.2%
12.9%
74 Broker quotes and/or 3rd party pricing servicesN/AN/AN/A
 106,883 
   Transaction price(1)
N/AN/AN/A
Partnership interest252,634 Discounted cash flowDiscount rate23.4%23.4%
Fixed income securities
799,759 Broker quotes and/or 3rd party pricing servicesN/AN/AN/A
107,133 Yield analysisYields
5.6% - 23.0%
10.8%
12,394 Transaction priceN/AN/AN/A
1,323 
 Other
N/AN/AN/A
Total assets$1,699,294 
Liabilities
Derivative instruments $(3,353)Broker quotes and/or 3rd party pricing servicesN/AN/AN/A
Total liabilities$(3,353)

(1)Transaction price consists of securities purchased or restructured. The Company determined that there was no change to the valuation based on the underlying assumptions used at the closing of such transactions.
(2)“EBITDA” in the table above is a non-GAAP financial measure and refers to earnings before interest, tax, depreciation and amortization.

28
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
The following tables summarize the quantitative inputs and assumptions used for the Company’s and the Consolidated Funds' Level III measurements as of December 31, 2021:
Level III Measurements of the CompanyFair Value Valuation Technique(s) Significant Unobservable Input(s)RangeWeighted Average
Assets
Equity securities
$14,610 
Transaction price(1)
N/AN/AN/A
50,690 Discounted cash flowDiscount rates
14.0% - 20.0%
14.3%
43,649 Market approachMultiple of book value
1.4x
1.4x
Partnership interests2,575 OtherN/AN/AN/A
Collateralized loan obligations30,815 Broker quotes and/or 3rd party pricing servicesN/AN/AN/A
Other fixed income21,582 OtherN/AN/AN/A
Total assets$163,921 
Liabilities
Contingent Consideration$(9,562)Monte Carlo simulationDiscount rate8.5%8.5%
Volatility18%18%
(47,873)OtherN/AN/AN/A
Total liabilities$(57,435)

Level III Measurements of the Consolidated FundsFair Value Valuation Technique(s) Significant Unobservable Input(s) RangeWeighted Average
Assets
Equity securities
$1,261 Market approach
EBITDA multiples(2)
1.0x - 64.4x
17.5x
140,185 Market approachMultiple of book values
1.0x- 1.2x
1.1x
123,685 Discounted cash flowDiscount rate20.0%20.0%
11 Broker quotes and/or 3rd party pricing servicesN/AN/AN/A
 74,041 
Transaction price(1)
N/AN/AN/A
Partnership interests238,673 Discounted cash flowDiscount rate23.4%23.4%
Fixed income securities
614,754 Broker quotes and/or 3rd party pricing servicesN/AN/AN/A
128,198 Income approachYields
3.5% - 16.2%
6.7%
Total assets$1,320,808 
Liabilities
Derivative instruments $(3,105)Broker quotes and/or 3rd party pricing servicesN/AN/AN/A
Total liabilities$(3,105)
(1)Transaction price consists of securities purchased or restructured. The Company determined that there has been no change to the valuation based on the underlying assumptions used at the closing of such transactions.
(2)“EBITDA” in the table above is a non-GAAP financial measure and refers to earnings before interest, tax, depreciation and amortization.

The Company has an insurance-related investment in a private fund managed by a third party that is valued using NAV per share. The terms and conditions of this fund do not allow for redemptions without certain events or approvals that are outside the Company's control. This investment had a fair value of $5.7 million and $6.0 million as of September 30, 2022 and December 31, 2021, respectively. The Company has no unfunded commitments for this investment.

The Consolidated Funds have limited partnership interests in private equity funds managed by the Company that are valued using NAV per share. The terms and conditions of these funds do not allow for redemptions without certain events or approvals that are outside the Company's control. As of September 30, 2022, these investments had a fair value of $1,052.1 million and unfunded commitments of $811.3 million. As of December 31, 2021, these investments had a fair value of $469.6 million and unfunded commitments of $1,200.0 million.
29
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
7. DERIVATIVE FINANCIAL INSTRUMENTS
In the normal course of business, the Company and the Consolidated Funds are exposed to certain risks relating to their ongoing operations and use various types of derivative instruments primarily to mitigate against interest rate and foreign exchange risk. The derivative instruments are not designated as hedging instruments under the accounting standards for derivatives and hedging. The Company recognizes all of its derivative instruments at fair value as either assets or liabilities in the Condensed Consolidated Statements of Financial Condition within other assets or accounts payable, accrued expenses and other liabilities, respectively. These amounts may be offset to the extent that there is a legal right to offset and if elected by management.
The following tables identify the fair value and notional amounts of derivative contracts by major product type on a gross basis for the Company and the Consolidated Funds:

As of September 30, 2022As of December 31, 2021
Assets Liabilities Assets Liabilities 
The Company
Notional(1)
Fair Value
Notional(1)
Fair Value
Notional(1)
Fair Value
Notional(1)
Fair Value
Foreign currency forward contracts$80,239 $9,247 $175,453 $6,581 $409,018 $5,682 $11,011 $328 
Total derivatives, at fair value(2)
$80,239 $9,247 $175,453 $6,581 $409,018 $5,682 $11,011 $328 

As of September 30, 2022As of December 31, 2021
AssetsLiabilitiesAssets Liabilities 
Consolidated Funds 
Notional(1)
Fair Value
Notional(1)
Fair Value
Notional(1)
Fair Value
Notional(1)
Fair Value
Foreign currency forward contracts$536 $536 $496 $496 $— $— $— $— 
Warrants— — 230,000 2,000 — — 230,000 17,822 
Asset swaps 55,963 — 49,475 3,353 56,000 — 49,516 3,105 
Total derivatives, at fair value(3)
$56,499 $536 $279,971 $5,849 $56,000 $— $279,516 $20,927 
(1)Represents the total contractual amount of derivative assets and liabilities outstanding.
(2)As of September 30, 2022 and December 31, 2021, the Company had the right to, but elected not to, offset $6.6 million and $0.3 million of its derivative liabilities.
(3)As of September 30, 2022 and December 31, 2021, the Consolidated Funds offset an immaterial amount of their derivative assets and liabilities.
30
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
8. DEBT
The following table summarizes the Company’s and its subsidiaries’ debt obligations:
As of September 30, 2022As of December 31, 2021
Debt Origination DateMaturityOriginal Borrowing AmountCarrying
Value		Interest RateCarrying
Value		Interest Rate
Credit Facility(1)
Revolving3/31/2027N/A$445,000 3.87%$415,000 
   1.25%
2024 Senior Notes(2)
10/8/201410/8/2024$250,000 248,511 4.21247,979 4.21
2030 Senior Notes(3)
6/15/20206/15/2030400,000 396,490 3.28396,156 3.28
2052 Senior Notes(4)
1/21/20222/1/2052500,000 483,750 3.77— —
2051 Subordinated Notes(5)
6/30/20216/30/2051450,000 444,711 4.13444,574 4.13
Total debt obligations$2,018,462 $1,503,709 
(1)On March 31, 2022, the Company amended the Credit Facility to, among other things, increase the revolver commitments from $1.090 billion to $1.275 billion with an accordion feature of $375.0 million, replace the LIBOR based-rate with a Secured Overnight Financing Rate (“SOFR”) based-rate plus an applicable credit spread adjustment and extend the maturity date from March 2026 to March 2027. On July 6, 2022, the Company increased the revolver commitments from $1.275 billion to $1.325 billion via the accordion. The AOG entities are borrowers under the Credit Facility. 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. As of September 30, 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.
(2)The 2024 Senior Notes were issued in October 2014 by Ares Finance Co. LLC, an indirect subsidiary of the Company, at 98.27% of the face amount with interest paid semi-annually. The Company may redeem the 2024 Senior Notes prior to maturity, subject to the terms of the indenture governing the 2024 Notes.
(3)The 2030 Senior Notes were issued in June 2020 by Ares Finance Co. II LLC, an indirect subsidiary of the Company, at 99.77% of the face amount with interest paid semi-annually. The Company may redeem the 2030 Senior Notes prior to maturity, subject to the terms of the indenture governing the 2030 Notes.
(4)The 2052 Senior Notes were issued in January 2022 by Ares Finance Co. IV LLC, an indirect subsidiary of the Company, at 97.78% of the face amount with interest paid semi-annually. The Company may redeem the 2052 Senior Notes prior to maturity, subject to the terms of the indenture governing the 2052 Notes.
(5)The 2051 Subordinated Notes were issued in June 2021 by Ares Finance Co. III LLC, an indirect subsidiary of the Company with interest paid semi-annually at a fixed-rate of 4.125%. Beginning June 30, 2026, the interest rate will reset on every fifth year based on the five-year U.S. Treasury Rate plus 3.237%. The Company may redeem the 2051 Subordinated Notes prior to maturity or defer interest payments up to five consecutive years, subject to the terms of the indenture governing the 2051 Subordinated Notes.

As of September 30, 2022, the Company and its subsidiaries were in compliance with all covenants under the debt obligations.
The Company typically incurs and pays debt issuance costs when entering into a new debt obligation or when amending an existing debt agreement. Debt issuance costs related to the 2024, 2030 and 2052 Senior Notes (the “Senior Notes”) and 2051 Subordinated Notes are recorded as a reduction of the corresponding debt obligation, and debt issuance costs related to the Credit Facility are included in other assets in the Condensed Consolidated Statements of Financial Condition. All debt issuance costs are amortized over the remaining term of the related obligation into interest expense in the Condensed Consolidated Statements of Operations.
The following table presents the activity of the Company's debt issuance costs:
Credit FacilitySenior
Notes		Subordinated Notes
Unamortized debt issuance costs as of December 31, 2021$5,274 $3,689 $5,426 
Debt issuance costs incurred1,517 5,436 — 
Amortization of debt issuance costs(957)(582)(137)
Unamortized debt issuance costs as of September 30, 2022$5,834 $8,543 $5,289 

31
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
Loan Obligations of the Consolidated CLOs
Loan obligations of the Consolidated Funds that are CLOs (“Consolidated CLOs”) represent amounts due to holders of debt securities issued by the Consolidated CLOs. The Company measures the loan obligations of the Consolidated CLOs using the fair value of the financial assets of its Consolidated CLOs.

The following loan obligations were outstanding and classified as liabilities of the Consolidated CLOs:
As of September 30, 2022As of December 31, 2021
Fair Value of
Loan Obligations		Weighted 
Average
 Interest Rate		Weighted 
Average
 Remaining Maturity 
In Years		Fair Value of Loan ObligationsWeighted 
Average
 Interest Rate		Weighted
Average
Remaining
Maturity 
In Years 
Senior secured notes$9,664,638 3.41%8.8$10,016,638 1.93%9.4
Subordinated notes(1)
649,243 N/A7.0641,023 N/A8.1
Total loan obligations of Consolidated CLOs$10,313,881 $10,657,661 
(1)The notes do not have contractual interest rates; instead, holders of the notes receive distributions from the excess cash flows generated by each Consolidated CLO.
Loan obligations of the Consolidated CLOs are collateralized by the assets held by the Consolidated CLOs, consisting of cash and cash equivalents, corporate loans, corporate bonds and other securities. The assets of one Consolidated CLO may not be used to satisfy the liabilities of another Consolidated CLO. Loan obligations of the Consolidated CLOs include floating rate notes, deferrable floating rate notes, revolving lines of credit and subordinated notes. Amounts borrowed under the notes are repaid based on available cash flows subject to priority of payments under each Consolidated CLO’s governing documents. Based on the terms of these facilities, the creditors of the facilities have no recourse to the Company.
Credit Facilities of the Consolidated Funds
Certain Consolidated Funds maintain credit facilities to fund investments between capital drawdowns. These facilities generally are collateralized by the unfunded capital commitments of the Consolidated Funds’ limited partners, bear an annual commitment fee based on unfunded commitments and contain various affirmative and negative covenants and reporting obligations, including restrictions on additional indebtedness, liens, margin stock, affiliate transactions, dividends and distributions, release of capital commitments and portfolio asset dispositions. The creditors of these facilities have no recourse to the Company and only have recourse to a subsidiary of the Company to the extent the debt is guaranteed by such subsidiary. As of September 30, 2022 and December 31, 2021, the Consolidated Funds were in compliance with all covenants under such credit facilities.
The Consolidated Funds had the following revolving bank credit facilities outstanding:
As of September 30, 2022As of December 31, 2021
Consolidated Funds' Debt FacilitiesMaturity DateTotal Capacity
Outstanding
Loan(1)
Effective Rate
Outstanding Loan(1)
Effective Rate
10/13/2022$112,817 $77,496 4.04%$71,500 1.59%
7/1/202318,000 15,550 4.6916,271 1.73
7/23/202475,000 56,500 5.9740,000 3.09
9/24/2026150,000 — N/A— N/A
9/12/202754,000 — N/A— N/A
Total borrowings of Consolidated Funds$149,546 $127,771 
(1)The fair values of the borrowings approximate the carrying value as the interest rate on the borrowings is a floating rate.

32
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
9. COMMITMENTS AND CONTINGENCIES
Indemnification Arrangements
Consistent with standard business practices in the normal course of business, the Company enters into contracts that contain indemnities for affiliates of the Company, persons acting on behalf of the Company or such affiliates and third parties. The terms of the indemnities vary from contract to contract and the Company’s maximum exposure under these arrangements cannot be determined and has not been recorded in the Condensed Consolidated Statements of Financial Condition. As of September 30, 2022, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
Commitments
As of September 30, 2022 and December 31, 2021, the Company had aggregate unfunded commitments to invest in funds it manages or to support certain strategic initiatives of $605.7 million and $677.3 million, respectively.
Guarantees
The Company has entered into agreements with financial institutions to guarantee credit facilities held by certain funds. In the ordinary course of business, the guarantee of credit facilities held by funds may indicate control and result in consolidation of the fund. As of September 30, 2022 and December 31, 2021, the Company’s maximum exposure to losses from guarantees was $76.7 million and $209.7 million, respectively.
Contingent Liabilities
In connection with the Landmark Acquisition, the Company established a management incentive program (the “Landmark MIP”) with certain professionals of Landmark. The Landmark MIP represents a contingent liability not to exceed $300.0 million and is based on the achievement of revenue targets from the fundraising of certain Landmark funds during a measurement period. The Landmark MIP has been remeasured each period with incremental changes in fair value included within compensation and benefits expense in the Condensed Consolidated Statements of Operations. In connection with current fundraising expectations for an acquired Landmark private equity secondaries fund, the revenue targets on which the Landmark MIP is contingent are not expected to be achieved so the Company reversed all previously recorded expenses of $36.7 million associated with the Landmark MIP during the three months ended September 30, 2022. The reversal of expense was recorded within compensation and benefits expense in the Condensed Consolidated Statements of Operations.
The purchase agreement with Black Creek contains provisions obligating the Company to make payments in an aggregate amount not to exceed $275.0 million to certain senior professionals and advisors upon the achievement of certain revenue targets through a measurement period no later than December 31, 2024. The revenue targets were achieved and the maximum contingent payment was recorded during the three months ended September 30, 2022.

Of the total contingent liability, 96% required continued service through the measurement period and is accounted for as compensation expense instead of as a component of purchase consideration. The fair value of this contingent liability was remeasured at each reporting date with compensation expense recorded ratably over the service period, which was the Black Creek Acquisition date through the achievement date. As of September 30, 2022 and December 31, 2021, the fair value of the contingent liability was $264.0 million and $229.5 million, respectively. As of September 30, 2022 and December 31, 2021, the Company has recorded $264.0 million and $45.9 million, respectively, within accrued compensation in the Condensed Consolidated Statements of Financial Condition. Compensation expense of $130.6 million and $218.1 million for the three and nine months ended September 30, 2022, respectively, and $13.5 million for the three and nine months ended September 30, 2021 is presented within compensation and benefits in the Condensed Consolidated Statements of Operations.

The remaining 4% portion of the contingent liability did not require continued service through the measurement period and is accounted for as contingent consideration that is a component of purchase consideration. The fair value of this contingent liability was remeasured at each reporting date with changes in fair value recorded within other expense over the service period. As of September 30, 2022 and December 31, 2021, the fair value of the contingent liability was $11.0 million and $9.6 million, respectively. Other expense of $0.3 million and $1.4 million for the three and nine months ended September 30, 2022,
33
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
respectively, and of $3.0 million for each of the three and nine months ended September 30, 2021, is presented within other income (expense), net in the Condensed Consolidated Statements of Operations.

In connection with the Infrastructure Debt Acquisition, the Company established a management incentive program (the “Infrastructure Debt MIP”) with certain professionals. The Infrastructure Debt MIP represents a contingent liability not to exceed $48.5 million and is based on the achievement of revenue targets from the fundraising of certain infrastructure debt funds during the measurement periods.

The Company expects to settle each portion of the liability with a combination of 15% cash and 85% equity awards. Expense associated with the cash components are recognized ratably over the respective measurement periods, which will end on the final fundraising date for each of the infrastructure debt funds included in the Infrastructure Debt MIP agreement. Expense associated with the equity component is recognized ratably over the service periods, which will continue for four years beyond each of the measurement period end dates. The Infrastructure Debt MIP is remeasured each period with incremental changes in fair value included within compensation and benefits expense in the Condensed Consolidated Statements of Operations. At each of the measurement period end dates, the cash component will be paid and restricted units for the portion of the Infrastructure Debt MIP award earned will be granted at fair value. The unpaid liability at the respective measurement period end dates will be reclassified from liability to additional paid-in-capital and any difference between the fair value of the Infrastructure Debt MIP award earned at the respective measurement period end date and the previously recorded compensation expense will be recognized over the remaining four year service period as equity-based compensation expense. As of September 30, 2022, the fair value of the contingent liability was estimated to be $39.2 million. Compensation expense of $2.8 million and $7.1 million for the three and nine months ended September 30, 2022, respectively, is presented within compensation and benefits in the Condensed Consolidated Statements of Operations with an equal offset presented within accrued compensation in the Condensed Consolidated Statements of Financial Condition.
Carried Interest
Carried interest is affected by changes in the fair values of the underlying investments in the funds that are advised by the Company. Valuations, on an unrealized basis, can be significantly affected by a variety of external factors including, but not limited to, public equity market volatility, industry trading multiples and interest rates. Generally, if at the termination of a fund (and increasingly at interim points in the life of a fund), the fund has not achieved investment returns that (in most cases) exceed the preferred return threshold or (in all cases) the general partner receives net profits over the life of the fund in excess of its allocable share under the applicable partnership agreement, the Company will be obligated to repay carried interest that was received by the Company in excess of the amounts to which the Company is entitled. This contingent obligation is normally reduced by income taxes paid by the Company related to its carried interest. 
Senior professionals of the Company who have received carried interest distributions are responsible for funding their proportionate share of any contingent repayment obligations. However, the governing agreements of certain of the Company's funds provide that if a current or former professional does not fund his or her respective share for such fund, then the Company may have to fund additional amounts beyond what was received in carried interest, although the Company will generally retain the right to pursue any remedies under such governing agreements against those carried interest recipients who fail to fund their obligations.
Additionally, at the end of the life of the funds there could be a payment due to a fund by the Company if the Company has recognized more carried interest than was ultimately earned. The general partner obligation amount, if any, will depend on final realized values of investments at the end of the life of the fund.
At September 30, 2022 and December 31, 2021, if the Company assumed all existing investments were worthless, the amount of carried interest subject to potential repayment, net of tax distributions, which may differ from the recognition of revenue, would have been approximately $185.3 million and $194.6 million, respectively, of which approximately $145.0 million and $153.3 million, respectively, is reimbursable to the Company by certain professionals who are the recipients of such carried interest. Management believes the possibility of all of the investments becoming worthless is remote. As of September 30, 2022 and December 31, 2021, if the funds were liquidated at their fair values, there would be no contingent repayment obligation or liability.
34
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
Litigation
From time to time, the Company is named as a defendant in legal actions relating to transactions conducted in the ordinary course of business. Although there can be no assurance of the outcome of such legal actions, in the opinion of management, the Company does not have a potential liability related to any current legal proceeding or claim that would individually or in the aggregate materially affect its results of operations, financial condition or cash flows.
Leases

The Company leases office space and certain office equipment. The Company's leases have remaining lease terms of one to eleven years. The tables below present certain supplemental quantitative disclosures regarding the Company's leases:

As of September 30,As of December 31,
Classification20222021
Operating lease assetsRight-of-use operating lease assets$159,686 $167,652 
Finance lease assets
Other assets(1)
543 1,011 
Total lease assets$160,229 $168,663 
Operating lease liabilitiesOperating lease liabilities$193,180 $205,075 
Finance lease obligationsAccounts payable, accrued expenses and other liabilities393 936 
Total lease liabilities$193,573 $206,011 
(1) Finance lease assets are recorded net of accumulated amortization of $2.0 million and $1.6 million as of September 30, 2022 and December 31, 2021, respectively.
Maturity of lease liabilitiesOperating LeasesFinance Leases
2022$10,732 $68 
202340,866 166 
202443,390 161 
202541,842 10 
202629,819 — 
After 202639,882 — 
Total future payments206,531 405 
Less: interest13,351 12 
Total lease liabilities$193,180 $393 
Three months ended September 30,Nine months ended September 30,
Classification2022202120222021
Operating lease expenseGeneral, administrative and other expenses$11,168 $9,697 $31,302 $27,203 
Finance lease expense:
Amortization of finance lease assetsGeneral, administrative and other expenses144 154 488 408 
Interest on finance lease liabilitiesInterest expense3 7 12 24 
Total lease expense$11,315 $9,858 $31,802 $27,635 
Nine months ended September 30,
Other information20222021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$33,156 $26,704 
Operating cash flows for finance leases19 34 
Financing cash flows for finance leases525 463 
Leased assets obtained in exchange for new finance lease liabilities13 189 
Leased assets obtained in exchange for new operating lease liabilities20,687 55,461 
35
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
As of September 30,As of December 31,
Lease term and discount rate20222021
Weighted-average remaining lease terms (in years):
Operating leases5.46.0
Finance leases2.21.8
Weighted-average discount rate:
Operating leases2.77 %1.81 %
Finance leases2.88 %2.94 %

10. RELATED PARTY TRANSACTIONS
Substantially all of the Company’s revenue is earned from its affiliates. The related accounts receivable are included within due from affiliates in the Condensed Consolidated Statements of Financial Condition, except that accrued carried interest allocations, which is predominantly due from affiliated funds, is presented separately within investments in the Condensed Consolidated Statements of Financial Condition.
The Company has investment management agreements with the Ares Funds that it manages. In accordance with these agreements, these Ares Funds may bear certain operating costs and expenses which are initially paid by the Company and subsequently reimbursed by the Ares Funds.
The Company has also entered into agreements to be reimbursed for its expenses incurred in providing administrative services to certain related parties, including our public vehicles, and with certain private funds that pay administrative fees based on invested capital. The Company is also party to agreements with certain real estate funds which pay fees to the Company to provide various services, such as administration, acquisition, development, property management and the distribution of fund shares in our non-traded REITs, among others.

Employees and other related parties may be permitted to participate in co-investment vehicles that generally invest in Ares funds alongside fund investors. Participation is limited by law to individuals who qualify under applicable securities laws. These co-investment vehicles generally do not require these individuals to pay management fees, carried interest or incentive fees.
The Company considers its professionals and non-consolidated funds to be affiliates. Amounts due from and to affiliates were composed of the following:
 As of September 30,As of December 31,
 20222021
Due from affiliates:  
Management fees receivable from non-consolidated funds$439,961 $372,249 
Incentive fee receivable from non-consolidated funds8,134 211,243 
Payments made on behalf of and amounts due from non-consolidated funds and employees113,408 86,891 
Due from affiliates—Company$561,503 $670,383 
Amounts due from non-consolidated funds$7,736 $7,234 
Due from affiliates—Consolidated Funds$7,736 $7,234 
Due to affiliates: 
Management fee received in advance and rebates payable to non-consolidated funds$5,744 $10,160 
Tax receivable agreement liability98,975 100,542 
Undistributed carried interest and incentive fees12,724 66,494 
Payments made by non-consolidated funds on behalf of and payable by the Company4,864 21,357 
Due to affiliates—Company$122,307 $198,553 

36
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
Due from Ares Funds and Portfolio Companies
In the normal course of business, the Company pays certain expenses on behalf of Consolidated Funds and non-consolidated funds for which it is reimbursed. Amounts advanced on behalf of Consolidated Funds are eliminated in consolidation. Certain expenses initially paid by the Company, primarily professional services, travel and other costs associated with particular portfolio company holdings, are subject to reimbursement by the portfolio companies.

11. INCOME TAXES
The Company’s income tax provision includes corporate income taxes and other entity level income taxes, as well as income taxes incurred by certain affiliated funds that are consolidated in these financial statements. For the three and nine months ended September 30, 2022, the Company recorded income tax benefit and income tax expense of $11.6 million and $22.3 million, respectively. For the three and nine months ended September 30, 2021, the Company recorded income tax expense of $30.3 million and $104.5 million, respectively.

The Company’s effective income tax rate is dependent on many factors, including the estimated nature and amounts of income and expenses allocated to the non-controlling interests without being subject to federal, state and local income taxes at the corporate level. Additionally, the Company’s effective tax rate is influenced by the amount of income tax provision recorded for any affiliated funds and co-investment entities that are consolidated in the Company's condensed consolidated financial statements. For the three and nine months ended September 30, 2022 and 2021, the Company recorded its interim income tax provision utilizing the estimated annual effective tax rate.
The income tax effects of temporary differences give rise to significant portions of deferred tax assets and liabilities, which are presented on a net basis. As of September 30, 2022 and December 31, 2021, the Company recorded a net deferred tax asset of $63.2 million and $39.4 million, respectively, within other assets in the Condensed Consolidated Statements of Financial Condition.
The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by U.S. federal, state, local and foreign tax authorities. With limited exceptions, the Company is no longer subject to income tax audits by taxing authorities for any years prior to 2018. Although the outcome of tax audits is always uncertain, the Company does not believe the outcome of any future audit will have a material adverse effect on the Company’s condensed consolidated financial statements.


37
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
12. EARNINGS PER SHARE
For the nine months ended September 30, 2022, the Company had Class A and non-voting common stock outstanding. The non-voting common stock has the same economic rights as the Class A common stock; therefore, earnings per share is presented on a combined basis. Income of the Company has been allocated on a proportionate basis to the two common stock classes.

Basic earnings per share of Class A and non-voting common stock is computed by using the two-class method. Diluted earnings per share of Class A and non-voting common stock is computed using the more dilutive method of either the two-class method or the treasury stock method.

For the three and nine months ended September 30, 2022, the two-class method was the more dilutive method. For the three and nine months ended September 30, 2021, the treasury stock method was the more dilutive method.

The computation of diluted earnings per share excludes the following AOG Units as their effect would have been anti-dilutive:
Three months ended September 30,Nine months ended September 30,
2022202120222021
Restricted units— 450 — 167 
AOG Units— 119,855,724 — 115,394,058 

The following table presents the computation of basic and diluted earnings per common share:
Three months ended September 30,Nine months ended September 30,
2022202120222021
Basic earnings per share of Class A and non-voting common stock:
Net income (loss) attributable to Ares Management Corporation Class A and non-voting common stockholders$(35,546)$84,726 $50,048 $262,659 
Distributions on unvested restricted units(3,555)(1,440)(10,601)(8,142)
Undistributed earnings allocable to participating unvested restricted units— (306)— (2,858)
Net income (loss) available to Class A and non-voting common stockholders$(39,101)$82,980 $39,447 $251,659 
Basic weighted-average shares of Class A and non-voting common stock175,631,144 168,931,621 175,010,241 161,071,151 
Basic earnings (loss) per share of Class A and non-voting common stock$(0.22)$0.49 $0.23 $1.55 
Diluted earnings per share of Class A and non-voting common stock:
Net income (loss) available to Class A and non-voting common stockholders$(35,546)$84,726 $50,048 $262,659 
Distributions on unvested restricted units(3,555)— (10,601)— 
Net income (loss) attributable to Ares Management Corporation Class A and non-voting common stockholders$(39,101)$84,726 $39,447 $262,659 
Effect of dilutive shares:
Restricted units— 12,273,068 — 10,807,242 
Options— 5,317,468 — 5,265,045 
Diluted weighted-average shares of Class A and non-voting common stock175,631,144 186,522,157 175,010,241 177,143,438 
Diluted earnings (loss) per share of Class A and non-voting common stock$(0.22)$0.45 $0.23 $1.48 
Dividend declared and paid per Class A and non-voting common stock$0.61 $0.47 $1.83 $1.41 
38
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
13. EQUITY COMPENSATION
Equity Incentive Plan
Equity-based compensation is granted under the Company's 2014 Equity Incentive Plan (as amended, the “Equity Incentive Plan”). The total number of shares available to be issued under the Equity Incentive Plan resets based on a formula defined in the Equity Incentive Plan and may increase on January 1 of each year. On January 1, 2022, the total number of shares available for issuance under the Equity Incentive Plan reset to 49,293,000 shares and as of September 30, 2022, 44,524,646 shares remained available for issuance.
Generally, unvested restricted units are forfeited upon termination of employment in accordance with the Equity Incentive Plan. The Company recognizes forfeitures as a reversal of previously recognized compensation expense in the period the forfeiture occurs.
Equity-based compensation expense, net of forfeitures, recorded by the Company is presented in the following table:
Three months ended September 30,Nine months ended September 30,
 2022202120222021
Restricted units$48,117 $36,390 $151,403 $127,219 
Restricted units with a market condition— 29,601 — 63,925 
Equity-based compensation expense$48,117 $65,991 $151,403 $191,144 

Restricted Units

Each restricted unit represents an unfunded, unsecured right of the holder to receive a share of the Company's Class A common stock on a specific date. The restricted units generally vest and are settled in shares of Class A common stock either (i) at a rate of one-third per year, beginning on the third anniversary of the grant date, (ii) at a rate of one quarter per year, beginning on the second anniversary of the grant date or the holder's employment commencement date, or (iii) at a rate of one-third per year, beginning on the first anniversary of the grant date in each case generally subject to the holder’s continued employment as of the applicable vesting date (subject to accelerated vesting upon certain qualifying terminations of employment or retirement eligibility provisions). Compensation expense associated with restricted units is recognized on a straight-line basis over the requisite service period of the award.

Restricted units are delivered net of the holder's payroll related taxes upon vesting. For the nine months ended September 30, 2022, 5.4 million restricted units vested and 3.0 million shares of Class A common stock were delivered to the holders. For the nine months ended September 30, 2021, 8.2 million restricted units vested and 4.4 million shares of Class A common stock were delivered to the holders.

The holders of restricted units, other than awards that have not yet been issued as described in the subsequent sections, generally have the right to receive as current compensation an amount in cash equal to (i) the amount of any dividend paid with respect to a share of Class A common stock multiplied by (ii) the number of restricted units held at the time such dividends are declared (“Dividend Equivalent”). During the nine months ended September 30, 2022, the Company declared dividends of $0.61 per share to Class A common stockholders at the close of business on March 17, 2022, June 16, 2022 and September 16, 2022. For the three and nine months ended September 30, 2022, Dividend Equivalents were made to the holders of restricted units in the aggregate amount of $7.9 million and $23.9 million, respectively, which are presented as dividends in the Condensed Consolidated Statements of Changes in Equity. When units are forfeited, the cumulative amount of Dividend Equivalents previously paid is reclassified to compensation and benefits expense in the Condensed Consolidated Statements of Operations.

During the first quarter of 2022, the Company approved the future grant of restricted units to certain senior executives in each of 2023, 2024 and 2025, subject to the holder’s continued employment and acceleration in certain instances. The vesting period of these awards are at a rate of 25% per year, beginning on the second anniversary of the grant date. Given that these future restricted units have been communicated to the recipient, the Company accounts for these awards as if they have been granted and recognizes the compensation expense on a straight-line basis over the service period. The restricted units that have been approved and communicated but not yet granted are not eligible to receive a Dividend Equivalent until the grant date.

39
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
The following table presents unvested restricted units' activity:
 Restricted UnitsWeighted Average
Grant Date Fair
Value Per Unit
Balance - January 1, 202218,323,036 $36.43 
Granted4,050,786 74.62 
Vested(5,333,182)26.89 
Forfeited(222,432)53.83 
Balance - September 30, 202216,818,208 $48.43 

The total compensation expense expected to be recognized in all future periods associated with the restricted units is approximately $589.5 million as of September 30, 2022 and is expected to be recognized over the remaining weighted average period of 3.6 years.

Options
Upon exercise, each option entitles the holders to purchase from the Company one share of Class A common stock at the stated exercise price. The term of the options is generally ten years, beginning on the grant date.
A summary of options activity during the nine months ended September 30, 2022 is presented below:
 OptionsWeighted Average Exercise PriceWeighted Average
Remaining Life
(in years)		Aggregate Intrinsic Value
Balance - January 1, 20226,306,282 $19.00 2.3$392,692 
Granted— — — 
Exercised(784,782)19.00 — — 
Expired— — — — 
Forfeited— — — — 
Balance - September 30, 20225,521,500 $19.00 1.6$237,148 
Exercisable at September 30, 20225,521,500 $19.00 1.6$237,148 

Net cash proceeds from exercises of stock options were $14.5 million for the nine months ended September 30, 2022. The Company realized tax benefits of approximately $6.1 million from those exercises.
40
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
14. EQUITY AND REDEEMABLE INTEREST
Common Stock

The Company's common stock consists of Class A, Class B, Class C and non-voting common stock, each $0.01 par value per share. The non-voting common stock has the same economic rights as the Class A common stock. Sumitomo Mitsui Banking Corporation (“SMBC”) is the sole holder of the non-voting common stock. The Class B common stock and Class C common stock are non-economic and holders are not entitled to dividends from the Company or to receive any assets of the Company in the event of any dissolution, liquidation or winding up of the Company. Ares Management GP LLC is the sole holder of the Class B common stock and Ares Voting LLC (“Ares Voting”) is the sole holder of the Class C common stock.
In February 2022, the Company's board of directors authorized the renewal of the stock repurchase program that allows for the repurchase of up to $150 million of shares of Class A common stock. Under the 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. The program is scheduled to expire in March 2023. Repurchases under the program, if any, will depend on the prevailing market conditions and other factors. During the nine months ended September 30, 2022 and 2021, the Company did not repurchase any shares as part of the stock repurchase program.
The following table presents the changes in each class of common stock:

Class A Common StockNon-Voting Common StockClass B Common StockClass C Common StockTotal
Balance - December 31, 2021168,351,305 3,489,911 1,000 118,609,332 290,451,548 
Exchanges of AOG Units 305,040 — — (305,040)— 
Redemptions of AOG Units— — — (25,000)(25,000)
Stock option exercises, net of shares withheld for tax772,228 — — — 772,228 
Vesting of restricted stock awards, net of shares withheld for tax2,973,864 — — — 2,973,864 
Cancellation of AOG Units
— — — (4,135)(4,135)
Balance - September 30, 2022172,402,437 3,489,911 1,000 118,275,157 294,168,505 

The following table presents each partner's AOG Units and corresponding ownership interest in each of the Ares Operating Group entities, as well as its daily average ownership of AOG Units in each of the Ares Operating Group entities:
Daily Average Ownership
As of September 30, 2022As of December 31, 2021Three months ended September 30,Nine months ended September 30,
AOG UnitsDirect Ownership InterestAOG UnitsDirect Ownership Interest2022202120222021
Ares Management Corporation175,892,348 59.79 %171,841,216 59.16 %59.74 %58.50 %59.64 %58.26 %
Ares Owners Holdings, L.P.118,275,157 40.21 118,609,332 40.84 40.26 41.50 40.36 41.74 
Total294,167,505 100.00 %290,450,548 100.00 %

41
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
Redeemable Interest

The following table summarizes the activities associated with the redeemable interest in Ares Operating Group entities:
Total
Balance - December 31, 2021$96,008 
Changes in ownership interests and related tax benefits231 
Net income399 
Currency translation adjustment, net of tax(331)
Equity compensation48 
Distributions(8)
Balance - March 31, 2022
96,347 
Changes in ownership interests and related tax benefits(1,445)
Net loss(457)
Currency translation adjustment, net of tax(996)
Equity compensation77 
Distributions(8)
Balance- June 30, 202293,518 
Changes in ownership interests and related tax benefits1,214 
Net income93 
Currency translation adjustment, net of tax(933)
Equity compensation77 
Distributions(1,861)
Balance- September 30, 2022$92,108 

The following table summarizes the activities associated with the redeemable interest in Consolidated Funds:
Total
Balance - December 31, 2021$1,000,000 
Change in redemption value— 
Balance - March 31, 2022
1,000,000 
Change in redemption value— 
Balance - June 30, 20221,000,000 
Change in redemption value4,994 
Balance - September 30, 2022$1,004,994 


15. SEGMENT REPORTING
The Company operates through its distinct operating segments. On January 1, 2022, the Company changed its segment composition and established the Real Assets Group. The Real Assets Group consists of the activities of the former Real Estate Group and the infrastructure and power strategy, now referred to as infrastructure opportunities, that was formerly presented within the Private Equity Group. The Real Assets Group also includes infrastructure debt following the Infrastructure Debt Acquisition. The Company reclassified activities from the infrastructure opportunities strategy in the Private Equity Group and from the former Real Estate Group to the Real Assets Group to better align the segment presentation with how the asset classes within the investment strategies are managed. The Company has modified historical results to conform with its current presentation. During the three months ended September 30, 2022, the Company decided to rename the Secondary Solutions Group segment to the Secondaries Group. The segment name change did not result in any change to the composition of the Company’s segments and therefore did not result in any change to historical results. The Company operating segments are summarized below:
Credit Group: The Credit Group manages credit strategies across the liquid and illiquid spectrum, including syndicated loans, high yield bonds, multi-asset credit, alternative credit investments and direct lending. The syndicated loans strategy focuses on evaluating individual credit opportunities related primarily to non-investment grade senior secured loans and primarily targets first lien secured debt, with a secondary focus on second lien secured loans and subordinated and other unsecured loans. The high yield bond strategy seeks to deliver a diversified portfolio of liquid, traded non-investment grade corporate bonds, including secured, unsecured and subordinated debt instruments. Multi-asset credit is a “go anywhere”
42
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
strategy designed to offer investors a flexible solution to global credit investing by allowing us to tactically allocate between multiple asset classes in various market conditions. The alternative credit strategy seeks to capitalize on asset-focused investment opportunities that fall outside of traditional, well-defined markets such as corporate debt, real estate and private equity. The alternative credit strategy emphasizes downside protection and capital preservation through a focus on investments that tend to share the following key attributes: asset security, covenants, structural protections and cash flow velocity. The direct lending strategy is one of the largest self-originating direct lenders to the U.S. and European markets and has a multi-channel origination strategy designed to address a broad set of investment opportunities in the middle market. The direct lending 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. direct lending activities are managed through a publicly traded business development company, ARCC, as well as through private commingled funds and separately managed accounts (“SMAs”).

Private Equity Group: The Private Equity Group broadly categorizes its investment strategies as corporate private equity and special opportunities. In the corporate private equity strategy, the Company targets four principal transactions types: (i) prudently leveraged control buyouts; (ii) growth equity; (iii) rescue capital; and (iv) distressed-for-control. This differentiated strategy, together with the broad resources of the Ares platform, widens our universe of potential investment opportunities and allows us to remain active across various market environments and to be highly selective in making investments by identifying the most attractive relative value opportunities. The corporate private equity strategy also includes our energy opportunities fund which serves as a companion fund and employs our flexible capital strategy to provide creative capital solutions across the energy industry. In the special opportunities strategy, the Company employs an “all weather” flexible capital strategy to finance debt and non-control equity solutions in middle market companies undergoing transformational change or stress. The strategy seeks to consistently invest in a range of private, special-situation opportunities and flex into distressed public market debt when attractive.

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

The real estate strategy focuses on activities categorized as core/core-plus, value-add, opportunistic and debt. Real estate equity strategies involve high-quality properties and locations and de-risked developments with an opportunity to create value through repositioning, lease-up, re-tenanting, redevelopment, and/or complex recapitalizations. The U.S. core/core-plus investment activities focuses on the acquisition of assets with strong long-term cash flow potential and durable tenancy diversified across end-user industries and geographies. The value-add investment activities focus on acquiring underperforming, income-producing, institutional-quality assets that can be improved through select value-creation initiatives across the U.S. and Europe. The opportunistic activities focus on capitalizing on distressed and special situations, repositioning underperforming assets and undertaking select development and redevelopment projects across the U.S. and Europe. The real estate debt strategy primarily focuses on directly originating a wide range of financing opportunities in the U.S. and Europe leveraging the Real Asset Group’s diverse sources of capital. In addition to managing private commingled funds and SMAs investing in equity and debt strategies, the real estate strategy also makes investments through Ares Real Estate Income Trust, Inc. (“AREIT”) and Ares Industrial Real Estate Income Trust, Inc. (“AIREIT”), its non-traded REITs, and ACRE, a publicly traded commercial mortgage REIT.

The infrastructure strategy focuses on investment strategies broadly categorized as infrastructure opportunities and infrastructure debt. Infrastructure opportunities is a market leader in infrastructure and power investing with a focus on climate infrastructure, natural gas generation and energy transportation sectors. The infrastructure opportunities strategy targets essential infrastructure assets and companies with stable cash flow profiles through long-term contracts and high-barriers to entry. The infrastructure debt strategy was formed during the first quarter of 2022 in connection with the Infrastructure Debt Acquisition. The infrastructure debt strategy targets global assets and businesses with defensive characteristics across the digital, transport, energy and utility sectors. Leveraging the established long standing relationships, the strategy seeks to generate exclusive deal flow and high-quality investment opportunities.

Secondaries Group: The Secondaries Group was formed during the second quarter of 2021 in connection with the Landmark Acquisition. The Secondaries Group invests in secondary markets across a range of alternative asset class strategies, including private equity, real estate and infrastructure. The Company acquires interests across a range of partnership vehicles, including funds, multi-asset portfolios and single asset joint ventures. Activities within each strategy include recapitalizing and restructuring the funds, including transactions that can address pending fund maturity, strategy change or the need for additional equity capital. The private equity secondaries strategy targets opportunities in non-competitive channels and makes investments
43
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
in durable, performing assets with attractive capital structures. In the real estate secondaries strategy, the Company seeks broad diversification by property sector and geography and to drive investment results through underwriting, transaction structuring and portfolio construction. In the infrastructure secondaries strategy, the Company focuses on achieving diversification through a portfolio that provides inflation protection and exposure to uncorrelated assets.

Strategic Initiatives: Strategic Initiatives represents an all-other category that includes operating segments and strategic investments that seek to expand the Company’s reach and its scale in new and existing global markets. Strategic Initiatives includes activities from (i) Ares SSG, the Asia-Pacific platform that makes credit and special situations investments through its local originating presence on behalf of its institutional client base, (ii) Ares Insurance Solutions (“AIS”), the Company’s insurance platform that provides solutions to insurance clients including asset management, capital solutions and corporate development and (iii) Ares Acquisition Corporation (NYSE: AAC) (“AAC”), the Company’s first sponsored SPAC, among others.

The OMG consists of shared resource groups to support the Company’s operating segments by providing infrastructure and administrative support in the areas of accounting/finance, operations, information technology, legal, compliance, human resources, strategy, relationship management and distribution. The OMG includes Ares Wealth Management Solutions, LLC (“AWMS”) that facilitates the product development, distribution, marketing and client management activities for investment offerings in the global wealth management channel. Additionally, the OMG provides services to certain of the Company’s managed funds and vehicles, which reimburse the OMG for expenses equal to the costs of services provided. The OMG’s revenues and expenses are not allocated to the Company’s reportable segments but the Company does consider the financial results of the OMG when evaluating its financial performance.
Segment Profit Measures: These measures supplement and should be considered in addition to, and not in lieu of, the Condensed Consolidated Statements of Operations prepared in accordance with GAAP.
Fee related earnings (“FRE”) is used to assess core operating performance by determining whether recurring revenue, primarily consisting of management fees and fee related performance revenues, is sufficient to cover operating expenses and to generate profits. FRE differs from income before taxes computed in accordance with GAAP as it excludes net performance income, investment income from the Consolidated Funds and non-consolidated funds and certain other items that the Company believes are not indicative of its core operating performance. Fee related performance revenues, together with fee related performance compensation, is presented within FRE because it represents incentive fees from perpetual capital vehicles that is measured and received on a recurring basis and not dependent on realization events from the underlying investments. Fee related performance revenues and fee related performance compensation were previously presented within realized net performance income. Historical periods have been modified to conform to the current period presentation.
Realized income (“RI”) is an operating metric used by management to evaluate performance of the business based on operating performance and the contribution of each of the business segments to that performance, while removing the fluctuations of unrealized income and expenses, which may or may not be eventually realized at the levels presented and whose realizations depend more on future outcomes than current business operations. RI differs from income before taxes by excluding (i) operating results of the Consolidated Funds, (ii) depreciation and amortization expense, (iii) the effects of changes arising from corporate actions, (iv) unrealized gains and losses related to carried interest, incentive fees and investment performance and (v) certain other items that the Company believes are not indicative of operating performance. Changes arising from corporate actions include equity-based compensation expenses, the amortization of intangible assets, transaction costs associated with mergers, acquisitions and capital activities, underwriting costs and expenses incurred in connection with corporate reorganization. RI is reduced by deferred placement fees, which represent the portion of placement fees that have been deferred and amortized over the expected life of each fund's life for segment purposes but have been expensed up front in accordance with GAAP. For periods in which the amortization of placement fees for segment purposes is higher than the GAAP expense, a placement fee adjustment is presented as a reduction to RI. Management believes RI is a more appropriate metric to evaluate the Company's current business operations.
Management makes operating decisions and assesses the performance of each of the Company’s business segments based on financial and operating metrics and other data that is presented before giving effect to the consolidation of any of the Consolidated Funds. Consequently, all segment data excludes the assets, liabilities and operating results related to the Consolidated Funds and non-consolidated funds. Total assets by segments is not disclosed because such information is not used by the Company’s chief operating decision maker in evaluating the segments.
44
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
The following tables present the financial results for the Company’s operating segments, as well as the OMG:
Three months ended September 30, 2022
Credit GroupPrivate Equity GroupReal
Assets Group
Secondaries Group

Strategic Initiatives
Total
Segments		OMGTotal
Management fees$345,871 $52,316 $91,013 $44,385 $18,183 $551,768 $— $551,768 
Fee related performance revenues— — 855 235 — 1,090 — 1,090 
Other fees8,143 556 11,493 — 67 20,259 7,547 27,806 
Compensation and benefits(102,839)(26,865)(46,947)(19,191)(7,859)(203,701)(61,084)(264,785)
General, administrative and other expenses(18,257)(7,824)(10,032)(3,215)(1,486)(40,814)(41,907)(82,721)
Fee related earnings232,918 18,183 46,382 22,214 8,905 328,602 (95,444)233,158 
Performance income—realized3,045 — 26,939 — — 29,984 — 29,984 
Performance related compensation—realized(1,737)(5)(17,115)(1)— (18,858)— (18,858)
Realized net performance income (loss)1,308 (5)9,824 (1)— 11,126 — 11,126 
Investment income—realized4,495 8 339 — — 4,842 — 4,842 
Interest and other investment income (expense)—realized8,893 201 2,180 424 1,096 12,794 (171)12,623 
Interest expense(3,904)(4,183)(3,095)(1,753)(5,244)(18,179)(128)(18,307)
Realized net investment income (loss)9,484 (3,974)(576)(1,329)(4,148)(543)(299)(842)
Realized income$243,710 $14,204 $55,630 $20,884 $4,757 $339,185 $(95,743)$243,442 
Three months ended September 30, 2021
Credit GroupPrivate Equity GroupReal
Assets Group		Secondaries Group
Strategic Initiatives
Total
Segments		OMGTotal
Management fees$271,591 $56,817 $67,934 $41,064 $16,544 $453,950 $— $453,950 
Fee related performance revenues— — 579 — — 579 — 579 
Other fees5,798 370 3,681 — 2 9,851 3,446 13,297 
Compensation and benefits
(86,502)(23,220)(33,070)(11,955)(5,316)(160,063)(66,107)(226,170)
General, administrative and other expenses(14,930)(4,984)(6,674)(2,593)(1,774)(30,955)(28,142)(59,097)
Fee related earnings175,957 28,983 32,450 26,516 9,456 273,362 (90,803)182,559 
Performance income—realized6,332 34,316 4,114 — — 44,762 — 44,762 
Performance related compensation—realized(3,079)(27,483)(2,809)— — (33,371)— (33,371)
Realized net performance income3,253 6,833 1,305 — — 11,391 — 11,391 
Investment income—realized618 1,878 1,841 — 1,025 5,362 — 5,362 
Interest and other investment income (expense)—realized4,716 4,861 918 699 163 11,357 (270)11,087 
Interest expense(2,392)(2,505)(1,904)(427)(4,135)(11,363)(160)(11,523)
Realized net investment income (loss)2,942 4,234 855 272 (2,947)5,356 (430)4,926 
Realized income$182,152 $40,050 $34,610 $26,788 $6,509 $290,109 $(91,233)$198,876 
45
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
Nine months ended September 30, 2022
Credit GroupPrivate Equity GroupReal
Assets Group
Secondaries Group
Strategic Initiatives
Total
Segments		OMGTotal
Management fees$972,201 $145,669 $254,233 $135,090 $52,377 $1,559,570 $— $1,559,570 
Fee related performance revenues12,628 — 2,178 235 — 15,041 — 15,041 
Other fees20,528 1,261 27,924 — 181 49,894 19,721 69,615 
Compensation and benefits(301,822)(70,724)(121,183)(45,964)(22,059)(561,752)(196,492)(758,244)
General, administrative and other expenses(52,734)(21,992)(28,308)(9,250)(5,575)(117,859)(109,516)(227,375)
Fee related earnings650,801 54,214 134,844 80,111 24,924 944,894 (286,287)658,607 
Performance income—realized58,941 2,212 78,637 4,156 — 143,946 — 143,946 
Performance related compensation—realized(35,675)(1,791)(50,510)(3,515)— (91,491)— (91,491)
Realized net performance income23,266 421 28,127 641 — 52,455 — 52,455 
Investment income—realized6,519 2,283 4,224 — 858 13,884 — 13,884 
Interest and other investment income (expense)—realized21,006 1,898 7,597 3,268 6,613 40,382 (1,450)38,932 
Interest expense(10,856)(11,185)(8,197)(3,775)(16,687)(50,700)(474)(51,174)
Realized net investment income (loss)16,669 (7,004)3,624 (507)(9,216)3,566 (1,924)1,642 
Realized income$690,736 $47,631 $166,595 $80,245 $15,708 $1,000,915 $(288,211)$712,704 
Nine months ended September 30, 2021
Credit GroupPrivate Equity GroupReal Assets Group
Secondaries Group
Strategic Initiatives
Total
Segments		OMGTotal
Management fees$764,702 $135,930 $150,691 $53,962 $48,963 $1,154,248 $— $1,154,248 
Fee related performance revenues1,331 — 1,938 — — 3,269 — 3,269 
Other fees18,494 726 4,604 — 82 23,906 3,446 27,352 
Compensation and benefits
(253,597)(62,047)(73,438)(16,244)(15,440)(420,766)(158,943)(579,709)
General, administrative and other expenses(37,716)(15,351)(14,212)(3,452)(5,580)(76,311)(69,872)(146,183)
Fee related earnings493,214 59,258 69,583 34,266 28,025 684,346 (225,369)458,977 
Performance income—realized76,924 159,479 10,317 — — 246,720 — 246,720 
Performance related compensation—realized(48,619)(127,706)(6,983)— — (183,308)— (183,308)
Realized net performance income28,305 31,773 3,334 — — 63,412 — 63,412 
Investment income (loss)—realized1,858 (4,387)13,877 — 1,347 12,695 — 12,695 
Interest and other investment income—realized14,354 9,825 4,783 701 2,824 32,487 170 32,657 
Interest expense(5,372)(5,434)(4,528)(432)(8,962)(24,728)(397)(25,125)
Realized net investment income (loss)10,840 4 14,132 269 (4,791)20,454 (227)20,227 
Realized income$532,359 $91,035 $87,049 $34,535 $23,234 $768,212 $(225,596)$542,616 
46
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
The following table presents the components of the Company’s operating segments’ revenue, expenses and realized net investment income:
Three months ended September 30,Nine months ended September 30,
2022202120222021
Segment revenues
Management fees$551,768 $453,950 $1,559,570 $1,154,248 
Fee related performance revenues1,090 579 15,041 3,269 
Other fees20,259 9,851 49,894 23,906 
Performance income—realized29,984 44,762 143,946 246,720 
Total segment revenues$603,101 $509,142 $1,768,451 $1,428,143 
Segment expenses
Compensation and benefits$203,701 $160,063 $561,752 $420,766 
General, administrative and other expenses40,814 30,955 117,859 76,311 
Performance related compensation—realized18,858 33,371 91,491 183,308 
Total segment expenses$263,373 $224,389 $771,102 $680,385 
Segment realized net investment income (expense)
Investment income—realized$4,842 $5,362 $13,884 $12,695 
Interest and other investment income —realized12,794 11,357 40,382 32,487 
Interest expense(18,179)(11,363)(50,700)(24,728)
Total segment realized net investment income (expense)$(543)$5,356 $3,566 $20,454 
The following table reconciles the Company's consolidated revenues to segment revenue:
Three months ended September 30,Nine months ended September 30,
2022202120222021
Total consolidated revenue$801,290 $948,719 $2,117,719 $2,901,926 
Performance income—unrealized(170,654)(415,317)(280,037)(1,381,697)
Management fees of Consolidated Funds eliminated in consolidation11,682 11,051 34,523 33,416 
Incentive fees of Consolidated Funds eliminated in consolidation— — 34 1,528 
Administrative, transaction and other fees of Consolidated Funds eliminated in consolidation3,946 4,264 13,030 13,157 
Administrative fees(1)
(16,099)(15,632)(50,947)(34,754)
OMG revenue(7,681)(3,446)(19,974)(3,446)
Performance income reclass(2)
— 680 (14)1,285 
Principal investment income, net of eliminations(11,582)(14,250)(15,521)(86,477)
Net income of non-controlling interests in consolidated subsidiaries(7,801)(6,927)(30,362)(16,795)
Total consolidation adjustments and reconciling items(198,189)(439,577)(349,268)(1,473,783)
Total segment revenue$603,101 $509,142 $1,768,451 $1,428,143 
(1)Represents administrative fees from expense reimbursements that are presented in administrative, transaction and other fees in the Company’s Condensed Consolidated Statements of Operations and are netted against the respective expenses for segment reporting.
(2)Related to performance income for AREA Sponsor Holdings LLC, an investment pool. Changes in value of this investment are reflected within net realized and unrealized gains (losses) on investments in the Company’s Condensed Consolidated Statements of Operations.
47
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
The following table reconciles the Company's consolidated expenses to segment expenses:
Three months ended September 30,Nine months ended September 30,
2022202120222021
Total consolidated expenses$898,102 $813,267 $2,062,654 $2,363,108 
Performance related compensation-unrealized(124,466)(296,044)(207,115)(1,022,393)
Expenses of Consolidated Funds added in consolidation(22,129)(23,206)(63,071)(66,653)
Expenses of Consolidated Funds eliminated in consolidation11,746 11,102 34,948 35,078 
Administrative fees(1)
(15,574)(15,632)(50,422)(34,754)
OMG expenses(102,991)(94,249)(306,008)(228,815)
Acquisition and merger-related expense(1,852)(754)(12,046)(18,364)
Equity compensation expense(48,041)(65,991)(151,202)(191,144)
Acquisition-related compensation expense(2)
(96,697)(28,194)(204,189)(32,824)
Placement fees(9,729)(32,413)(7,611)(33,740)
Depreciation and amortization expense(3)
(219,339)(36,668)(297,795)(71,742)
Expense of non-controlling interests in consolidated subsidiaries
(5,657)(6,829)(27,041)(17,372)
Total consolidation adjustments and reconciling items(634,729)(588,878)(1,291,552)(1,682,723)
Total segment expenses$263,373 $224,389 $771,102 $680,385 
(1)Represents administrative fees from expense reimbursements that are presented in administrative, transaction and other fees in the Company’s Condensed Consolidated Statements of Operations and are netted against the respective expenses for segment reporting.
(2)Represents contingent obligations resulting from the Landmark Acquisition, the Black Creek Acquisition and the Infrastructure Debt Acquisition that are recorded as compensation expense and are presented within compensation and benefits in the Company’s Condensed Consolidated Statements of Operations.
(3)The three and nine months ended September 30, 2022 include non-cash impairment charges of $181.6 million recorded on certain intangible assets.


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

Three months ended September 30,Nine months ended September 30,
2022202120222021
Total consolidated other income$36,434 $111,536 $112,932 $218,011 
Investment (income) loss—unrealized57 (3,609)9,995 (60,588)
Interest and other investment (income) loss—unrealized(4,600)(1,405)(16,661)3,057 
Other income from Consolidated Funds added in consolidation, net(38,434)(76,287)(132,852)(178,195)
Other expense from Consolidated Funds eliminated in consolidation, net(1,922)(4,973)(13,655)(13,783)
OMG other expense3,016 37 8,700 646 
Performance income reclass(1)
— (680)14 (1,285)
Principal investment income9,438 20,719 37,421 96,448 
Other (income) expense, net
(1,060)(34,812)934 (34,666)
Other income of non-controlling interests in consolidated subsidiaries(3,472)(5,170)(3,262)(9,191)
Total consolidation adjustments and reconciling items(36,977)(106,180)(109,366)(197,557)
Total segment realized net investment income (expense)$(543)$5,356 $3,566 $20,454 
(1)Related to performance income for AREA Sponsor Holdings LLC. Changes in value of this investment are reflected within net realized and unrealized gains (losses) on investments in the Company’s Condensed Consolidated Statements of Operations.
48
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
The following table presents the reconciliation of income before taxes as reported in the Condensed Consolidated Statements of Operations to segment results of RI and FRE:
Three months ended September 30,Nine months ended September 30,
2022202120222021
Income (loss) before taxes$(60,378)$246,988 $167,997 $756,829 
Adjustments:
Depreciation and amortization expense(1)
219,339 36,668 297,795 71,742 
Equity compensation expense47,516 65,991 150,677 191,144 
Acquisition-related compensation expense(2)
96,697 28,194 204,189 32,824 
Acquisition and merger-related expense1,852 754 12,046 18,364 
Placement fees9,729 32,413 7,611 33,740 
OMG expense, net98,325 90,840 294,734 226,015 
Other (income) expense, net
(1,059)(34,812)934 (34,666)
Net income of non-controlling interests in consolidated subsidiaries(5,616)(5,268)(6,583)(8,614)
Income before taxes of non-controlling interests in Consolidated Funds, net of eliminations(16,489)(47,372)(48,897)(102,331)
Total performance income—unrealized(170,654)(415,317)(280,037)(1,381,697)
Total performance related compensation—unrealized124,466 296,044 207,115 1,022,393 
Total investment income—unrealized(4,543)(5,014)(6,666)(57,531)
Realized income339,185 290,109 1,000,915 768,212 
Total performance income—realized(29,984)(44,762)(143,946)(246,720)
Total performance related compensation—realized18,858 33,371 91,491 183,308 
Total investment income—realized543 (5,356)(3,566)(20,454)
Fee related earnings$328,602 $273,362 $944,894 $684,346 
(1)The three and nine months ended September 30, 2022 include non-cash impairment charges of $181.6 million recorded on certain intangible assets.
(2)Represents contingent obligations resulting from the Landmark Acquisition, the Black Creek Acquisition and the Infrastructure Debt Acquisition that are recorded as compensation expense and are presented within compensation and benefits in the Company’s Condensed Consolidated Statements of Operations.
49
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
16. CONSOLIDATION
Investments in Consolidated Variable Interest Entities
The Company consolidates entities in which the Company has a variable interest and as the general partner or investment manager, has both the power to direct the most significant activities and a potentially significant economic interest. Investments in the consolidated VIEs are reported at fair value and represent the Company’s maximum exposure to loss.
Investments in Non-Consolidated Variable Interest Entities
The Company holds interests in certain VIEs that are not consolidated as the Company is not the primary beneficiary. The Company's interest in such entities generally is in the form of direct equity interests, fixed fee arrangements or both. The maximum exposure to loss represents the potential loss of assets by the Company relating to these non-consolidated entities. Investments in the non-consolidated VIEs are carried at fair value.
The Company's interests in consolidated and non-consolidated VIEs, as presented in the Condensed Consolidated Statements of Financial Condition, and its respective maximum exposure to loss relating to non-consolidated VIEs are as follows:

As of September 30,As of December 31,
20222021
Maximum exposure to loss attributable to the Company's investment in non-consolidated VIEs(1)
$377,935 $353,768 
Maximum exposure to loss attributable to the Company's investment in consolidated VIEs(1)
533,941 583,192 
Assets of consolidated VIEs
12,501,069 13,197,321 
Liabilities of consolidated VIEs
11,173,216 12,018,655 
(1)As of September 30, 2022 and December 31, 2021, the Company's maximum exposure of loss for CLO securities was equal to the cumulative fair value of our capital interest in CLOs that are managed and totaled $82.2 million and $103.8 million, respectively.

Three months ended September 30,Nine months ended September 30,
2022202120222021
Net income attributable to non-controlling interests related to consolidated VIEs$8,733 $38,597 $28,470 $84,285 
50
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
Consolidating Schedules
The following supplemental financial information illustrates the consolidating effects of the Consolidated Funds on the Company's financial condition, results from operations and cash flows:
 As of September 30, 2022
 Consolidated
Company 
Entities 		Consolidated
Funds 		Eliminations Consolidated 
Assets    
Cash and cash equivalents$361,500 $— $— $361,500 
Investments (includes $3,290,381 of accrued carried interest)
4,638,092 — (525,699)4,112,393 
Due from affiliates744,981 — (183,478)561,503 
Other assets275,189 — — 275,189 
Right-of-use operating lease assets159,686 — — 159,686 
Intangible assets, net1,238,108 — — 1,238,108 
Goodwill996,740 — — 996,740 
Assets of Consolidated Funds
Cash and cash equivalents— 683,976 — 683,976 
U.S. Treasury securities, at fair value— 1,005,094 — 1,005,094 
Investments, at fair value— 11,564,696 4,495 11,569,191 
Due from affiliates— 17,537 (9,801)7,736 
Receivable for securities sold— 189,823 — 189,823 
Other assets— 45,387 — 45,387 
Total assets$8,414,296 $13,506,513 $(714,483)$21,206,326 
Liabilities    
Accounts payable, accrued expenses and other liabilities$314,932 $— $(9,801)$305,131 
Accrued compensation595,330 — — 595,330 
Due to affiliates122,307 — — 122,307 
Performance related compensation payable2,402,019 — — 2,402,019 
Debt obligations2,018,462 — — 2,018,462 
Operating lease liabilities193,180 — — 193,180 
Liabilities of Consolidated Funds
Accounts payable, accrued expenses and other liabilities— 123,527 (1,533)121,994 
Due to affiliates— 178,983 (178,983)— 
Payable for securities purchased— 419,726 — 419,726 
CLO loan obligations, at fair value— 10,343,840 (29,959)10,313,881 
Fund borrowings— 149,546 — 149,546 
Total liabilities5,646,230 11,215,622 (220,276)16,641,576 
Commitments and contingencies
Redeemable interest in Consolidated Funds— 1,004,994 — 1,004,994 
Redeemable interest in Ares Operating Group entities92,108 — — 92,108 
Non-controlling interest in Consolidated Funds— 1,285,897 (451,187)834,710 
Non-controlling interest in Ares Operating Group entities1,138,659 — (17,382)1,121,277 
Stockholders' Equity
Class A common stock, $0.01 par value, 1,500,000,000 shares authorized (172,402,437 shares issued and outstanding)
1,724 — — 1,724 
Non-voting common stock, $0.01 par value, 500,000,000 shares authorized (3,489,911 shares issued and outstanding)
35 — — 35 
Class B common stock, $0.01 par value, 1,000 shares authorized (1,000 shares issued and outstanding)
— — — — 
Class C common stock, $0.01 par value, 499,999,000 shares authorized (118,275,157 shares issued and outstanding)
1,183 — — 1,183 
Additional paid-in-capital1,937,374 — (25,638)1,911,736 
Accumulated deficit(374,198)— — (374,198)
Accumulated other comprehensive loss, net of tax(28,819)— — (28,819)
       Total stockholders' equity1,537,299 — (25,638)1,511,661 
       Total equity2,675,958 1,285,897 (494,207)3,467,648 
Total liabilities, redeemable interest, non-controlling interests and equity$8,414,296 $13,506,513 $(714,483)$21,206,326 
51
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
 As of December 31, 2021
 Consolidated
Company 
Entities 		Consolidated
Funds 		EliminationsConsolidated 
Assets    
Cash and cash equivalents$343,655 $— $— $343,655 
Investments (includes $2,998,421 of accrued carried interest)
4,271,836 — (587,572)3,684,264 
Due from affiliates696,963 — (26,580)670,383 
Other assets338,685 — (3,930)334,755 
Right-of-use operating lease assets167,652 — — 167,652 
Intangible assets, net1,422,818 — — 1,422,818 
Goodwill787,972 — — 787,972 
Assets of Consolidated Funds
Cash and cash equivalents— 1,049,191 — 1,049,191 
U.S. Treasury securities, at fair value— 1,000,285 — 1,000,285 
Investments, at fair value— 11,812,093 4,300 11,816,393 
Due from affiliates— 16,761 (9,527)7,234 
Receivable for securities sold— 281,132 —281,132 
Other assets— 39,430 —39,430 
Total assets$8,029,581 $14,198,892 $(623,309)$21,605,164 
Liabilities    
Accounts payable, accrued expenses and other liabilities$289,200 $— $(9,527)$279,673 
Accrued compensation310,222 — — 310,222 
Due to affiliates198,553 — — 198,553 
Performance related compensation payable2,190,352 — — 2,190,352 
Debt obligations1,503,709 — — 1,503,709 
Operating lease liabilities205,075 — — 205,075 
Liabilities of Consolidated Funds
Accounts payable, accrued expenses and other liabilities— 117,139 (13,881)103,258 
Due to affiliates— 26,210 (26,210)— 
Payable for securities purchased— 1,118,456 — 1,118,456 
CLO loan obligations, at fair value— 10,698,681 (41,020)10,657,661 
Fund borrowings— 127,771 — 127,771 
Total liabilities4,697,111 12,088,257 (90,638)16,694,730 
Commitments and contingencies
Redeemable interest in Consolidated Funds— 1,000,000 — 1,000,000 
Redeemable interest in Ares Operating Group entities96,008 — — 96,008 
Non-controlling interest in Consolidated Funds— 1,110,635 (519,183)591,452 
Non-controlling interest in Ares Operating Group entities1,403,255 — (5,508)1,397,747 
Stockholders' Equity
Class A common stock, $0.01 par value, 1,500,000,000 shares authorized (168,351,305 shares issued and outstanding)
1,684 — — 1,684 
Non-voting common stock, $0.01 par value, 500,000,000 shares authorized (3,489,911 shares issued and outstanding)
35 — — 35 
Class B common stock, $0.01 par value, 1,000 shares authorized (1,000 shares issued and outstanding)
— — — — 
Class C common stock, $0.01 par value, 499,999,000 shares authorized (118,609,332 shares issued and outstanding)
1,186 — — 1,186 
Additional paid-in-capital1,921,539 — (7,980)1,913,559 
Accumulated deficit(89,382)— — (89,382)
Accumulated other comprehensive loss, net of tax(1,855)— — (1,855)
       Total stockholders' equity1,833,207 — (7,980)1,825,227 
       Total equity3,236,462 1,110,635 (532,671)3,814,426 
       Total liabilities, redeemable interest, non-controlling interests and equity$8,029,581 $14,198,892 $(623,309)$21,605,164 
52
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
Three months ended September 30, 2022
Consolidated
Company 
Entities 		Consolidated
Funds 		Eliminations Consolidated 
Revenues
Management fees $560,140 $— $(11,682)$548,458 
Carried interest allocation192,186 — — 192,186 
Incentive fees8,882 — — 8,882 
Principal investment income9,438 — 2,144 11,582 
Administrative, transaction and other fees44,128 — (3,946)40,182 
Total revenues814,774 — (13,484)801,290 
Expenses
Compensation and benefits425,419 — — 425,419 
Performance related compensation142,934 — — 142,934 
General, administrative and other expense319,366 — (14)319,352 
Expenses of the Consolidated Funds— 22,129 (11,732)10,397 
Total expenses887,719 22,129 (11,746)898,102 
Other income (expense)
Net realized and unrealized gains on investments5,433 — (1,002)4,431 
Interest and dividend income5,820 — (3,734)2,086 
Interest expense(18,307)— — (18,307)
Other income, net3,132 — (531)2,601 
Net realized and unrealized losses on investments of the Consolidated Funds— (3,760)3,730 (30)
Interest and other income of the Consolidated Funds— 157,884 531 158,415 
Interest expense of the Consolidated Funds— (115,690)2,928 (112,762)
Total other income (expense), net(3,922)38,434 1,922 36,434 
Income (loss) before taxes(76,867)16,305 184 (60,378)
Income tax expense (benefit)(11,748)149 — (11,599)
Net income (loss)(65,119)16,156 184 (48,779)
Less: Net income attributable to non-controlling interests in Consolidated Funds— 16,156 184 16,340 
Net loss attributable to Ares Operating Group entities(65,119)— — (65,119)
Less: Net income attributable to redeemable interest in Ares Operating Group entities93 — — 93 
Less: Net loss attributable to non-controlling interests in Ares Operating Group entities(29,666)— — (29,666)
Net loss attributable to Ares Management Corporation Class A and non-voting common stockholders$(35,546)$— $— $(35,546)
53
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
 Three months ended September 30, 2021
 Consolidated
Company 
Entities 		Consolidated
Funds 		Eliminations Consolidated 
Revenues    
Management fees $459,313 $— $(11,051)$448,262 
Carried interest allocation460,651 — — 460,651 
Incentive fees696 — — 696 
Principal investment income20,719 — (6,469)14,250 
Administrative, transaction and other fees29,124 — (4,264)24,860 
Total revenues970,503 — (21,784)948,719 
Expenses
Compensation and benefits335,569 — — 335,569 
Performance related compensation331,141 — — 331,141 
General, administrative and other expense134,453 — — 134,453 
Expenses of the Consolidated Funds— 23,206 (11,102)12,104 
Total expenses801,163 23,206 (11,102)813,267 
Other income (expense)
Net realized and unrealized gains on investments2,759 — 5,575 8,334 
Interest and dividend income2,702 — (1,326)1,376 
Interest expense(11,523)— — (11,523)
Other income, net36,338 — 316 36,654 
Net realized and unrealized gains on investments of the Consolidated Funds— 36,695 (2,450)34,245 
Interest and other income of the Consolidated Funds— 104,344 (316)104,028 
Interest expense of the Consolidated Funds— (64,752)3,174 (61,578)
Total other income, net30,276 76,287 4,973 111,536 
Income before taxes199,616 53,081 (5,709)246,988 
Income tax expense30,273 2 — 30,275 
Net income169,343 53,079 (5,709)216,713 
Less: Net income attributable to non-controlling interests in Consolidated Funds— 53,079 (5,709)47,370 
Net income attributable to Ares Operating Group entities169,343 — — 169,343 
Less: Net income attributable to redeemable interest in Ares Operating Group entities324 — — 324 
Less: Net income attributable to non-controlling interests in Ares Operating Group entities84,293 — — 84,293 
Net income attributable to Ares Management Corporation Class A common stockholders$84,726 $— $— $84,726 
54
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
 
Nine months ended September 30, 2022
 Consolidated
Company 
Entities 		Consolidated
Funds 		Eliminations Consolidated
Revenues    
Management fees$1,580,873 $— $(34,523)$1,546,350 
Carried interest allocation417,779 — — 417,779 
Incentive fees30,013 — (34)29,979 
Principal investment income37,421 — (21,900)15,521 
Administrative, transaction and other fees121,120 — (13,030)108,090 
Total revenues2,187,206 — (69,487)2,117,719 
Expenses    
Compensation and benefits1,155,031 — — 1,155,031 
Performance related compensation316,818 — — 316,818 
General, administrative and other expense562,682 — (241)562,441 
Expenses of the Consolidated Funds— 63,071 (34,707)28,364 
Total expenses2,034,531 63,071 (34,948)2,062,654 
Other income (expense)    
Net realized and unrealized gains (losses) on investments(9,926)— 20,691 10,765 
Interest and dividend income17,605 — (12,541)5,064 
Interest expense(51,174)— — (51,174)
Other income, net9,920 — 274 10,194 
Net realized and unrealized gains on investments of the Consolidated Funds— 12,445 (4,414)8,031 
Interest and other income of the Consolidated Funds— 396,354 (274)396,080 
Interest expense of the Consolidated Funds— (275,947)9,919 (266,028)
Total other income (expense)(33,575)132,852 13,655 112,932 
Income before taxes119,100 69,781 (20,884)167,997 
Income tax expense22,075 197 — 22,272 
Net income97,025 69,584 (20,884)145,725 
Less: Net income attributable to non-controlling interests in Consolidated Funds— 69,584 (20,884)48,700 
Net income attributable to Ares Operating Group entities97,025 — — 97,025 
Less: Net income attributable to redeemable interest in Ares Operating Group entities35 — — 35 
Less: Net income attributable to non-controlling interests in Ares Operating Group entities46,942 — — 46,942 
Net income attributable to Ares Management Corporation Class A and non-voting common stockholders$50,048 $— $— $50,048 

55
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
 Nine months ended September 30, 2021
 Consolidated
Company 
Entities 		Consolidated
Funds 		EliminationsConsolidated 
Revenues    
Management fees$1,169,237 $— $(33,416)$1,135,821 
Carried interest allocation1,610,707 — — 1,610,707 
Incentive fees20,948 — (1,528)19,420 
Principal investment income96,448 — (9,971)86,477 
Administrative, transaction and other fees62,658 — (13,157)49,501 
Total revenues2,959,998 — (58,072)2,901,926 
Expenses
Compensation and benefits837,108 — — 837,108 
Performance related compensation1,208,954 — — 1,208,954 
General, administrative and other expense285,471 — — 285,471 
Expenses of the Consolidated Funds— 66,653 (35,078)31,575 
Total expenses2,331,533 66,653 (35,078)2,363,108 
Other income (expense)
Net realized and unrealized gains on investments10,602 — 8,142 18,744 
Interest and dividend income9,695 — (2,877)6,818 
Interest expense(25,125)— — (25,125)
Other income, net30,861 — (175)30,686 
Net realized and unrealized gains on investments of the Consolidated Funds— 46,541 (1,821)44,720 
Interest and other income of the Consolidated Funds— 333,570 175 333,745 
Interest expense of the Consolidated Funds— (201,916)10,339 (191,577)
Total other income26,033 178,195 13,783 218,011 
Income before taxes654,498 111,542 (9,211)756,829 
Income tax expense104,411 76 — 104,487 
Net income550,087 111,466 (9,211)652,342 
Less: Net income attributable to non-controlling interests in Consolidated Funds— 111,466 (9,211)102,255 
Net income attributable to Ares Operating Group entities550,087 — — 550,087 
Less: Net income attributable to redeemable interest in Ares Operating Group entities693 — — 693 
Less: Net income attributable to non-controlling interests in Ares Operating Group entities264,646 — — 264,646 
Net income attributable to Ares Management Corporation284,748 — — 284,748 
Less: Series A Preferred Stock dividends paid10,850 — — 10,850 
Less: Series A Preferred Stock redemption premium11,239 — — 11,239 
Net income attributable to Ares Management Corporation Class A common stockholders$262,659 $— $— $262,659 
56
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
 
Nine months ended September 30, 2022
 Consolidated
Company 
Entities 		Consolidated
Funds		EliminationsConsolidated
Cash flows from operating activities:  
Net income$97,025 $69,584 $(20,884)$145,725 
Adjustments to reconcile net income to net cash provided by operating activities382,823 — (61,873)320,950 
Adjustments to reconcile net income to net cash used in operating activities allocable to non-controlling interests in Consolidated Funds— (1,132,839)4,414 (1,128,425)
Cash flows due to changes in operating assets and liabilities160,957 — 152,692 313,649 
Cash flows due to changes in operating assets and liabilities allocable to redeemable and non-controlling interest in Consolidated Funds— (427,022)231,518 (195,504)
Net cash provided by (used in) operating activities640,805 (1,490,277)305,867 (543,605)
Cash flows from investing activities: 
Purchase of furniture, equipment and leasehold improvements, net of disposals(28,388)— — (28,388)
Acquisitions, net of cash acquired(301,658)— — (301,658)
Net cash used in investing activities(330,046)— — (330,046)
Cash flows from financing activities: 
Proceeds from Credit Facility940,000 — — 940,000 
Proceeds from senior notes488,915 — — 488,915 
Repayments of Credit Facility(910,000)— — (910,000)
Dividends and distributions (608,220)— — (608,220)
Stock option exercises14,531 — — 14,531 
Taxes paid related to net share settlement of equity awards(194,223)— — (194,223)
Other financing activities2,457 — — 2,457 
Allocable to redeemable and non-controlling interests in Consolidated Funds:
Contributions from redeemable and non-controlling interests in Consolidated Funds— 362,752 (64,106)298,646 
Distributions to non-controlling interests in Consolidated Funds— (227,886)123,454 (104,432)
Borrowings under loan obligations by Consolidated Funds— 1,120,680 — 1,120,680 
Repayments under loan obligations by Consolidated Funds— (121,273)— (121,273)
Net cash provided by (used in) financing activities(266,540)1,134,273 59,348 927,081 
Effect of exchange rate changes(26,374)(9,211)— (35,585)
Net change in cash and cash equivalents17,845 (365,215)365,215 17,845 
Cash and cash equivalents, beginning of period343,655 1,049,191 (1,049,191)343,655 
Cash and cash equivalents, end of period$361,500 $683,976 $(683,976)$361,500 
Supplemental disclosure of non-cash financing activities:
Issuance of Class A common stock in connection with acquisitions$12,835 $— $— $12,835 
57
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
 Nine months ended September 30, 2021
 Consolidated
Company 
Entities 		Consolidated
Funds		EliminationsConsolidated
Cash flows from operating activities:  
Net income$550,087 $111,466 $(9,211)$652,342 
Adjustments to reconcile net income to net cash provided by (used in) operating activities(28,467)— 99,600 71,133 
Adjustments to reconcile net income to net cash used in operating activities allocable to non-controlling interests in Consolidated Funds— (1,697,529)9,444 (1,688,085)
Cash flows due to changes in operating assets and liabilities(153,361)— 3,923 (149,438)
Cash flows due to changes in operating assets and liabilities allocable to non-controlling interest in Consolidated Funds— 343,253 (1,072,956)(729,703)
Net cash provided by (used in) operating activities368,259 (1,242,810)(969,200)(1,843,751)
Cash flows from investing activities: 
Purchase of furniture, equipment and leasehold improvements, net of disposals(15,152)— — (15,152)
Acquisitions, net of cash acquired(1,057,426)— — (1,057,426)
Net cash used in investing activities(1,072,578)— — (1,072,578)
Cash flows from financing activities: 
Net proceeds from issuance of Class A and non-voting common stock827,430 — — 827,430 
Proceeds from Credit Facility468,000 — — 468,000 
Proceeds from subordinated notes450,000 — — 450,000 
Repayments of Credit Facility(318,000)— — (318,000)
Dividends and distributions (438,568)— — (438,568)
Series A Preferred Stock dividends(10,850)— — (10,850)
Redemption of Series A Preferred Stock(310,000)— — (310,000)
Stock option exercises27,409 — — 27,409 
Taxes paid related to net share settlement of equity awards(221,287)— — (221,287)
Other financing activities1,976 — — 1,976 
Allocable to non-controlling interests in Consolidated Funds: 
Contributions from non-controlling interests in Consolidated Funds— 1,027,454 (107,788)919,666 
Distributions to non-controlling interests in Consolidated Funds— (102,701)17,931 (84,770)
Borrowings under loan obligations by Consolidated Funds— 1,456,887 — 1,456,887 
Repayments under loan obligations by Consolidated Funds— (74,909)— (74,909)
Net cash provided by financing activities476,110 2,306,731 (89,857)2,692,984 
Effect of exchange rate changes(15,899)(4,864)— (20,763)
Net change in cash and cash equivalents(244,108)1,059,057 (1,059,057)(244,108)
Cash and cash equivalents, beginning of period539,812 522,377 (522,377)539,812 
Cash and cash equivalents, end of period$295,704 $1,581,434 $(1,581,434)$295,704 
Supplemental disclosure of non-cash financing activities
Issuance of AOG Units in connection with acquisitions$511,069 $— $— $511,069 

58
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
17. SUBSEQUENT EVENTS
The Company evaluated all events or transactions that occurred after September 30, 2022 through the date the unaudited condensed consolidated financial statements were issued. During this period, the Company had the following material subsequent events that require disclosure:
In October 2022, the Company's board of directors declared a quarterly dividend of $0.61 per share of Class A and non-voting common stock payable on December 30, 2022 to common stockholders of record at the close of business on December 16, 2022.
59
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
Ares Management Corporation is a Delaware corporation. Unless the context otherwise requires, references to “Ares,” “we,” “us,” “our,” and the “Company” are intended to mean the business and operations of Ares Management Corporation and its consolidated subsidiaries. The following discussion analyzes the financial condition and results of operations of the Company. “Consolidated Funds” refers collectively to certain Ares funds, co-investment entities, CLOs and special purpose acquisition companies that are required under generally accepted accounting principles in the United States (“GAAP”) to be consolidated in our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Additional terms used by the Company are defined in the Glossary and throughout the Management's Discussion and Analysis in this Quarterly Report on Form 10-Q.
The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements of Ares Management Corporation and the related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and the related notes included in the 2021 Annual Report on Form 10-K of Ares Management Corporation.
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. In addition, illustrative charts may not be presented at scale.

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 three months ended September 30, 2022, approximately 95% of our management fees were derived from perpetual capital vehicles and other long-dated funds. Our funds have a stable base of committed capital enabling us to invest in assets with a long-term focus over different points in a market cycle and to take advantage of market volatility. However, our results of operations, including the fair value of our AUM, are affected by a variety of factors, particularly in the United States and Western Europe, including conditions in the global financial markets and the economic and political environments.

Global markets remained volatile during the third quarter, fueled by tightening monetary policies and geopolitical uncertainty, including the conflict in Ukraine and surrounding region. The outlook for future macroeconomic growth remained generally weak, with expectations of further softening of demand. Year-over-year inflation in the U.S. and Europe remained elevated and were further impacted by global supply chain issues and energy trade disruptions. Specifically, the ICE BAML High Yield Master II Index, a high yield bond index, declined 0.7% in the third quarter of 2022 and 14.6% in the year-to-date period. Meanwhile, the Credit Suisse Leveraged Loan Index (“CSLLI”), a leveraged loan index, returned 1.2% in the third quarter and declined 3.3% in the year-to-date period.
In Europe, high yield bonds and leveraged loans performed similarly to their U.S. counterparts. Increasing concerns of potential recession and inflationary pressures put downward pressure on the asset class in Europe. The ICE BAML European Currency High Yield Index declined 0.9% in the quarter and 15.6% in the year-to-date period, while the Credit Suisse Western European Leveraged Loan Index returned 0.8% in the quarter and declined 6.0% in the year-to-date period.

The global equity markets broadly declined during the third quarter with the weakened macroeconomic environment. The S&P 500 Index declined 4.9% in the quarter and 23.9% in the year-to-date period while the MSCI All Country World Index ex USA declined 9.9% in the quarter and 26.5% for the year-to-date period.

The private equity markets experienced heightened volatility that is expected to continue in the near-term. Continued asset selectivity, portfolio construction, portfolio diversification and a differentiated view to drive value creation are instrumental in delivering attractive returns to investors. Recent trends have had a more pronounced negative impact on certain industries, including the energy and retail industries, which are industries in which some of our funds have made investments. As of September 30, 2022, approximately 2% of our total AUM was invested in the energy sector (including oil and gas exploration and midstream investments) and approximately 2% in the retail sector.

The commercial real estate markets continued to be impacted by the macroeconomic environment, particularly the effect of rapidly rising interest rates on the asset class. Given the rise in interest rates by central banks globally, property valuations are beginning to show early signs of the cycle turning, with capitalization rate compressions waning and in certain cases yields widening. However, we believe some of these market trends will be offset by continued strong fundamentals, such as occupancy and rental rates, in certain property types, including multifamily and industrial. The FTSE EPRA/NAREIT
60
Developed Europe and the FTSE NAREIT All Equity REITs indices declined 16.4% and 10.8%, respectively, for the quarter and declined 39.4% and 27.9%, respectively, for the year-to-date period.

We believe our portfolios across all strategies are well positioned for a rising interest rate environment. On a market value basis, approximately 90% of our debt assets and 59% of our total assets were floating rate instruments as of September 30, 2022.

Managing Business Performance
Operating Metrics
We measure our business performance using certain operating metrics that are common to the alternative asset management industry, which are discussed below.
Assets Under Management
AUM refers to the assets we manage and is viewed as a metric to measure our investment and fundraising performance as it reflects assets generally at fair value plus available uncalled capital.

61
The tables below present rollforwards of our total AUM by segment ($ in millions):

Credit
Group		Private Equity GroupReal Assets
Group
Secondaries Group
Strategic Initiatives
Total AUM
Balance at 6/30/2022
$201,911 $33,412 $62,577 $23,892 $12,521 $334,313 
Net new par/equity commitments3,684 1,337 2,166 441 1,108 8,736 
Net new debt commitments3,702 — 404 — 1,372 5,478 
Capital reductions(547)(2)(224)— — (773)
Distributions(1,646)(82)(511)(1,084)(1,118)(4,441)
Redemptions(329)— (180)— — (509)
Change in fund value(2,295)601 763 (460)3 (1,388)
Balance at 9/30/2022
$204,480 $35,266 $64,995 $22,789 $13,886 $341,416 
Credit
Group		Private Equity GroupReal Assets
Group		Secondaries Group
Strategic Initiatives
Total AUM
Balance at 6/30/2021
$167,587 $26,910 $23,547 $19,476 $10,366 $247,886 
Acquisitions— — 13,719 — — 13,719 
Net new par/equity commitments9,050 1,653 2,401 1,130 213 14,447 
Net new debt commitments5,533 200 250 — — 5,983 
Capital reductions(381)(2)(41)— (29)(453)
Distributions(944)(1,133)(1,065)(535)202 (3,475)
Redemptions(267)— (28)— — (295)
Change in fund value655 1,334 1,452 672 84 4,197 
Balance at 9/30/2021
$181,233 $28,962 $40,235 $20,743 $10,836 $282,009 
Credit
Group		Private Equity GroupReal Assets
Group		Secondaries Group
Strategic Initiatives
Total AUM
Balance at 12/31/2021
$192,712 $33,404 $45,919 $22,119 $11,623 $305,777 
Acquisitions— — 8,184 199 — 8,383 
Net new par/equity commitments13,216 2,137 8,589 2,386 2,725 29,053 
Net new debt commitments10,225 — 2,953 — 1,372 14,550 
Capital reductions(1,001)(206)(521)— (5)(1,733)
Distributions(3,481)(602)(2,526)(2,209)(1,443)(10,261)
Redemptions(1,134)— (398)— — (1,532)
Change in fund value(6,057)533 2,795 294 (386)(2,821)
Balance at 9/30/2022
$204,480 $35,266 $64,995 $22,789 $13,886 $341,416 
Credit
Group		Private Equity GroupReal Assets
Group		Secondaries Group
Strategic Initiatives
Total AUM
Balance at 12/31/2020
$145,472 $23,954 $18,293 $— $9,261 $196,980 
Acquisitions— — 13,719 19,513 — 33,232 
Net new par/equity commitments24,999 1,704 5,337 1,231 1,393 34,664 
Net new debt commitments13,496 200 2,655 — 29 16,380 
Capital reductions(2,491)(7)(273)— (29)(2,800)
Distributions(2,504)(2,827)(2,062)(659)(178)(8,230)
Redemptions(1,242)— (35)— — (1,277)
Change in fund value3,503 5,938 2,601 658 360 13,060 
Balance at 9/30/2021
$181,233 $28,962 $40,235 $20,743 $10,836 $282,009 
62
The components of our AUM are presented below as of ($ in billions):
ares-20220930_g2.jpgares-20220930_g3.jpg
AUM: $341.4AUM: $282.0
FPAUM
Non-fee paying(1)
AUM not yet paying fees

(1) Includes $14.0 billion and $8.5 billion of AUM of funds from which we indirectly earn management fees as of September 30, 2022 and 2021, respectively and includes $3.4 billion and $3.1 billion of non-fee paying AUM based on our general partner commitment as of September 30, 2022 and 2021, respectively.

Please refer to “— Results of Operations by Segment” for a more detailed presentation of AUM by segment for each of the periods presented.
Fee Paying Assets Under Management
FPAUM refers to AUM from which we directly earn management fees and is equal to the sum of all the individual fee bases of our funds that directly contribute to our management fees.
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The tables below present rollforwards of our total FPAUM by segment ($ in millions):
Credit
Group		Private Equity GroupReal Assets
Group
Secondaries Group
Strategic Initiatives
Total
Balance at 6/30/2022
$129,723 $17,691 $39,231 $17,554 $7,092 $211,291 
Commitments2,377 — 1,133 412 634 4,556 
Subscriptions/deployment/increase in leverage6,561 1,486 835 96 820 9,798 
Capital reductions(505)— — — (8)(513)
Distributions(1,657)(206)(566)(221)(935)(3,585)
Redemptions(471)— (180)— — (651)
Change in fund value(1,737)(3)(235)(170)(153)(2,298)
Change in fee basis— (14)3 49 — 38 
Balance at 9/30/2022
$134,291 $18,954 $40,221 $17,720 $7,450 $218,636 
Credit
Group		Private Equity GroupReal Assets
Group		Secondaries Group
Strategic Initiatives
Total
Balance at 6/30/2021
$99,588 $15,007 $15,542 $16,927 $6,621 $153,685 
Acquisitions— — 7,155 — — 7,155 
Commitments2,864 1,427 1,647 278 233 6,449 
Subscriptions/deployment/increase in leverage6,095 576 1,464 7 379 8,521 
Capital reductions(335)— — — (121)(456)
Distributions(1,468)(515)(669)(73)(273)(2,998)
Redemptions(296)— (28)— — (324)
Change in fund value(46)5 588 83 53 683 
Change in fee basis— (6)(5)(37)— (48)
Balance at 9/30/2021
$106,402 $16,494 $25,694 $17,185 $6,892 $172,667 
Credit
Group		Private Equity GroupReal Assets
Group		Secondaries Group
Strategic Initiatives
Total
Balance at 12/31/2021
$117,390 $16,689 $28,615 $18,364 $6,787 $187,845 
Acquisitions— — 4,855 131 — 4,986 
Commitments8,591 — 5,394 1,919 2,514 18,418 
Subscriptions/deployment/increase in leverage21,894 3,699 3,266 415 1,810 31,084 
Capital reductions(3,283)— (91)— (242)(3,616)
Distributions(4,212)(1,182)(1,829)(1,081)(1,518)(9,822)
Redemptions(1,344)— (408)— — (1,752)
Change in fund value(4,744)(4)1,243 749 (820)(3,576)
Change in fee basis(1)(248)(824)(2,777)(1,081)(4,931)
Balance at 9/30/2022
$134,291 $18,954 $40,221 $17,720 $7,450 $218,636 
Credit
Group		Private Equity GroupReal Assets
Group		Secondaries Group
Strategic Initiatives
Total
Balance at 12/31/2020
$88,017 $17,493 $13,931 $— $6,596 $126,037 
Acquisitions— — 7,155 16,839 — 23,994 
Commitments(1)
6,705 1,579 3,477 378 (66)12,073 
Subscriptions/deployment/increase in leverage17,178 1,843 2,187 9 1,504 22,721 
Capital reductions(1,618)— (32)— (302)(1,952)
Distributions(3,783)(1,661)(1,244)(73)(952)(7,713)
Redemptions(1,298)— (35)— — (1,333)
Change in fund value1,201 5 567 81 112 1,966 
Change in fee basis— (2,765)(312)(49)— (3,126)
Balance at 9/30/2021
$106,402 $16,494 $25,694 $17,185 $6,892 $172,667 
(1) Reallocation of capital among the segments may occur for pools of capital with investment mandates in more than one investment strategy. This reallocation activity is presented within commitments and may result in balances presented to be negative.
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The charts below present FPAUM by its fee basis ($ in billions):
ares-20220930_g4.jpg ares-20220930_g5.jpg
FPAUM: $218.6FPAUM: $172.7
Invested capital/other(1)
Market value(2)
Collateral balances (at par)Capital commitments
    
(1)Other consists of ACRE's FPAUM, which is based on ACRE’s stockholders’ equity.
(2)Includes $54.9 billion and $38.3 billion from funds that primarily invest in illiquid strategies as of September 30, 2022 and 2021, respectively. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies.

Please refer to “— Results of Operations by Segment” for detailed information by segment of the activity affecting total FPAUM for each of the periods presented.

Incentive Eligible Assets Under Management, Incentive Generating Assets Under Management and Available Capital

IEAUM generally represents the NAV plus uncalled equity or total assets plus uncalled debt, as applicable, of our funds from which we are entitled to receive carried interest and incentive fees, excluding capital committed by us and our professionals (from which we do not earn carried interest and incentive fees). With respect to ARCC's AUM, only ARCC Part II Fees may be generated from IEAUM.

IGAUM generally represents the AUM of our funds that are currently generating carried interest and incentive fees on a realized or unrealized basis. It represents the basis on which we are entitled to receive carried interest and incentive fees. The basis is typically the NAV or total assets of the fund, excluding amounts on which we do not earn carried interest and incentive fees, such as capital committed by us and our professionals. ARCC is only included in IGAUM when ARCC Part II Fees are being generated.
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The charts below present our IEAUM and IGAUM by segment ($ in billions):
ares-20220930_g6.jpg
CreditPrivate EquityReal Assets
Secondaries
Strategic Initiatives
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The charts below present our available capital and AUM not yet paying fees by segment ($ in billions):
ares-20220930_g7.jpg
CreditPrivate EquityReal Assets
Secondaries
Strategic Initiatives

As of September 30, 2022, AUM Not Yet Paying Fees includes $45.8 billion of AUM available for future deployment which could generate approximately $441.3 million in potential incremental annual management fees. As of September 30, 2021, AUM Not Yet Paying Fees includes $50.3 billion of AUM available for future deployment which could generate approximately $488.7 million in potential incremental annual management fees.

The chart below presents our perpetual capital AUM by segment ($ in billions):
ares-20220930_g8.jpg
CreditReal Assets
Secondaries
Strategic Initiatives

As of September 30, 2022, perpetual capital AUM of $88.9 billion included 76% from commingled funds and 24% from managed accounts. As of September 30, 2021, perpetual capital AUM of $71.5 billion included 72% from commingled funds and 28% from managed accounts. As of September 30, 2022, perpetual capital IGAUM from which we will generate fee
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related performance revenues totaled $24.0 billion, composed of $10.2 billion from managed accounts within the Credit Group and $13.8 billion from commingled funds within the Real Assets Group.

Management Fees By Type

We view the duration of funds we manage as a metric to measure the stability of our future management fees. For the three months ended September 30, 2022 and 2021, 95% and 94%, respectively, of management fees were earned from perpetual capital or long-dated funds. The charts below present the composition of our segment management fees by the initial fund duration:
ares-20220930_g9.jpg    ares-20220930_g10.jpg
Long-Dated Funds(1)
Perpetual Capital - Commingled Funds
Perpetual Capital - Managed AccountsOther
(1) Long-dated funds generally have a contractual life of five years or more at inception.


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. 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. The fund performance information reflected in this discussion and analysis is not indicative of our overall performance. An investment in Ares is not an investment in any of our funds. Past performance is not indicative of future results. As with any investment, there is always the potential for gains as well as the possibility of losses. There can be no assurance that any of these funds or our other existing and future funds will achieve similar returns.
Fund performance metrics for significant funds may be marked as “NM” as they may not be considered meaningful due to the limited time since the initial investment and/or early stage of capital deployment.

To further facilitate an understanding of the impact a significant fund may have on our results, we present our drawdown funds as either harvesting investments or deploying capital to indicate the fund's stage in its life cycle. A fund harvesting investments is generally not seeking to deploy capital into new investment opportunities, while a fund deploying capital is generally seeking new investment opportunities.
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Consolidation and Deconsolidation of Ares Funds
Consolidated Funds represented approximately 4% of our AUM as of September 30, 2022, 2% of our management fees and less than 1% of our carried interest and incentive fees for the nine months ended September 30, 2022. As of September 30, 2022, we consolidated 25 CLOs and 10 private funds and one SPAC, and as of September 30, 2021, we consolidated 22 CLOs, 10 private funds and one SPAC.
The activity of the Consolidated Funds is reflected within the unaudited condensed consolidated financial statement line items indicated by reference thereto. 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. Generally, the consolidation of our Consolidated Funds has a significant gross-up effect on our assets, liabilities and cash flows but has no net effect on the net income attributable to us or our stockholders' equity, except where a reallocation of ownership occurs based on specific redemption or liquidation preference terms. The net economic ownership interests of our Consolidated Funds, to which we have no economic rights, are reflected as redeemable and non-controlling interests in the Consolidated Funds in our unaudited condensed consolidated financial statements. Redeemable interest in Consolidated Funds represent the shares issued by Ares Acquisition Corporation (“AAC”) that are redeemable for cash by the public shareholders in connection with AAC’s failure to complete a business combination or tender offer associated with stockholder approval provisions.
We generally deconsolidate funds and CLOs when we are no longer deemed to have a controlling interest in the entity. During the nine months ended September 30, 2022, we did not deconsolidate any entities. During the nine months ended September 30, 2021, we deconsolidated one CLO as a result of a significant change in ownership.
The performance of our Consolidated Funds is not necessarily consistent with, or representative of, the combined performance trends of all of our funds.
For the actual impact that consolidation had on our results and further discussion on consolidation and deconsolidation of funds, see “Note 16. Consolidation” to our unaudited condensed consolidated financial statements included herein.
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Results of Operations
Consolidated Results of Operations
We consolidate funds and entities where we are deemed to hold a controlling financial interest. The Consolidated Funds are not necessarily the same entities in each year presented due to changes in ownership, changes in limited partners' or investor rights, and the creation and termination of funds and entities. The consolidation of these funds and entities had no effect on net income attributable to us for the periods presented. As such, we separate the analysis of the Consolidated Funds and evaluate that activity in total. The following table and discussion sets forth information regarding our consolidated results of operations ($ in thousands):

Three months ended September 30,Favorable (Unfavorable)Nine months ended September 30,Favorable (Unfavorable)
20222021$ Change% Change20222021$ Change% Change
Revenues
Management fees$548,458 $448,262 $100,196 22%$1,546,350 $1,135,821 $410,529 36%
Carried interest allocation192,186 460,651 (268,465)(58)417,779 1,610,707 (1,192,928)(74)
Incentive fees8,882 696 8,186 NM29,979 19,420 10,559 54
Principal investment income11,582 14,250 (2,668)(19)15,521 86,477 (70,956)(82)
Administrative, transaction and other fees40,182 24,860 15,322 62108,090 49,501 58,589 118
Total revenues801,290 948,719 (147,429)(16)2,117,719 2,901,926 (784,207)(27)
Expenses
Compensation and benefits425,419 335,569 (89,850)(27)1,155,031 837,108 (317,923)(38)
Performance related compensation142,934 331,141 188,207 57316,818 1,208,954 892,136 74
General, administrative and other expenses319,352 134,453 (184,899)(138)562,441 285,471 (276,970)(97)
Expenses of Consolidated Funds10,397 12,104 1,707 1428,364 31,575 3,211 10
Total expenses898,102 813,267 (84,835)(10)2,062,654 2,363,108 300,454 13
Other income (expense)
Net realized and unrealized gains on investments4,431 8,334 (3,903)(47)10,765 18,744 (7,979)(43)
Interest and dividend income2,086 1,376 710 525,064 6,818 (1,754)(26)
Interest expense(18,307)(11,523)(6,784)(59)(51,174)(25,125)(26,049)(104)
Other income, net2,601 36,654 (34,053)(93)10,194 30,686 (20,492)(67)
Net realized and unrealized gains (losses) on investments of Consolidated Funds(30)34,245 (34,275)NM8,031 44,720 (36,689)(82)
Interest and other income of Consolidated Funds158,415 104,028 54,387 52396,080 333,745 62,335 19
Interest expense of Consolidated Funds(112,762)(61,578)(51,184)(83)(266,028)(191,577)(74,451)(39)
Total other income, net36,434 111,536 (75,102)(67)112,932 218,011 (105,079)(48)
Income (loss) before taxes(60,378)246,988 (307,366)NM167,997 756,829 (588,832)(78)
Income tax expense (benefit)(11,599)30,275 41,874 NM22,272 104,487 82,215 79
Net income (loss)(48,779)216,713 (265,492)NM145,725 652,342 (506,617)(78)
Less: Net income attributable to non-controlling interests in Consolidated Funds16,340 47,370 (31,030)(66)48,700 102,255 (53,555)(52)
Net income (loss) attributable to Ares Operating Group entities(65,119)169,343 (234,462)NM97,025 550,087 (453,062)(82)
Less: Net income attributable to redeemable interest in Ares Operating Group entities93 324 (231)(71)35 693 (658)(95)
Less: Net income (loss) attributable to non-controlling interests in Ares Operating Group entities(29,666)84,293 (113,959)NM46,942 264,646 (217,704)(82)
Net income (loss) attributable to Ares Management Corporation(35,546)84,726 (120,272)NM50,048 284,748 (234,700)(82)
Less: Series A Preferred Stock dividends paid— — — —— 10,850 (10,850)(100)
Less: Series A Preferred Stock redemption premium— — — —— 11,239 11,239 100
Net income (loss) attributable to Ares Management Corporation Class A and non-voting common stockholders$(35,546)$84,726 (120,272)NM$50,048 $262,659 (212,611)(81)
NM - Not Meaningful
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Three and Nine Months Ended September 30, 2022 Compared to Three and Nine Months Ended September 30, 2021 
Consolidated Results of Operations of the Company
Management Fees. Management fees increased by $100.2 million, or 22%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $410.5 million, or 36%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increase was primarily driven by higher FPAUM from capital deployment in direct lending funds. The Landmark Acquisition, which was completed on June 2, 2021, contributed additional fees of $80.1 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Funds from the Black Creek Acquisition, which was completed on July 1, 2021, contributed additional fees of $17.1 million and $76.9 million for the three and nine months ended September 30, 2022, respectively, compared to the three and nine months ended September 30, 2021 primarily driven by additional capital raised in the non-traded REITs and also fees generated for the full period for the nine months ended September 30, 2022. The Infrastructure Debt Acquisition, which was completed on February 10, 2022, contributed additional fees of $10.7 million and $25.3 million for the three and nine months ended September 30, 2022, respectively. For detail regarding the fluctuations of management fees within each of our segments see “—Results of Operations by Segment.”

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Carried Interest Allocation. Carried interest allocation decreased by $268.5 million, or 58%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $1,192.9 million, or 74%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The activity was principally composed of the following ($ in millions):
Three months ended September 30, 2022Primary DriversThree months ended September 30, 2021Primary Drivers
Credit funds$43.0 
Primarily from two direct lending funds with $13.3 billion of IGAUM generating returns in excess of their hurdle rates. Ares Capital Europe V L.P. (“ACE V”) generated $17.6 million of carried interest allocation driven by net investment income on an increasing invested capital base. Ares Capital Europe IV, L.P. (“ACE IV”) generated carried interest allocation of $12.5 million, driven by net investment income during the period.
$92.6 
Primarily from four direct lending funds and one alternative credit fund with $16.1 billion of IGAUM generating returns in excess of their hurdle rates. Ares Private Credit Solutions, L.P. (“PCS”) and ACE IV generated carried interest allocation of $11.7 million and $27.5 million, respectively. ACE V also generated $18.0 million of carried interest allocation. The carried interest allocation generated by these funds was driven by net investment income on an increasing invested capital base. Ares Capital Europe III (“ACE III”) generated carried interest allocation of $10.5 million driven by net investment income during the period. Ares Pathfinder Fund, L.P. (“Pathfinder”) generated carried interest allocation of $16.0 million that was driven by market appreciation of various investments.
Private equity funds130.4 Appreciation across several portfolio company investments, driven by improving operating performance metrics from portfolio companies that primarily operate in industries such as retail, healthcare and energy, generated carried interest allocation of $45.1 million from Ares Corporate Opportunities Fund V, L.P. (“ACOF V”), $20.4 million from Ares Corporate Opportunities Fund VI, L.P. (“ACOF VI”), $28.0 million from Ares Special Situations Fund IV, L.P. (“SSF IV”) and $35.6 million from Ares Special Opportunities Fund, L.P. (“ASOF”).235.4 
Market appreciation across several portfolio company investments, primarily operating in the services and technology, retail and healthcare industries, generated carried interest allocation of $141.5 million from ACOF V, $72.5 million from ASOF and $16.9 million from ACOF VI. Market depreciation across several investments led to a reversal of carried interest allocation for Ares Corporate Opportunities Fund IV, L.P. (“ACOF IV”) of $6.9 million, primarily due to a lower stock price for AZEK.
Real assets funds33.7 
Ares Climate Infrastructure Partners, L.P. (“ACIP”) and related vehicles and Ares Energy Investors Fund V, L.P. (“EIF V”) generated carried interest allocation of $30.0 million and $29.8 million, respectively, due to market appreciation of certain investments. Appreciation from properties within Ares U.S. Real Estate Fund VIII, L.P. (“US VIII”), driven by increasing operating income primarily from industrial and multifamily investments, generated carried interest allocation of $3.5 million. In addition, realized gains from the sale of properties generated carried interest allocation of $6.4 million from Ares U.S. Real Estate Opportunity Fund III, L.P. (“AREOF III”). The activity was partially offset by the reversal of unrealized carried interest of $32.2 million from Ares European Real Estate Fund V, L.P. (“EF V”), driven by a lower stock price for one of its publicly traded investments, and $5.7 million from Ares European Real Estate Fund IV, L.P. (“EF IV”) due to lower valuations of certain properties.
95.4 
Market appreciation from properties within real estate equity funds, primarily driven by gains generated across several industrial and multifamily assets, generated carried interest allocation of $11.5 million from US VIII, $35.8 million from Ares U.S. Real Estate Fund IX, L.P (“US IX”), $12.7 million from AREOF III, $11.0 million from EF IV and $13.8 million from EF V. Market depreciation across several investments led to a reversal of carried interest allocation for EIF V of $7.1 million primarily due to a decrease in value of certain energy investments.
Secondaries funds
(15.0)
Depreciation across several investments in Landmark Equity Partners XVI, L.P. (“LEP XVI”), primarily driven by the impact of foreign exchange revaluations on underlying limited partnership interests, led to the reversal of unrealized carried interest of $20.7 million, partially offset by market appreciation of certain investments in Landmark Real Estate Partners VIII, L.P. (“LREP VIII”) that generated carried interest allocation of $11.6 million.
37.7 
Market appreciation of certain investments held in LEP XVI and LREP VIII that generated carried interest allocation of $14.1 million and $17.3 million, respectively.
Strategic initiatives funds0.1 Carried interest allocation generated from Ares SSG Secured Lending Opportunities III, L.P. ("SLO III") primarily driven by higher net investment income.(0.4)Reversal driven by the market influence of residential housing lending in Asia on certain investments held in SLO III.
Carried interest allocation$192.2 $460.7 
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Nine months ended September 30, 2022Primary DriversNine months ended September 30, 2021Primary Drivers
Credit funds$134.5 Primarily from four direct lending funds and one alternative credit fund with $19.7 billion of IGAUM generating returns in excess of their hurdle rates. ACE V and Pathfinder generated carried interest allocation of $53.8 million and $25.9 million, respectively, driven by net investment income on an increasing invested capital base. ACE IV, ACE III and PCS generated carried interest allocation of $32.8 million, $10.2 million and $10.2 million, respectively, primarily driven by net investment income during the period. $292.8 
Primarily from four direct lending funds and one alternative credit fund with $16.1 billion of IGAUM generating returns in excess of their hurdle rates. PCS and ACE IV generated carried interest allocation of $45.3 million and $84.7 million, respectively. ACE V also generated carried interest allocation of $32.5 million. The carried interest allocation generated by these funds was driven by net investment income on an increasing invested capital base. ACE III generated carried interest allocation of $36.4 million primarily driven by net investment income during the period. In addition, Pathfinder generated carried interest allocation of $43.3 million that was driven by market appreciation of various investments.
Private equity funds127.7 Appreciation across several portfolio company investments, driven by improving operating performance metrics from portfolio companies that primarily operate in industries such as services, technology, retail, healthcare and energy, generated carried interest allocation of $84.8 million from ACOF V, $51.3 million from ACOF VI, $23.6 million from SSF IV and $39.3 million from ASOF. The appreciation was partially offset by the reversal of unrealized carried interest allocation of $24.5 million and $58.6 million from Ares Corporate Opportunities Fund III, L.P. (“ACOF III”) and ACOF IV, respectively, primarily driven by lower stock prices for certain publicly traded investments.982.6 
ACOF IV generated carried interest allocation of $171.1 million primarily due to market appreciation of its investment in AZEK driven by its higher stock price. In addition, market appreciation across several portfolio company investments, primarily operating in the services and technology, retail and healthcare industries, generated carried interest allocation of $532.2 million from ACOF V, $192.4 million from ASOF and $63.9 million from ACOF VI.
Real assets funds110.8 
ACIP and related vehicles and EIF V generated carried interest allocation of $34.1 million and $24.4 million, respectively, due to market appreciation of certain investments. Appreciation from properties within real estate equity funds, driven by increasing operating income primarily from industrial and multifamily investments, generated carried interest allocation of $17.6 million from US IX, $15.7 million from US VIII and $9.4 million from Ares U.S. Real Estate Fund X, L.P. (“US X”). In addition, realized gains from the sale of properties generated carried interest allocation of $29.7 million from AREOF III. The activity was partially offset by the reversal of unrealized carried interest of $42.2 million from EF V, driven by a lower stock price for one of its publicly traded investments.
236.3 
Market appreciation from properties within real estate equity funds, primarily driven by gains generated across several industrial and multifamily assets, generated carried interest allocation of $33.1 million from US VIII, $61.6 million from US IX, $17.5 million from AREOF III, $10.9 million from EF IV and $61.3 million from EF V.
Secondaries funds
44.6 Market appreciation of certain investments held in LREP VIII that generated carried interest allocation of $37.8 million.98.9 
Market appreciation of certain investments held in LEP XVI and LREP VIII that generated carried interest allocation of $54.6 million and $26.1 million, respectively.
Strategic initiatives funds0.2 Carried interest allocation generated from SLO III primarily driven by higher net investment income.0.1 Market appreciation of certain investments held in SLO III.
Carried interest allocation$417.8 $1,610.7 

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Incentive Fees. Incentive fees increased by $8.2 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $10.6 million, or 54%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The activity was principally composed of the following ($ in millions):
Three months ended September 30, 2022Primary DriversThree months ended September 30, 2021Primary Drivers
Credit funds$0.1 
Incentive fees generated from a U.S. CLO.
$0.1 Incentive fees generated from one alternative credit fund.
Real assets funds8.6 Incentive fees generated from an industrial real estate fund and ACRE.0.6 Incentive fees generated from ACRE.
Secondaries funds
0.2 Incentive fees generated from APMF.— N/A
Incentive fees$8.9 $0.7 
Nine months ended September 30, 2022Primary DriversNine months ended September 30, 2021Primary Drivers
Credit funds$15.9 
Incentive fees generated from three direct lending funds and one alternative credit fund.
$17.5 Incentive fees generated from one alternative credit fund and one CLO.
Real assets funds13.5 Incentive fees generated from an industrial real estate fund and ACRE.1.9 Incentive fees generated from ACRE.
Secondaries funds
0.6 Incentive fees generated from a private equity secondaries fund and APMF.— N/A
Incentive fees$30.0 $19.4 
Principal Investment Income. Principal investment income decreased by $2.7 million, or 19%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and decreased by $71.0 million, or 82%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The activity for the three and nine months ended September 30, 2022 was primarily due to appreciation of various investments across funds in our infrastructure opportunities and special opportunities strategies. The activity for the nine months ended September 30, 2022 also included dividend income from various investments across funds in our U.S. and European direct lending strategies and realizations from the sale of underlying properties held by funds in our U.S. real estate equity strategy.
The activity for the three and nine months ended September 30, 2021 was driven by market appreciation of several investments in funds within our private equity secondaries, real estate secondaries and special opportunities strategies. The activity for the nine months ended September 30, 2021 also included market appreciation of various investments within our corporate private equity extended value fund and ACOF VI.
Administrative, Transaction and Other Fees. Administrative, transaction and other fees increased by $15.3 million, or 62%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $58.6 million, or 118%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increases were primarily due to higher property-related fees, such as acquisition, development and property management, and the distribution of fund shares in our non-traded REITs. These fees collectively increased by $13.6 million and $41.2 million for the three and nine months ended September 30, 2022, respectively, compared to the three and nine months ended September 30, 2021. In addition, certain private funds pay administrative fees on invested capital and deployment will result in a higher fee base. Administrative fees from these private funds increased by $1.8 million and $5.2 million for the three and nine months ended September 30, 2022, respectively, compared to the three and nine months ended September 30, 2021. The administrative fees from the funds that were acquired in the Black Creek Acquisition on July 1, 2021 increased by $15.4 million for the nine months ended September 30, 2022 compared to the same period in 2021.
Compensation and Benefits. Compensation and benefits increased by $89.9 million, or 27%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $317.9 million, or 38%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increases were primarily driven by (i) headcount growth to support the expansion of our business, (ii) strategic initiatives and acquisitions, (iii) higher incentive compensation attributable to improved operating performance and (iv) higher employee commission expense in connection with the sale and distribution of fund shares in our non-traded REITs. Average headcount for the year-to-date period increased by 34% to 2,238 professionals for the 2022 period from 1,674 professionals for the same period in 2021.
Headcount growth attributable to our strategic acquisitions contributed $102.6 million to the increase in salaries and benefits for the nine months ended September 30, 2022 when compared to the same period in 2021, of which the Infrastructure
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Debt Acquisition that closed in the first quarter of 2022 has contributed $4.9 million and $12.7 million in recurring employment related costs for the three and nine months ended September 30, 2022, respectively.
The performance-based, acquisition-related compensation arrangements (“earnouts”) that were established in connection with the Landmark Acquisition, Black Creek Acquisition and Infrastructure Debt Acquisition are based on the achievement of revenue targets for certain funds. As all earnouts are subject to the continued and future services of senior professionals and advisors, they are required to be recorded as compensation expense and recognized ratably over the respective service periods. The revenue targets for the Black Creek earnout were achieved and the maximum contingent payment was recorded during the three months ended September 30, 2022. Compensation expense related to the Black Creek earnout was $130.6 million and $218.1 million for the three and nine months ended September 30, 2022, respectively, and $13.5 million for the three and nine months ended September 30, 2021. Compensation expense related to the Infrastructure Debt earnout was $2.8 million and $7.1 million for the three and nine months ended September 30, 2022, respectively. In connection with current fundraising expectations for an acquired Landmark private equity secondaries fund, we determined that the revenue targets on which the Landmark earnout is contingent are not expected to be achieved. This resulted in a reversal of all previously recorded expenses of $36.7 million and $21.0 million for the three and nine months ended September 30, 2022, respectively, compared to compensation expense of $14.7 million and $19.3 million for the three and nine months ended September 30, 2021, respectively. See “Note 9. Commitments and Contingencies” for a further description of the contingent liabilities related to these arrangements.
The following table presents equity compensation expense based on the different types of restricted unit awards ($ in thousands):
 Three months ended September 30,Favorable (Unfavorable)Nine months ended September 30,Favorable (Unfavorable)
20222021$ Change% Change20222021$ Change% Change
Non-recurring awards:
   Multi-year future grants$11,099 $7,886 $(3,213)(41)$32,271 $25,021 $(7,250)(29)
   Performance-based awards— 186 186 100— 20,499 20,499 100
   Performance-based awards - accelerated— 29,415 29,415 100— 43,426 43,426 100
   Other non-recurring awards1,622 5,099 3,477 685,803 17,832 12,029 67
Total non-recurring awards12,721 42,586 29,865 7038,074 106,778 68,704 64
Recurring annual awards:
   Discretionary awards24,142 11,986 (12,156)(101)69,275 47,938 (21,337)(45)
   Bonus awards11,255 11,419 164 144,054 36,428 (7,626)(21)
Total recurring annual awards35,397 23,405 (11,992)(51)113,329 84,366 (28,963)(34)
Equity compensation expense, net$48,118 $65,991 17,873 27$151,403 $191,144 39,741 21

Equity compensation expense decreased by $17.9 million and by $39.7 million for the three and nine months ended September 30, 2022, respectively, compared to the three and nine months ended September 30, 2021. The decreases were primarily attributable to non-recurring equity compensation expense recognized during the three and nine months ended September 30, 2021 related to performance-based awards with market conditions that were granted to certain executive officers in the first quarter of 2021 and to other non-recurring awards with service conditions that substantially vested prior to 2022. The decrease in equity compensation expense was partially offset by the increase in awards granted as part of the recurring annual award programs. Additional multi-year future grants were approved in the first quarter of 2022 with grant dates in 2023, 2024 and 2025. Given that these future restricted units have been communicated to the recipient, we account for these awards as if they have been granted and recognize the compensation expense on a straight-line basis over the service period.
For detail regarding the fluctuations of compensation and benefits within each of our segments see “—Results of Operations by Segment.”
Performance Related Compensation. Performance related compensation decreased by $188.2 million, or 57%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $892.1 million, or 74%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Changes in performance related compensation are directly associated with the changes in carried interest allocation and incentive fees described above and may include performance allocations to charitable organizations as part of our philanthropic initiatives.
General, Administrative and Other Expenses. General, administrative and other expenses increased by $184.9 million, or 138%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $277.0 million, or 97%, for the nine months ended September 30, 2022 compared to the nine months ended September 30,
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2021. During the three months ended September 30, 2022, we recognized non-cash impairment charges of $181.6 million to certain intangible assets comprised of i) $86.2 million to the carrying value of the Landmark trade name following our decision to rebrand our secondaries group as Ares Secondaries and to discontinue the ongoing use of the Landmark trade name, ii) $88.4 million to the fair value of a management contract in connection with lower than expected FPAUM resulting from missing fundraising targets for an acquired Landmark private equity secondaries fund and iii) $7.1 million of accelerated amortization expense in connection with the impairment of certain acquired management contracts as a result of returning capital to fund investors sooner than initially planned. See “Note 4. Goodwill and Intangible Assets” for a further description of the impairment of intangible assets.
The Infrastructure Debt Acquisition, which was completed on February 10, 2022, has contributed $6.2 million and $16.0 million in general, administrative and other expenses to the three and nine months ended September 30, 2022, respectively. These expenses increased primarily due to (i) amortization expense of $4.6 million and $12.2 million related to the intangible assets recorded in connection with the acquisition and (ii) certain professional services of $0.9 million and $1.7 million for the three and nine months ended September 30, 2022, respectively. In addition, the Black Creek Acquisition and Landmark Acquisition have collectively contributed to an increase in general, administrative and other expenses of $54.4 million for the first half of 2022 compared to the same period in 2021. These expenses primarily consisted of (i) amortization expense of $33.8 million related to the intangible assets recorded in connection with the acquisitions and (ii) certain recurring operating expenses, including occupancy costs, information services, information technology and office services of $7.1 million.
Excluding the impact from the Black Creek Acquisition, Landmark Acquisition and Infrastructure Debt Acquisition, certain expenses have also increased during the current period, including occupancy costs to support our growing headcount, as well as information services and information technology costs to support the expansion of our business. Collectively, these expenses increased by $4.9 million and $10.3 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. Other operating expenses, most notably travel, marketing sponsorships and certain fringe benefits, collectively increased by $11.2 million and $34.4 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021, as travel, marketing and company events have returned to pre-pandemic levels.
Placement fees were $18.3 million for the three months ended September 30, 2022, a decrease of $21.2 million compared to the three months ended September 30, 2021, and $30.7 million for the nine months ended September 30, 2022, a decrease of $17.8 million compared to the nine months ended September 30, 2021. The activity for the three and nine months ended September 30, 2022 was primarily attributable to new commitments to Ares Special Opportunities Fund II, L.P. (“ASOF II”). The activity for the three and nine months ended September 30, 2021 was primarily attributable to new commitments to Ares Private Credit Solutions II, L.P. (“PCS II”) and Ares Senior Direct Lending Fund II, L.P. (“SDL II”).
Acquisition-related costs decreased by $6.4 million for the nine months ended September 30, 2022 compared to the same period in 2021. Acquisition-related costs generally precede a business combination, vary with the complexity of the transaction and may occur even when acquisitions are not successfully completed. The activity for the nine months ended September 30, 2022 was primarily attributable to the Infrastructure Debt Acquisition, whereas the activity for the nine months ended September 30, 2021 was largely composed of the Black Creek Acquisition and Landmark Acquisition, which were collectively larger in terms of size and scope.
Net Realized and Unrealized Gains on Investments. Net realized and unrealized gains on investments decreased by $3.9 million, or 47%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and decreased by $8.0 million, or 43%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The activity for the three and nine months ended September 30, 2022 and 2021 was primarily attributable to unrealized gains from certain strategic initiative investments made in connection with our acquisition of SSG. The activity for the nine months ended September 30, 2022 also included unrealized losses on our investments in the subordinated notes of U.S. CLOs. The CSLLI declined 3.3% for the nine months ended September 30, 2022 compared to a positive return of 4.7% for the nine months ended September 30, 2021. The activity for the three and nine months ended September 30, 2021 was also attributable to unrealized gains on our investments in the subordinated notes of U.S. CLOs.
Interest Expense. Interest expense increased by $6.8 million, or 59%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $26.0 million, or 104%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The issuance of the 2052 Senior Notes in January 2022 increased interest expense by $4.7 million and $12.9 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. Higher average interest rates, driven by rising SOFR rates, and a higher average outstanding balance of the Credit Facility in the third quarter of 2022 also contributed to an increase in interest expense of $2.2 million and $3.7 million for the three and nine months ended September 30, 2022, respectively, compared to the same
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periods in the prior year. The issuance of the 2051 Subordinated Notes on the last day of the second quarter of 2021 has also increased interest expense by $9.3 million for the nine months ended September 30, 2022 compared to the same period in 2021.
Other Income, Net. Other income, net decreased by $34.1 million, or 93%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and decreased by $20.5 million, or 67%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Other income, net includes transaction gains (losses) associated with currency fluctuations impacting the revaluation of non-functional currency balances. Transaction gains of $1.9 million and $10.7 million for the three and nine months ended September 30, 2022, respectively, were primarily attributable to the British pound weakening against the Euro. The three and nine months ended September 30, 2021 included transaction gains of $1.3 million and transaction losses of $4.0 million, respectively, primarily attributable to the partial recovery of the Euro in the third quarter of 2021 against the losses incurred in the first half of 2021 from the Euro weakening against the British pound.
Other income, net also includes the change in fair value of a contingent obligation recognized in connection with the Black Creek Acquisition. The purchase agreement with Black Creek contains provisions that required us to record separate contingent consideration liabilities that are (i) dependent on the achievement of revenue targets for certain funds that were acquired in the Black Creek Acquisition and (ii) obligated us to pay the sellers 50% of the incentive fees realized for the non-traded REITs for the year ended December 31, 2021. The revenue targets for the Black Creek earnout were fully achieved and the maximum contingent payment was recorded during the three months ended September 30, 2022. For the three and nine months ended September 30, 2022, we recorded $0.3 million and $1.4 million, respectively, in expense for the revaluation of the contingent obligation related to the achievement of revenue targets compared to $3.0 million in expense for each of the three and nine months ended September 30, 2021. The three and nine months ended September 30, 2021 also included $4.2 million in expense for the revaluation of the contingent obligation related to the 50% portion of incentive fees payable to the sellers. See Note 9. Commitments and Contingencies for a further description of the contingency.

Finally, other income, net for the three and nine months ended September 30, 2021 included a $42.3 million bargain purchase gain from the Black Creek Acquisition. The bargain purchase gain resulted from the fair value of the identifiable tangible and intangible assets that we acquired exceeding the purchase consideration.
Income Tax Expense (Benefit) Income tax expense (benefit) decreased by $41.9 million to a tax benefit of $11.6 million for the three months ended September 30, 2022 and by $82.2 million, or 79%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The decreases were attributable to the net losses allocable to AMC during the three months ended September 30, 2022. The calculation of income taxes is sensitive to any changes in weighted average daily ownership. The weighted average daily ownership for AMC common stockholders increased from 58.5% and 58.3% for the three and nine months ended September 30, 2021 to 59.7% and 59.6% for the three and nine months ended September 30, 2022. The changes in ownership were primarily driven by the issuance of Class A common stock in connection with stock option exercises and vesting of restricted stock awards. The increase in the weighted average daily ownership for the AMC common stockholders was partially offset by the issuance of AOG Units in connection with the Landmark Acquisition and the Black Creek Acquisition that increased the ownership of AOG Units not held by AMC.
Redeemable and Non-Controlling Interests. 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. 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 income attributable to redeemable interest in AOG entities is allocated based on the ownership percentage for periods presented.
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. Net income (loss) is allocated to other strategic distribution partners with whom we have established joint ventures based on the respective ownership percentages and based on the activity of certain membership interests. Net income of $5.5 million, $6.5 million and $4.9 million, $7.9 million for the three and nine months ended September 30, 2022 and 2021, respectively, was allocated based on ownership percentages of the strategic distribution partners and the activity of those membership interests.
Net income (loss) attributable to non-controlling interests in AOG entities decreased by $114.0 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $217.7 million, or 82%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The changes in the comparative periods are a result of the respective changes in income before taxes and weighted average daily ownership. The weighted average daily ownership for the non-controlling AOG unitholders decreased from 41.5% and 41.7% for the three and nine months ended September 30, 2021 to 40.3% and 40.4% for the three and nine months ended September 30, 2022.
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Consolidated Results of Operations of the Consolidated Funds
The following table presents the results of operations of the Consolidated Funds ($ in thousands):
 Three months ended September 30,Favorable (Unfavorable)Nine months ended September 30,Favorable (Unfavorable)
20222021$ Change% Change20222021$ Change% Change
Expenses of the Consolidated Funds$(10,397)$(12,104)$1,707 14%$(28,364)$(31,575)$3,211 10%
Net realized and unrealized gains (losses) on investments of Consolidated Funds(30)34,245 (34,275)NM8,031 44,720 (36,689)(82)
Interest and other income of Consolidated Funds158,415 104,028 54,387 52396,080 333,745 62,335 19
Interest expense of Consolidated Funds(112,762)(61,578)(51,184)(83)(266,028)(191,577)(74,451)(39)
Income before taxes35,226 64,591 (29,365)(45)109,719 155,313 (45,594)(29)
Income tax expense of Consolidated Funds(149)(2)(147)NM(197)(76)(121)(159)
Net income35,077 64,589 (29,512)(46)109,522 155,237 (45,715)(29)
Less: Revenues attributable to Ares Management Corporation eliminated upon consolidation13,484 21,784 (8,300)(38)69,487 58,072 11,415 20
Less: Other income (expense), net attributable to Ares Management Corporation eliminated upon consolidation5,267 (4,565)9,832 NM(8,424)(5,090)(3,334)(66)
Add: General, administrative and other expense attributable to Ares Management Corporation eliminated upon consolidation14 — (14)NM241 — (241)NM
Net income attributable to non-controlling interests in Consolidated Funds$16,340 $47,370 (31,030)(66)$48,700 $102,255 (53,555)(52)
NM - Not Meaningful

The results of operations of the Consolidated Funds primarily represents activity from certain CLOs that we are deemed to control. Expenses primarily reflect professional fees that were incurred as a result of debt issuance costs related to the issuance of new, refinanced or restructured CLOs. These fees were expensed in the period incurred, as CLO debt is recorded at fair value on our Consolidated Statements of Financial Condition. As of September 30, 2022 and September 30, 2021, we consolidated 25 and 22 CLOs, respectively. For the three and nine months ended September 30, 2022, expenses were primarily driven by professional fees incurred from the issuance of two new U.S. CLOs during 2022. For the three and nine months ended September 30, 2021, expenses were primarily driven by professional fees incurred from the issuance of two new U.S. CLOs and the restructure of the European CLOs legal entities. Net realized and unrealized gains fluctuated for the comparative periods, primarily due to a significant change in the value of loans held by the CLOs. The CSLLI declined 3.3% for the nine months ended September 30, 2022 compared to a positive return of 4.7% for the nine months ended September 30, 2021. The increases in interest and other income and interest expense were attributable to the consolidation of three CLOs subsequent to the second quarter of 2021 and one CLO that closed during the last week of the second quarter of 2021.
Revenues, other income (expense), net and general, administrative and other expense attributable to AMC represents management fees, incentive fees, principal investment income, administrative, transaction and other fees and general, administrative and other expense that are attributable to AMC’s proportional share in the activity of the Consolidated Funds and is eliminated from the respective components of AMC’s results upon consolidation. The decrease in revenues attributable to AMC for the three months ended September 30, 2022 compared to the same period in 2021 was primarily attributable to lower principal investment income from a fund invested in insurance companies, while the increase for the nine months ended September 30, 2022 compared to the same period in 2021 was primarily attributable to higher principal investment income from a fund invested in insurance companies and an Asian corporate private equity fund.

Other income (expense), net attributable to AMC for the three and nine months ended September 30, 2022 and 2021 was primarily attributable to unrealized losses on our investments in the subordinated notes of U.S. CLOs. Other income (expense), net attributable to AMC for the three months ended September 30, 2022 and 2021 also included unrealized losses on investments from our SPAC.

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Segment Analysis
For segment reporting purposes, revenues and expenses are presented before giving effect to the results of our Consolidated Funds and the results attributable to non-controlling interests of joint ventures that we consolidate. As a result, segment revenues from management fees, fee related performance revenues, performance income and investment income are different than those presented on a consolidated basis in accordance with GAAP. Revenues recognized from Consolidated Funds are eliminated in consolidation and results attributable to the non-controlling interests of joint ventures have been excluded by us. Furthermore, expenses and the effects of other income (expense) are different than related amounts presented on a consolidated basis in accordance with GAAP due to the exclusion of the results of Consolidated Funds and the non-controlling interests of joint ventures.
Non-GAAP Financial Measures
We use the following non-GAAP measures to make operating decisions, assess performance and allocate resources:
•Fee Related Earnings (“FRE”)
•Realized Income (“RI”)
These non-GAAP financial measures supplement and should be considered in addition to and not in lieu of, the results of operations, which are discussed further under “—Components of Consolidated Results of Operations” and are prepared in accordance with GAAP. On January 1, 2022, we changed our segment composition and established the Real Assets Group. The Real Assets Group consists of the activities of the former Real Estate Group and the infrastructure and power strategy, now referred to as infrastructure opportunities, that was formerly presented within the Private Equity Group. The Real Assets Group also includes infrastructure debt following the Infrastructure Debt Acquisition. We reclassified activities from the infrastructure opportunities strategy in the Private Equity Group and from the former Real Estate Group to the Real Assets Group to better align the segment presentation with how the asset classes within the investment strategies are managed. Historical periods have been modified to conform to the current period presentation. During the third quarter of 2022, we renamed the Secondary Solutions Group segment to the Secondaries Group. The segment name change did not result in any change to the composition of our segments and therefore did not result in any change to historical results. The following table sets forth FRE and RI by reportable segment and OMG ($ in thousands):

 Three months ended September 30,Favorable (Unfavorable)Nine months ended September 30,Favorable (Unfavorable)
20222021$ Change% Change20222021$ Change% Change
Fee Related Earnings:
Credit Group$232,918 $175,957 $56,961 32%$650,801 $493,214 $157,587 32%
Private Equity Group18,183 28,983 (10,800)(37)54,214 59,258 (5,044)(9)
Real Assets Group46,382 32,450 13,932 43134,844 69,583 65,261 94
Secondaries Group
22,214 26,516 (4,302)(16)80,111 34,266 45,845 134
Strategic Initiatives
8,905 9,456 (551)(6)24,924 28,025 (3,101)(11)
Operations Management Group(95,444)(90,803)(4,641)(5)(286,287)(225,369)(60,918)(27)
Fee Related Earnings$233,158 $182,559 50,599 28$658,607 $458,977 199,630 43
Realized Income:
Credit Group$243,710 $182,152 $61,558 34%$690,736 $532,359 $158,377 30%
Private Equity Group14,204 40,050 (25,846)(65)47,631 91,035 (43,404)(48)
Real Assets Group55,630 34,610 21,020 61166,595 87,049 79,546 91
Secondaries Group20,884 26,788 (5,904)(22)80,245 34,535 45,710 132
Strategic Initiatives
4,757 6,509 (1,752)(27)15,708 23,234 (7,526)(32)
Operations Management Group(95,743)(91,233)(4,510)(5)(288,211)(225,596)(62,615)(28)
Realized Income$243,442 $198,876 44,566 22$712,704 $542,616 170,088 31

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Income before provision for income taxes is the GAAP financial measure most comparable to RI and FRE. The following table presents the reconciliation of income before taxes as reported in the Condensed Consolidated Statements of Operations to RI and FRE of the reportable segments and OMG ($ in thousands):
Three months ended September 30,Nine months ended September 30,
2022202120222021
Income (loss) before taxes$(60,378)$246,988 $167,997 $756,829 
Adjustments:
Depreciation and amortization expense(1)
219,339 36,668 297,795 71,742 
Equity compensation expense47,516 65,991 150,677 191,144 
Acquisition-related compensation expense(2)
96,697 28,194 204,189 32,824 
Acquisition and merger-related expense1,852 754 12,046 18,364 
Placement fees9,729 32,413 7,611 33,740 
Other (income) expense, net(1,059)(34,812)934 (34,666)
Net income of non-controlling interests in consolidated subsidiaries(5,616)(5,268)(6,583)(8,614)
Income before taxes of non-controlling interests in Consolidated Funds, net of eliminations(16,489)(47,372)(48,897)(102,331)
Total performance income—unrealized(170,789)(415,317)(280,290)(1,381,697)
Total performance related compensation—unrealized124,466 296,044 207,115 1,022,393 
Total net investment (income) loss—unrealized(1,826)(5,407)110 (57,112)
Realized Income243,442 198,876 712,704 542,616 
Total performance income—realized(29,984)(44,762)(143,946)(246,720)
Total performance related compensation—realized18,858 33,371 91,491 183,308 
Total investment (income) loss—realized842 (4,926)(1,642)(20,227)
Fee Related Earnings$233,158 $182,559 $658,607 $458,977 
(1)The three and nine months ended September 30, 2022 include non-cash impairment charges of $181.6 million recorded on certain intangible assets.
(2)Represents earnouts in connection with the Landmark Acquisition, the Black Creek Acquisition and the Infrastructure Debt Acquisition that are recorded as compensation expense and are presented within compensation and benefits in the Company’s Condensed Consolidated Statements of Operations.

For the specific components and calculations of these non-GAAP measures, as well as a reconciliation of the reportable segments to the most comparable measures in accordance with GAAP, see “Note 15. Segment Reporting” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Discussed below are our results of operations for our reportable segments and OMG.
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Results of Operations by Segment

Credit Group—Three and Nine Months Ended September 30, 2022 Compared to Three and Nine Months Ended September 30, 2021
Fee Related Earnings:
The following table presents the components of the Credit Group's FRE ($ in thousands):
 Three months ended September 30,Favorable (Unfavorable)Nine months ended September 30,Favorable (Unfavorable)
20222021$ Change% Change20222021$ Change% Change
Management fees$345,871 $271,591 $74,280 27%$972,201 $764,702 $207,499 27%
Fee related performance revenues— — — —12,628 1,331 11,297 NM
Other fees8,143 5,798 2,345 4020,528 18,494 2,034 11
Compensation and benefits(102,839)(86,502)(16,337)(19)(301,822)(253,597)(48,225)(19)
General, administrative and other expenses(18,257)(14,930)(3,327)(22)(52,734)(37,716)(15,018)(40)
Fee Related Earnings$232,918 $175,957 56,961 32$650,801 $493,214 157,587 32
NM - Not Meaningful
Management Fees. The chart below presents Credit Group management fees and effective management fee rates ($ in millions):
ares-20220930_g11.jpg
Management fees on existing funds increased primarily from deployment of capital with Pathfinder, ACE V and PCS II collectively generating additional fees of $20.3 million and $66.5 million for the three and nine months ended September 30, 2022, respectively, compared to the three and nine months ended September 30, 2021. Management fees from SDL II, which launched at the end of the second quarter of 2021, increased by $9.6 million and $26.9 million for the three and nine months ended September 30, 2022, respectively, compared to the three and nine months ended September 30, 2021. The launch of our
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open-end core alternative credit fund in the third quarter of 2021 also contributed to the increase in management fees, generating additional fees of $5.2 million and $9.1 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. Management fees from ARCC, excluding Part I Fees described below, increased by $12.6 million and $42.3 million for the three and nine months ended September 30, 2022, respectively, primarily due to an increase in the average size of ARCC's portfolio. The remaining increases in management fees from funds in existence in both periods was primarily driven by deployment of capital in other direct lending funds and SMAs. Management fees from CLOs also increased primarily due to the net addition of seven and six CLOs for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021.

Part I Fees increased for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 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.

The decreases in effective management fee rate for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021 were primarily driven by growth in lower fee generating strategies such as CLOs and our alternative credit funds, as well as deployment in Ares Senior Direct Lending Fund L.P. (“SDL”) and SDL II that have fee rates below 1.00%.

Fee Related Performance Revenues. Fee related performance revenues increased by $11.3 million to $12.6 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.The increase was primarily attributable to fee related performance revenues from three direct lending funds for the nine months ended September 30, 2022 and one direct lending fund for the nine months ended September 30, 2021. We expect the majority of our fee related performance revenues to be recognized in the fourth quarter in connection with the typical measurement period end date of each applicable fund’s performance against the annual performance hurdles.

Compensation and Benefits. Compensation and benefits increased by $16.3 million, or 19%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $48.2 million, or 19%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increases were primarily driven by higher incentive compensation attributable to increased fee revenues and improved operating performance. The increase in compensation and benefits for the three months ended September 30, 2022 compared to the same period in 2021 was partially offset by a decrease in payroll taxes of $3.9 million primarily attributable to the vesting of non-recurring equity compensation awards in the third quarter of 2021. The nine months ended September 30, 2022 also included fee related performance compensation of $7.4 million from direct lending SMAs from the first quarter of 2022 and payroll related taxes of $7.2 million primarily attributable to the increase in restricted unit awards that vested in the first quarter of 2022.

Average headcount for the year-to-date period increased by 3% to 444 investment and investment support professionals for the third quarter of 2022 from 429 professionals for the same period in 2021 as we continued to add professionals to support our growing U.S. and European direct lending and alternative credit platforms.

General, Administrative and Other Expenses. General, administrative and other expenses increased by $3.3 million, or 22%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $15.0 million, or 40%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Travel, marketing sponsorships and certain fringe benefits collectively increased by $2.1 million and $7.5 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021, as marketing and company events returned to pre-pandemic levels and travel continues to ramp up toward historical levels. In connection with our fundraising efforts, amortization of placement fees has increased by $4.4 million for the nine months ended September 30, 2022 compared to the same period in 2021. The increases were primarily associated with new commitments to PCS II and SDL II.
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Realized Income:
The following table presents the components of the Credit Group's RI ($ in thousands):
Three months ended September 30,Favorable (Unfavorable)Nine months ended September 30,Favorable (Unfavorable)
20222021$ Change% Change20222021$ Change% Change
Fee Related Earnings$232,918 $175,957 $56,961 32 %$650,801 $493,214 $157,587 32%
Performance income—realized3,045 6,332 (3,287)(52)58,941 76,924 (17,983)(23)
Performance related compensation—realized(1,737)(3,079)1,342 44(35,675)(48,619)12,944 27
Realized net performance income1,308 3,253 (1,945)(60)23,266 28,305 (5,039)(18)
Investment income—realized4,495 618 3,877 NM6,519 1,858 4,661 251
Interest and other investment income—realized8,893 4,716 4,177 8921,006 14,354 6,652 46
Interest expense(3,904)(2,392)(1,512)(63)(10,856)(5,372)(5,484)(102)
Realized net investment income9,484 2,942 6,542 22216,669 10,840 5,829 54
Realized Income$243,710 $182,152 61,558 34$690,736 $532,359 158,377 30
NM - Not Meaningful

Realized net performance income for the nine months ended September 30, 2022 and 2021 was primarily attributable to tax distributions from ACE III, ACE IV and PCS. Realized net performance income for the nine months ended September 30, 2022 also included incentive fees from an alternative credit fund, while the nine months ended September 30, 2021 also included incentive fees from an alternative credit fund and a CLO.
Realized net investment income for the three and nine months ended September 30, 2022 and 2021 was primarily attributable to interest income generated from our CLO investments. Realized net investment income for the three and nine months ended September 30, 2022 also included realizations from the settlement of forward contracts entered into to hedge our exposure to foreign currency fluctuations, primarily from the Euro, and included distributions from a U.S. direct lending fund and a European direct lending fund. In addition, the nine months ended September 30, 2022 included liquidating distributions from a European direct lending fund. Interest expense, which is allocated based on the cost basis of investments, increased over the comparative periods primarily due to the issuance of the 2051 Subordinated Notes and the 2052 Senior Notes in June 2021 and January 2022, respectively.
Credit Group—Performance Income
The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Credit Group. Accrued net performance income excludes net performance income that has been realized but not yet received as of the reporting date ($ in thousands):
As of September 30, 2022
As of December 31, 2021
Accrued Performance IncomeAccrued Performance CompensationAccrued Net Performance IncomeAccrued Performance IncomeAccrued Performance CompensationAccrued Net Performance Income
ACE III$102,777 $61,666 $41,111 $99,551 $59,731 $39,820 
ACE IV161,710 100,260 61,450 146,580 90,879 55,701 
ACE V105,232 63,139 42,093 51,482 30,889 20,593 
PCS117,483 69,419 48,064 132,050 77,780 54,270 
PCS II— — — 9,053 5,345 3,708 
Other credit funds182,996 130,415 52,581 156,717 105,064 51,653 
Total Credit Group$670,198 $424,899 $245,299 $595,433 $369,688 $225,745 
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The following table presents the change in accrued performance income for the Credit Group ($ in thousands):
 As of December 31, 2021Activity during the periodAs of September 30, 2022
Waterfall TypeAccrued
Performance
Income		Change in UnrealizedRealizedForeign Exchange and Other AdjustmentsAccrued
Performance
Income
Accrued Carried Interest
ACE IIIEuropean$99,551 $10,176 $(7,448)$498 $102,777 
ACE IVEuropean146,580 32,758 (18,779)1,151 161,710 
ACE VEuropean51,482 53,750 — — 105,232 
PCSEuropean132,050 10,209 (24,143)(633)117,483 
PCS IIEuropean9,053 (8,908)— (145)— 
Other credit fundsEuropean156,453 36,571 (5,310)(4,968)182,746 
Other credit fundsAmerican264 (14)— — 250 
Total accrued carried interest595,433 134,542 (55,680)(4,097)670,198 
Other credit funds
Incentive— 3,261 (3,261)— — 
Total Credit Group$595,433 $137,803 $(58,941)$(4,097)$670,198 
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Credit Group—Assets Under Management
The tables below present rollforwards of AUM for the Credit Group ($ in millions):
Syndicated LoansHigh
Yield		Multi-Asset CreditAlternative CreditU.S. Direct LendingEuropean Direct LendingTotal Credit Group
Balance at 6/30/2022$33,537 $3,197 $5,379 $19,249 $92,710 $47,839 $201,911 
Net new par/equity commitments347 36 74 1,917 1,249 61 3,684 
Net new debt commitments403 — — — 3,299 — 3,702 
Capital reductions(53)— — (45)(433)(16)(547)
Distributions(31)(4)3 (607)(728)(279)(1,646)
Redemptions(76)(134)(136)100 (83)— (329)
Change in fund value(310)(11)(47)(269)242 (1,900)(2,295)
Balance at 9/30/2022$33,817 $3,084 $5,273 $20,345 $96,256 $45,705 $204,480 
Syndicated LoansHigh
Yield		Multi-Asset CreditAlternative CreditU.S. Direct LendingEuropean Direct LendingTotal Credit Group
Balance at 6/30/2021$29,306 $3,152 $3,929 $14,493 $68,586 $48,121 $167,587 
Net new par/equity commitments151 284 427 3,173 3,795 1,220 9,050 
Net new debt commitments1,010 — 100 — 3,670 753 5,533 
Capital reductions(339)— — — (43)1 (381)
Distributions(21)— 14 (273)(392)(272)(944)
Redemptions(82)(81)(65)— (39)— (267)
Change in fund value(90)36 56 123 776 (246)655 
Balance at 9/30/2021$29,935 $3,391 $4,461 $17,516 $76,353 $49,577 $181,233 
Syndicated LoansHigh
Yield		Multi-Asset CreditAlternative CreditU.S. Direct LendingEuropean Direct LendingTotal Credit Group
Balance at 12/31/2021$31,491 $3,632 $5,212 $17,424 $85,849 $49,104 $192,712 
Net new par/equity commitments972 259 857 4,806 5,930 392 13,216 
Net new debt commitments2,970 — — — 6,101 1,154 10,225 
Capital reductions(171)— — (45)(757)(28)(1,001)
Distributions(80)(9)13 (881)(1,679)(845)(3,481)
Redemptions(257)(308)(197)(199)(173)— (1,134)
Change in fund value(1,108)(490)(612)(760)985 (4,072)(6,057)
Balance at 9/30/2022$33,817 $3,084 $5,273 $20,345 $96,256 $45,705 $204,480 
Syndicated LoansHigh
Yield		Multi-Asset CreditAlternative CreditU.S. Direct LendingEuropean Direct LendingTotal Credit Group
Balance at 12/31/2020$27,967 $2,863 $2,953 $12,897 $56,516 $42,276 $145,472 
Net new par/equity commitments754 609 1,388 4,968 12,395 4,885 24,999 
Net new debt commitments2,306 — 100 — 7,966 3,124 13,496 
Capital reductions(603)— — — (1,801)(87)(2,491)
Distributions(81)— 8 (467)(1,129)(835)(2,504)
Redemptions(249)(237)(206)(415)(124)(11)(1,242)
Change in fund value(159)156 218 533 2,530 225 3,503 
Balance at 9/30/2021$29,935 $3,391 $4,461 $17,516 $76,353 $49,577 $181,233 
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The components of our AUM for the Credit Group are presented below ($ in billions):
ares-20220930_g12.jpg    ares-20220930_g13.jpg
AUM: $204.5AUM: $181.2
FPAUM
Non-fee paying(1)
AUM not yet paying fees

(1) Includes $14.0 billion and $8.5 billion of AUM of funds from which we indirectly earn management fees as of September 30, 2022 and 2021, respectively, and includes $1.0 billion of non-fee paying AUM based on our general partner commitment as of September 30, 2022 and 2021.
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Credit Group—Fee Paying AUM
The tables below present rollforwards of fee paying AUM for the Credit Group ($ in millions):

Syndicated LoansHigh
Yield		Multi-Asset CreditAlternative CreditU.S. Direct LendingEuropean Direct LendingTotal Credit Group
Balance at 6/30/2022$32,121 $3,197 $4,904 $12,413 $51,769 $25,319 $129,723 
Commitments1,117 36 89 694 441 — 2,377 
Subscriptions/deployment/increase in leverage— — — 1,904 2,355 2,302 6,561 
Capital reductions(53)— (12)— (113)(327)(505)
Distributions(21)(4)(14)(480)(977)(161)(1,657)
Redemptions(76)(134)(144)100 (83)(134)(471)
Change in fund value(287)(11)(48)(359)146 (1,178)(1,737)
Balance at 9/30/2022$32,801 $3,084 $4,775 $14,272 $53,538 $25,821 $134,291 
Syndicated LoansHigh
Yield		Multi-Asset CreditAlternative CreditU.S. Direct LendingEuropean Direct LendingTotal Credit Group
Balance at 6/30/2021$28,211 $3,149 $3,423 $7,916 $36,101 $20,788 $99,588 
Commitments1,099 284 514 303 664 — 2,864 
Subscriptions/deployment/increase in leverage19 — 41 391 3,153 2,491 6,095 
Capital reductions(290)— — — (36)(9)(335)
Distributions(15)— (34)(201)(1,108)(110)(1,468)
Redemptions(82)(77)(61)— (40)(36)(296)
Change in fund value(128)35 53 (90)390 (306)(46)
Balance at 9/30/2021$28,814 $3,391 $3,936 $8,319 $39,124 $22,818 $106,402 
Syndicated LoansHigh
Yield		Multi-Asset CreditAlternative CreditU.S. Direct LendingEuropean Direct LendingTotal Credit Group
Balance at 12/31/2021$30,327 $3,632 $4,714 $8,742 $46,128 $23,847 $117,390 
Commitments3,923 259 954 1,597 1,858 — 8,591 
Subscriptions/deployment/increase in leverage1 — 5 5,471 9,675 6,742 21,894 
Capital reductions(171)— (41)(25)(1,507)(1,539)(3,283)
Distributions(50)(9)(42)(795)(2,802)(514)(4,212)
Redemptions(257)(308)(204)(143)(173)(259)(1,344)
Change in fund value(972)(490)(611)(574)359 (2,456)(4,744)
Balance at 9/30/2022$32,801 $3,084 $4,775 $14,272 $53,538 $25,821 $134,291 
Syndicated LoansHigh
Yield		Multi-Asset CreditAlternative CreditU.S. Direct LendingEuropean Direct LendingTotal Credit Group
Balance at 12/31/2020$27,171 $2,861 $2,457 $6,331 $32,337 $16,860 $88,017 
Commitments2,265 609 1,194 1,119 1,518 — 6,705 
Subscriptions/deployment/increase in leverage714 — 356 1,694 7,463 6,951 17,178 
Capital reductions(554)— (18)— (790)(256)(1,618)
Distributions(37)— (68)(441)(2,656)(581)(3,783)
Redemptions(249)(234)(189)(294)(99)(233)(1,298)
Change in fund value(496)155 204 (90)1,351 77 1,201 
Balance at 9/30/2021$28,814 $3,391 $3,936 $8,319 $39,124 $22,818 $106,402 
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The charts below present FPAUM for the Credit Group by its fee basis ($ in billions):

ares-20220930_g14.jpg    ares-20220930_g15.jpg
FPAUM: $134.3FPAUM: $106.4
Invested capital
Market value(1)
Collateral balances (at par)
(1)Includes $29.9 billion and $24.6 billion from funds that primarily invest in illiquid strategies as of September 30, 2022 and 2021, respectively. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies.
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Credit Group—Fund Performance Metrics as of September 30, 2022
ARCC contributed approximately 41% of the Credit Group’s total management fees for the nine months ended September 30, 2022. In addition, eight other significant funds, ACE III, ACE IV, ACE V, CADC, PCS, PCS II, SDL and SDL II, collectively contributed approximately 27% of the Credit Group’s management fees for the nine months ended September 30, 2022.

    The following table presents the performance data for our significant funds that are not drawdown funds in the Credit Group as of September 30, 2022 ($ in millions):
   Returns(%) 
Year of InceptionAUMCurrent QuarterYear-To-Date
Since Inception(1)
Primary
Investment Strategy
FundGrossNetGrossNetGrossNet
ARCC(2)
2004$25,654 N/A1.1 N/A5.1 N/A11.9 U.S. Direct Lending
CADC(3)
20174,096 N/A1.0 N/A(2.2)N/A5.2 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. Net returns are calculated using the fund's NAV and assume dividends are reinvested at the closest quarter-end NAV to the relevant quarterly ex-dividend dates. Additional information related to ARCC can be found in its filings with the SEC, which are not part of this report.
(3)Returns are time-weighted rates of return and include the reinvestment of income and other earnings from securities or other investments and reflect the deduction of all trading expenses. Returns are shown for institutional share class. Shares of other classes may have lower returns due to higher selling commissions and fees. Net returns are calculated using the fund’s NAV and assume distributions are reinvested at the NAV on the date of distribution. Additional information related to CADC can be found in its filings with the SEC, which are not part of this report.

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The following table presents the performance data of our significant drawdown funds as of September 30, 2022 ($ in millions):
Year of InceptionAUMOriginal Capital CommitmentsCapital Invested to Date
Realized Value(1)
Unrealized Value(2)
Total ValueMoICIRR(%)Primary Investment Strategy
Fund
Gross(3)
Net(4)
Gross(5)
Net(6)
Funds Harvesting Investments
ACE III(7)
2015$4,613 $2,822 $2,249 $1,090 $2,179 $3,269 1.6x1.4x11.7 8.5 European Direct Lending
PCS20173,535 3,365 2,653 1,580 1,938 3,518 1.4x1.3x12.1 8.6 U.S. Direct Lending
SDL Unlevered20185,468 922 872 156 810 966 1.2x1.1x8.5 6.4 U.S. Direct Lending
SDL Levered2,045 2,022 584 1,856 2,440 1.3x1.2x16.1 11.8 
Funds Deploying Capital
ACE IV Unlevered(8)
20189,310 2,851 2,048 451 1,966 2,417 1.2x1.2x8.6 6.1 European Direct Lending
ACE IV Levered(8)
4,819 3,559 993 3,556 4,549 1.4x1.3x12.7 9.3 
ACE V Unlevered(9)
202014,869 7,026 3,453 94 3,616 3,710 1.1x1.1x14.1 10.6 European Direct Lending
ACE V Levered(9)
6,376 3,131 141 3,370 3,511 1.2x1.1x22.7 17.0 
PCS II(10)
20205,232 5,114 2,405 15 2,368 2,383 1.0x1.0x1.0 (1.4)U.S. Direct Lending
SDL II Unlevered202113,577 1,989 642 16 650 666 1.1x1.0x6.9 4.8 U.S. Direct Lending
SDL II Levered6,047 1,704 89 1,741 1,830 1.1x1.1x12.8 8.8 
Fund performance metrics for significant funds may be marked as “NMˮ as it is not considered meaningful due to the limited time since the initial investment and/or early stage of capital deployment.
(1)Realized value represents the sum of all cash distributions to all partners and if applicable, exclude tax and incentive distributions made to the general partner.
(2)Unrealized value represents the fund's NAV reduced by the accrued incentive allocation, if applicable. There can be no assurance that unrealized values will be realized at the valuations indicated.
(3)The gross multiple of invested capital (“MoIC”) is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The gross MoIC is before giving effect to management fees, carried interest and other expenses, as applicable, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the gross fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.
(4)The net MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes those interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The net MoIC is after giving effect to management fees and carried interest, other expenses and credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.
(5)The gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Gross IRR reflects returns to the fee-paying limited partners and, if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest and other expenses, as applicable, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Gross fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.
(6)The net IRR is an annualized since inception net internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Net IRRs reflect returns to the fee-paying limited partners and, if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the net IRR calculations are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees and carried interest, other expenses and credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.
(7)ACE III is made up of two feeder funds, one denominated in U.S. dollars and one denominated in Euros. The gross and net IRR and MoIC presented in the table are for the Euro denominated feeder fund. The gross and net IRR for the U.S. dollar denominated feeder fund are 12.1% and 8.9%, respectively. The gross and net MoIC for the U.S. dollar denominated feeder fund are 1.6x and 1.5x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund's closing. All other values for ACE III are for the combined fund and are converted to U.S. dollars at the prevailing quarter-end exchange rate.
(8)ACE IV is made up of four parallel funds, two denominated in Euros and two denominated in pound sterling: ACE IV (E) Unlevered, ACE IV (G) Unlevered, ACE IV (E) Levered and ACE IV (G) Levered. The gross and net IRR and MoIC presented in the table are for ACE IV (E) Unlevered and ACE IV (E) Levered. Metrics for ACE IV (E) Levered are inclusive of a U.S. dollar denominated feeder fund, which has not been presented separately The gross and net IRR for ACE IV (G) Unlevered are 9.8% and 7.0%, respectively. The gross and net MoIC for ACE IV (G) Unlevered are 1.3x and 1.2x, respectively. The gross and net IRR for ACE IV (G) Levered are 13.5% and 9.7%, respectively. The gross and net MoIC for ACE IV (G) Levered are 1.4x and 1.3x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund's closing. All other values for ACE IV Unlevered and ACE IV Levered are for the combined levered and unlevered parallel funds and are converted to U.S. dollars at the prevailing quarter-end exchange rate.
(9)ACE V is made up of four parallel funds, two denominated in Euros and two denominated in pound sterling: ACE V (E) Unlevered, ACE V (G) Unlevered, ACE V (E) Levered, and ACE V (G) Levered. The gross and net MoIC presented in the table are for ACE V (E) Unlevered and ACE V (E) Levered. Metrics for ACE V (E) Unlevered are inclusive of a Japanese yen denominated feeder fund, which has not been presented separately. Metrics for ACE V (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 V (G) Unlevered are 14.9% and 11.0%, respectively. The gross and net MoIC for ACE V (G) Unlevered are 1.1x and 1.1x, respectively. The gross and net IRR for ACE V (G) Levered are 22.6% and 16.3%, respectively. The gross and net MoIC for ACE V (G) Levered are 1.2x and 1.1x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund's closing. All other values for ACE V Unlevered and ACE V Levered are for the combined levered and unlevered parallel funds and are converted to U.S. dollars at the prevailing quarter-end exchange rate.
(10)Gross and net fund-level IRRs for PCS II are shown on a non-annualized basis as the time elapsed from the date of the first capital call is less than one year.
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Private Equity Group—Three and Nine Months Ended September 30, 2022 Compared to Three and Nine Months Ended September 30, 2021
Fee Related Earnings:
The following table presents the components of the Private Equity Group's FRE ($ in thousands):
Three months ended September 30,Favorable (Unfavorable)Nine months ended September 30,Favorable (Unfavorable)
20222021$ Change% Change20222021$ Change% Change
Management fees$52,316 $56,817 $(4,501)(8)%$145,669 $135,930 $9,739 7%
Other fees556 370 186 501,261 726 535 74
Compensation and benefits(26,865)(23,220)(3,645)(16)(70,724)(62,047)(8,677)(14)
General, administrative and other expenses(7,824)(4,984)(2,840)(57)(21,992)(15,351)(6,641)(43)
Fee Related Earnings$18,183 $28,983 (10,800)(37)$54,214 $59,258 (5,044)(9)

Management Fees. The chart below presents Private Equity Group management fees and effective management fee rates ($ in millions):

ares-20220930_g16.jpg
Management fees decreased for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 primarily due to one-time catch-up fees of $11.5 million that were generated from ACOF VI in the prior year period. Management fees for the three and nine months ended September 30, 2022 included increases of $2.2 million and $9.7 million, respectively, compared to the same periods in 2021 primarily driven by deployment in ASOF. ASOF II, which launched during the fourth quarter of 2021, contributed $7.4 million and $10.6 million in management fees for the three and nine months ended September 30, 2022, respectively. Management fees for ACOF IV, ACOF V and SSF IV decreased by $7.5 million for the nine months ended September 30, 2022 compared to the same period in 2021 due to various asset realizations and distributions that reduced the fee bases. The increase in management fees for the nine months ended September 30, 2022 was also partially offset by one-time catch up fees of $2.5 million generated from ACOF VI in the prior year period.
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The increase in effective management fee rate for the for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021 was primarily driven by deployment of capital in ASOF and ASOF II, each of which have a higher effective management fee rate than the Private Equity Group’s average effective management fee rate.

Compensation and Benefits. Compensation and benefits increased by $3.6 million, or 16%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $8.7 million, or 14%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increases were primarily driven by higher incentive compensation.

General, Administrative and Other Expenses. General, administrative and other expenses increased by $2.8 million, or 57%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $6.6 million, or 43%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. Travel, marketing sponsorships and certain fringe benefits collectively increased by $0.6 million and $2.2 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021, as marketing and company events returned to pre-pandemic levels and travel continues to ramp up toward historical levels. In connection with our fundraising efforts, amortization of placement fees has increased by $1.0 million and $3.0 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021, primarily driven by new commitments to ASOF II.
Realized Income:
The following table presents the components of the Private Equity Group's RI ($ in thousands):

Three months ended September 30,Favorable (Unfavorable)Nine months ended September 30,Favorable (Unfavorable)
20222021$ Change% Change20222021$ Change% Change
Fee Related Earnings$18,183 $28,983 $(10,800)(37)%$54,214 $59,258 $(5,044)(9)%
Performance income—realized— 34,316 (34,316)(100)2,212 159,479 (157,267)(99)
Performance related compensation—realized(5)(27,483)27,478 100(1,791)(127,706)125,915 99
Realized net performance income(5)6,833 (6,838)NM421 31,773 (31,352)(99)
Investment income (loss)—realized8 1,878 (1,870)(100)2,283 (4,387)6,670 NM
Interest and other investment income—realized201 4,861 (4,660)(96)1,898 9,825 (7,927)(81)
Interest expense(4,183)(2,505)(1,678)(67)(11,185)(5,434)(5,751)(106)
Realized net investment income (loss)(3,974)4,234 (8,208)NM(7,004)4 (7,008)NM
Realized Income$14,204 $40,050 (25,846)(65)$47,631 $91,035 (43,404)(48)
NM - Not Meaningful
Realized net investment loss for the three and nine months ended September 30, 2022 largely represents interest expense exceeding limited realization activity during these periods. Interest expense, which is allocated based on the cost basis of investments, increased over the comparative periods primarily due to the issuance of the 2051 Subordinated Notes and the 2052 Senior Notes in June 2021 and January 2022, respectively.
Realized net performance income and realized net investment income for the three and nine months ended September 30, 2021 was primarily attributable to realizations from the monetization of ACOF IV’s investment in Farrow & Ball following the sale of the company and of various assets in a fund within our special opportunities strategy. Realized net performance income for the nine months ended September 30, 2021 also included realizations from partial sales of ACOF IV’s position in AZEK. For the nine months ended September 30, 2021, realized net investment income was offset by a realized loss recognized in connection with an Asian corporate private equity fund’s sale of its investment in a dairy farm company.
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Private Equity Group—Performance Income
The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Private Equity Group ($ in thousands):
 As of September 30, 2022As of December 31, 2021
Accrued Performance IncomeAccrued Performance CompensationAccrued Net Performance IncomeAccrued Performance IncomeAccrued Performance CompensationAccrued Net Performance Income
ACOF III$18,988 $15,190 $3,798 $43,510 $34,808 $8,702 
ACOF IV327,046 261,637 65,409 387,901 310,321 77,580 
ACOF V750,833 600,666 150,167 666,074 532,859 133,215 
ACOF VI124,562 99,650 24,912 73,261 58,608 14,653 
ASOF378,132 264,692 113,440 338,857 237,200 101,657 
Other funds69,850 46,017 23,833 33,526 21,787 11,739 
Total Private Equity Group$1,669,411 $1,287,852 $381,559 $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, 2021Activity during the periodAs of September 30, 2022
Waterfall TypeAccrued Carried InterestChange in UnrealizedRealizedOther AdjustmentsAccrued Carried
Interest
ACOF IIIAmerican$43,510 $(24,522)$— $— $18,988 
ACOF IVAmerican387,901 (58,643)(2,212)— 327,046 
ACOF VAmerican666,074 84,759 — — 750,833 
ACOF VIAmerican73,261 51,301 — — 124,562 
ASOFEuropean338,857 39,275 — — 378,132 
Other fundsEuropean30,784 38,208 — 799 69,791 
Other fundsAmerican2,742 (2,683)— — 59 
Total Private Equity Group$1,543,129 $127,695 $(2,212)$799 $1,669,411 
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Private Equity Group—Assets Under Management
The tables below present rollforwards of AUM for the Private Equity Group ($ in millions):
Corporate Private EquitySpecial OpportunitiesTotal Private Equity Group
Balance at 6/30/2022$21,270 $12,142 $33,412 
Net new par/equity commitments— 1,337 1,337 
Capital reductions(2)— (2)
Distributions(79)(3)(82)
Change in fund value367 234 601 
Balance at 9/30/2022$21,556 $13,710 $35,266 
Corporate Private EquitySpecial OpportunitiesTotal Private Equity Group
Balance at 6/30/2021$20,603 $6,307 $26,910 
Net new par/equity commitments1,453 200 1,653 
Net new debt commitments— 200 200 
Capital reductions(2)— (2)
Distributions(864)(269)(1,133)
Change in fund value828 506 1,334 
Balance at 9/30/2021$22,018 $6,944 $28,962 
Corporate Private EquitySpecial OpportunitiesTotal Private Equity Group
Balance at 12/31/2021$21,639 $11,765 $33,404 
Net new par/equity commitments— 2,137 2,137 
Capital reductions(6)(200)(206)
Distributions(469)(133)(602)
Change in fund value392 141 533 
Balance at 9/30/2022$21,556 $13,710 $35,266 
Corporate Private EquitySpecial OpportunitiesTotal Private Equity Group
Balance at 12/31/2020$18,233 $5,721 $23,954 
Net new par/equity commitments1,554 150 1,704 
Net new debt commitments— 200 200 
Capital reductions(7)— (7)
Distributions(2,273)(554)(2,827)
Change in fund value4,511 1,427 5,938 
Balance at 9/30/2021$22,018 $6,944 $28,962 
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The components of our AUM for the Private Equity Group are presented below ($ in billions):
ares-20220930_g17.jpg    ares-20220930_g18.jpg
AUM: $35.2AUM: $29.0
FPAUM
Non-fee paying(1)
AUM not yet paying fees
(1) Includes $1.1 billion and $1.2 billion of non-fee paying AUM based on our general partner commitment as of September 30, 2022 and 2021, respectively.
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Private Equity Group—Fee Paying AUM

The tables below present rollforwards of fee paying AUM for the Private Equity Group ($ in millions):

Corporate Private EquitySpecial OpportunitiesTotal Private Equity Group
Balance at 6/30/2022$12,116 $5,575 $17,691 
Subscriptions/deployment/increase in leverage21 1,465 1,486 
Distributions(25)(181)(206)
Change in fund value(2)(1)(3)
Change in fee basis(14)— (14)
Balance at 9/30/2022$12,096 $6,858 $18,954 
Corporate Private EquitySpecial OpportunitiesTotal Private Equity Group
Balance at 6/30/2021$11,748 $3,259 $15,007 
Commitments1,427 — 1,427 
Subscriptions/deployment/increase in leverage89 487 576 
Distributions(471)(44)(515)
Change in fund value5 — 5 
Change in fee basis(6)— (6)
Balance at 9/30/2021$12,792 $3,702 $16,494 
Corporate Private EquitySpecial OpportunitiesTotal Private Equity Group
Balance at 12/31/2021$12,473 $4,216 $16,689 
Subscriptions/deployment/increase in leverage38 3,661 3,699 
Distributions(163)(1,019)(1,182)
Change in fund value(4)— (4)
Change in fee basis(248)— (248)
Balance at 9/30/2022$12,096 $6,858 $18,954 
Corporate Private EquitySpecial OpportunitiesTotal Private Equity Group
Balance at 12/31/2020$14,770 $2,723 $17,493 
Commitments1,579 — 1,579 
Subscriptions/deployment/increase in leverage535 1,308 1,843 
Distributions(1,332)(329)(1,661)
Change in fund value5 — 5 
Change in fee basis(2,765)— (2,765)
Balance at 9/30/2021$12,792 $3,702 $16,494 
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The charts below present FPAUM for the Private Equity Group by its fee basis ($ in billions):
ares-20220930_g19.jpgares-20220930_g20.jpg    
FPAUM: $19.0FPAUM: $16.5
Invested capitalCapital commitments

Private Equity Group—Fund Performance Metrics as of September 30, 2022

Three significant funds, ACOF V, ASOF and ACOF VI, collectively contributed approximately 75% of the Private Equity Group’s management fees for the nine months ended September 30, 2022.

The following table presents the performance data of our significant drawdown funds as of September 30, 2022 ($ in millions):
Year of InceptionAUMOriginal Capital CommitmentsCapital Invested to Date
Realized Value(1)
Unrealized Value(2)
Total ValueMoICIRR(%)Primary Investment Strategy
Fund
Gross(3)
Net(4)
Gross(5)
Net(6)
Funds Deploying Capital
ACOF V 2017$9,426 $7,850 $7,415 $3,243 $8,702 $11,945 1.6x1.4x15.411.0Corporate Private Equity
ASOF20195,430 3,518 5,407 2,964 4,420 7,384 1.6x1.5x33.826.1Special Opportunities
ACOF VI20206,327 5,743 3,728 323 4,279 4,602 1.2x1.1x21.522.2Corporate Private Equity
(1)Realized value represents the sum of all cash dividends, interest income, other fees and cash proceeds from realizations of interests in portfolio investments. Realized value excludes any proceeds related to bridge financings.
(2)Unrealized value represents the fair market value of remaining investments. Unrealized value does not take into account any bridge financings. There can be no assurance that unrealized investments will be realized at the valuations indicated.
(3)For the corporate private equity funds, the gross MoIC is calculated at the investment-level and is based on the interests of all partners. The gross MoIC is before giving effect to management fees, carried interest, as applicable, and other expenses. For the special opportunities funds, the gross MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The gross MoIC is before giving effect to management fees, carried interest as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the gross fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. The gross MoICs for the corporate private equity funds are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the gross MoIC would be 1.5x for ACOF V and 1.2x for ACOF VI.
(4)The net MoIC for ASOF is calculated at the fund-level. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. The net MoIC for the corporate private equity funds is calculated at the investment level. For all funds, the net MoIC is based on the interests of the fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or performance fees. The net MoIC is after giving effect to management fees and carried interest, other expenses and credit facility interest expenses, as applicable. The net MoICs for the corporate private equity funds 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.
(5)For the corporate private equity funds, the gross IRR is an annualized since inception gross internal rate of return of cash flows to and from investments and the residual value of the investments at the end of the measurement period. Gross IRRs reflect returns to all partners. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest, as applicable, and other expenses. For the special opportunities funds the gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Gross IRRs reflect returns to the fee-paying limited partners and, if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The gross IRRs for the corporate private equity funds are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the gross IRRs would be 15.3% for ACOF V and 20.1% for ACOF VI.
(6)The net IRR is an annualized since inception net internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Net IRRs reflect returns to the fee-paying limited partners and if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the net IRR calculation are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees, carried interest as applicable, and other expenses and exclude commitments by the general partner and non-fee paying limited partners who do not pay either management fees or carried interest. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. The net IRRs for the corporate private equity funds are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the net IRRs would be 11.1% for ACOF V and 18.4% for ACOF VI.

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Real Assets Group—Three and Nine Months Ended September 30, 2022 Compared to Three and Nine Months Ended September 30, 2021
Fee Related Earnings:
The following table presents the components of the Real Assets Group's FRE ($ in thousands):
Three months ended September 30,Favorable (Unfavorable)Nine months ended September 30,Favorable (Unfavorable)
20222021$ Change% Change20222021$ Change% Change
Management fees$91,013 $67,934 $23,079 34%$254,233 $150,691 $103,542 69%
Fee related performance revenues855 579 276 482,178 1,938 240 12
Other fees11,493 3,681 7,812 21227,924 4,604 23,320 NM
Compensation and benefits(46,947)(33,070)(13,877)(42)(121,183)(73,438)(47,745)(65)
General, administrative and other expenses(10,032)(6,674)(3,358)(50)(28,308)(14,212)(14,096)(99)
Fee Related Earnings$46,382 $32,450 13,932 43$134,844 $69,583 65,261 94
NM - Not Meaningful
Management Fees. The chart below presents Real Assets Group management fees and effective management fee rates ($ in millions):

ares-20220930_g21.jpg
Management fees increased by $27.8 million and $102.2 million for the three and nine months ended September 30, 2022, respectively, compared to the three and nine months ended September 30, 2021 due to funds from the Black Creek Acquisition and Infrastructure Debt Acquisition. Excluding one-time catch-up fees of $1.8 million and $4.8 million for the three and nine months ended September 30, 2022, respectively, management fees from US X increased by $2.7 million and $9.4 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. Management fees also increased by $3.9 million and $10.5 million, for the three and nine months ended September 30, 2022, respectively, due to new commitments to our sixth European real estate equity fund. Management fees from real estate debt funds increased by $2.0 million and $6.4 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021, primarily due to the continued fundraising and subsequent deployment within these open-ended funds. The increases in management fees were partially offset by decreases driven by one-time catch-up fees
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generated by Ares European Property Enhancement Partners III, SCSp and ACIP in the prior year periods. In addition, management fees from US IX and EF V collectively decreased by $4.6 million and $11.9 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. The fee base for US IX has been reduced due to various asset realizations and distributions and the fee base for EF V changed from committed capital to invested capital following the launch of our sixth European real estate equity fund.

The decreases in effective management fee rate for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021 were primarily due to recently acquired funds with effective management fees rates below 0.75%, including funds within our infrastructure debt strategy and certain newly managed core/core-plus and industrial U.S. real estate equity funds. The decreases were also attributable to deployment in our real estate debt funds that have effective management fee rates below 0.75%. The decreases in effective management fee rates were partially offset by additional capital raised in our non-traded REITs, which have effective management fee rates between 1.10% and 1.25%.
Other Fees. Other fees increased by $7.8 million, or 212%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $23.3 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. These increases primarily represent higher fees that were generated under the investment management agreements of the funds that were acquired in the Black Creek Acquisition, including property-related fees, such as acquisition, development and property management, of $5.8 million and $17.8 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021, of which $4.6 million and $6.9 million for the comparative periods related to development fees from AIREIT. These property-related fees are recognized as services are performed which may result in periodic fluctuations. Other fees also includes upfront transaction fees, referred to as facilitation fees, which are generated when investors contribute real property through a like-kind 1031 exchange for fund shares. For the three and nine months ended September 30, 2022 when compared to the same periods in 2021, we have recognized facilitation fees of $0.7 million and $3.8 million, respectively.
Compensation and Benefits. Compensation and benefits increased by $13.9 million, or 42%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $47.7 million, or 65%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increases were primarily driven by headcount growth from acquisitions and to support the expansion of our business, as we continued to add professionals to support our growing U.S. real estate equity and infrastructure opportunities platforms. Headcount growth attributable to the Infrastructure Debt Acquisition contributed $3.9 million and $9.4 million in recurring employment related costs for the three and nine months ended September 30, 2022, respectively. The increase in salaries and benefits for the nine months ending September 30, 2022 included $21.7 million from the first two quarters of 2022 related to the Black Creek Acquisition which did not have comparable results as the transaction closed at the beginning of the third quarter of 2021.
Average headcount for the third quarter of 2022 increased by 29% to 328 investment and investment support professionals for the 2022 period from 255 professionals for the same period in 2021, including 25 professionals from the Infrastructure Debt Acquisition. Average headcount for the year-to-date period increased by 79% to 303 investment and investment support professionals for the third quarter of 2022 from 169 professionals for the same period in 2021, including 146 professionals from the Black Creek Acquisition and the Infrastructure Debt Acquisition.
General, Administrative and Other Expenses. General, administrative and other expenses increased by $3.4 million, or 50%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $14.1 million, or 99%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The Infrastructure Debt Acquisition has contributed general, administrative and other expenses of $1.4 million and $3.0 million for the three and nine months ended September 30, 2022, respectively. The increase in general, administrative and other expenses for the nine months ending September 30, 2022 included $4.7 million from the first two quarters of 2022 related to the Black Creek Acquisition which did not have comparable results as the transaction closed at the beginning of the third quarter of 2021.
Excluding the impact from the acquisitions, other operating expenses, most notably travel, marketing sponsorships and certain fringe benefits, collectively increased by $2.7 million for the nine months ended September 30, 2022 compared to the same period in 2021, as travel, marketing and company events have returned to pre-pandemic levels. Certain expenses, primarily the occupancy costs, information technology and information services, have also increased by $0.7 million and $1.4 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021, to support the expanding platform.

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Realized Income:
The following table presents the components of the Real Assets Group's RI ($ in thousands):
Three months ended September 30,Favorable (Unfavorable)Nine months ended September 30,Favorable (Unfavorable)
20222021$ Change% Change20222021$ Change% Change
Fee Related Earnings$46,382 $32,450 $13,932 43%$134,844 $69,583 $65,261 94%
Performance income—realized26,939 4,114 22,825 NM78,637 10,317 68,320 NM
Performance related compensation—realized(17,115)(2,809)(14,306)NM(50,510)(6,983)(43,527)NM
Realized net performance income9,824 1,305 8,519 NM28,127 3,334 24,793 NM
Investment income—realized339 1,841 (1,502)(82)4,224 13,877 (9,653)(70)
Interest and other investment income—realized2,180 918 1,262 1377,597 4,783 2,814 59
Interest expense(3,095)(1,904)(1,191)(63)(8,197)(4,528)(3,669)(81)
Realized net investment income (loss)(576)855 (1,431)NM3,624 14,132 (10,508)(74)
Realized Income$55,630 $34,610 21,020 61$166,595 $87,049 79,546 91
NM - Not Meaningful
Realized net performance income and realized net investment income for the three and nine months ended September 30, 2022 were primarily attributable to realizations from US VIII driven by multifamily and industrial property sales. Realized net performance income for the three and nine months ended September 30, 2022 also included incentive fees generated from an industrial real estate fund.
Realized net performance income and realized net investment income for the three and nine months ended September 30, 2021 were primarily attributable to realizations from the sale of multiple properties held in U.S. real estate equity funds. Realized net investment income for the nine months ended September 30, 2021 was also attributable to monetization of various assets in an infrastructure opportunities fund and to distributions from real estate debt vehicles, driven by operating income during the period.
Interest expense, which is allocated based on the cost basis of investments, increased over the comparative periods primarily due to the issuance of the 2051 Subordinated Notes and the 2052 Senior Notes in June 2021 and January 2022, respectively.

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Real Assets Group—Performance Income

The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Real Assets Group. Accrued net performance income excludes net performance income that has been realized but not yet received as of the reporting date ($ in thousands):
 As of September 30, 2022As of December 31, 2021
Accrued Performance IncomeAccrued Performance CompensationAccrued Net Performance IncomeAccrued Performance IncomeAccrued Performance CompensationAccrued Net Performance Income
US VIII$38,159 $24,421 $13,738 $88,112 $56,391 $31,721 
US IX127,697 79,172 48,525 110,074 68,246 41,828 
EF IV66,665 40,000 26,665 70,600 42,361 28,239 
EF V27,760 19,432 8,328 69,946 48,962 20,984 
AREOF III53,867 32,320 21,547 24,204 14,523 9,681 
EIF V87,029 65,054 21,975 62,592 46,787 15,805 
Other real assets funds186,025 114,968 71,057 113,932 68,599 45,333 
Total Real Assets Group$587,202 $375,367 $211,835 $539,460 $345,869 $193,591 

The following table presents the change in accrued performance income for the Real Assets Group ($ in thousands):

 As of December 31, 2021Activity during the periodAs of September 30, 2022
Waterfall
Type		Accrued Performance
Income		Change in UnrealizedRealizedForeign Exchange and Other
Adjustments		Accrued Performance
Income
Accrued Carried Interest
US VIIIEuropean$88,112 $15,667 $(65,620)$— $38,159 
US IXEuropean110,074 17,623 — — 127,697 
EF IVAmerican70,600 (3,935)— — 66,665 
EF VAmerican69,946 (42,186)— — 27,760 
AREOF IIIEuropean24,204 29,663 — — 53,867 
EIF VEuropean62,592 24,437 — — 87,029 
Other real assets fundsEuropean52,262 61,675 (709)4,100 117,328 
Other real assets fundsAmerican61,670 7,765 (1,000)262 68,697 
Total accrued carried interest539,460 110,709 (67,329)4,362 587,202 
Other real assets fundsIncentive— 11,308 (11,308)— — 
Total Real Assets Group$539,460 $122,017 $(78,637)$4,362 $587,202 



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Real Assets Group—Assets Under Management
The tables below present rollforwards of AUM for the Real Assets Group ($ in millions):

U.S. Real Estate EquityEuropean Real Estate EquityReal Estate
Debt		Infrastructure OpportunitiesInfrastructure DebtTotal Real Assets Group
Balance at 6/30/2022$30,271 $8,558 $11,372 $4,316 $8,060 $62,577 
Net new par/equity commitments1,170 20 99 366 511 2,166 
Net new debt commitments200 — 204 — — 404 
Capital reductions(200)— (24)— — (224)
Distributions(248)(50)(49)(112)(52)(511)
Redemptions(180)— — — — (180)
Change in fund value121 (495)68 751 318 763 
Balance at 9/30/2022$31,134 $8,033 $11,670 $5,321 $8,837 $64,995 
U.S. Real Estate EquityEuropean Real Estate EquityReal Estate
Debt		Infrastructure OpportunitiesInfrastructure DebtTotal Real Assets Group
Balance at 6/30/2021$5,702 $5,648 $8,375 $3,822 $— $23,547 
Acquisitions13,719 — — — — 13,719 
Net new par/equity commitments791 1,040 246 324 — 2,401 
Net new debt commitments— — 250 — — 250 
Capital reductions— — (41)— — (41)
Distributions(488)(180)(39)(358)— (1,065)
Redemptions(28)— — — — (28)
Change in fund value1,399 57 50 (54)— 1,452 
Balance at 9/30/2021$21,095 $6,565 $8,841 $3,734 $— $40,235 
U.S. Real Estate EquityEuropean Real Estate EquityReal Estate
Debt		Infrastructure OpportunitiesInfrastructure DebtTotal Real Assets Group
Balance at 12/31/2021$24,677 $6,827 $9,659 $4,756 $— $45,919 
Acquisitions— — — — 8,184 8,184 
Net new par/equity commitments4,467 2,038 955 431 698 8,589 
Net new debt commitments1,305 419 1,229 — — 2,953 
Capital reductions(434)— (87)— — (521)
Distributions(1,301)(409)(144)(433)(239)(2,526)
Redemptions(308)— (90)— — (398)
Change in fund value2,728 (842)148 567 194 2,795 
Balance at 9/30/2022$31,134 $8,033 $11,670 $5,321 $8,837 $64,995 
U.S. Real Estate EquityEuropean Real Estate EquityReal Estate
Debt		Infrastructure OpportunitiesInfrastructure DebtTotal Real Assets Group
Balance at 12/31/2020$4,404 $4,811 $5,593 $3,485 $— $18,293 
Acquisitions13,719 — — — — 13,719 
Net new par/equity commitments1,985 1,917 843 592 — 5,337 
Net new debt commitments— — 2,655 — — 2,655 
Capital reductions— — (273)— — (273)
Distributions(788)(475)(107)(692)— (2,062)
Redemptions(28)— (7)— — (35)
Change in fund value1,803 312 137 349 — 2,601 
Balance at 9/30/2021$21,095 $6,565 $8,841 $3,734 $— $40,235 
    

102
The components of our AUM for the Real Assets Group are presented below ($ in billions):

ares-20220930_g22.jpg    ares-20220930_g23.jpg
AUM: $65.0AUM: $40.2
FPAUM
Non-fee paying(1)
AUM not yet paying fees
(1) Includes $0.6 billion and $0.5 billion of non-fee paying AUM based on our general partner commitment as of September 30, 2022 and 2021, respectively.
103
Real Assets Group—Fee Paying AUM

The tables below present rollforwards of fee paying AUM for the Real Assets Group ($ in millions):

U.S. Real Estate EquityEuropean Real Estate EquityReal Estate
Debt		Infrastructure OpportunitiesInfrastructure DebtTotal Real Assets Group
Balance at 6/30/2022$19,934 $5,352 $3,953 $4,474 $5,518 $39,231 
Commitments1,113 20 — — — 1,133 
Subscriptions/deployment/increase in leverage52 171 11 106 495 835 
Distributions(136)(11)(51)(154)(214)(566)
Redemptions(180)— — — — (180)
Change in fund value119 (315)74 — (113)(235)
Change in fee basis3 — — — — 3 
Balance at 9/30/2022$20,905 $5,217 $3,987 $4,426 $5,686 $40,221 
U.S. Real Estate EquityEuropean Real Estate EquityReal Estate
Debt		Infrastructure OpportunitiesInfrastructure DebtTotal Real Assets Group
Balance at 6/30/2021$4,365 $4,339 $3,113 $3,725 $— $15,542 
Acquisitions7,155 — — — — 7,155 
Commitments721 602 — 324 — 1,647 
Subscriptions/deployment/increase in leverage931 234 299 — — 1,464 
Distributions(114)(158)(103)(294)— (669)
Redemptions(28)— — — — (28)
Change in fund value610 (65)43 — — 588 
Change in fee basis— (5)— — — (5)
Balance at 9/30/2021$13,640 $4,947 $3,352 $3,755 $— $25,694 
U.S. Real Estate EquityEuropean Real Estate EquityReal Estate
Debt		Infrastructure OpportunitiesInfrastructure DebtTotal Real Assets Group
Balance at 12/31/2021$15,687 $4,916 $3,516 $4,496 $— $28,615 
Acquisitions— — — — 4,855 4,855 
Commitments3,661 1,627 106 — — 5,394 
Subscriptions/deployment/increase in leverage663 427 574 306 1,296 3,266 
Capital reductions— (10)(81)— — (91)
Distributions(759)(246)(185)(376)(263)(1,829)
Redemptions(308)— (100)— — (408)
Change in fund value1,966 (678)157 — (202)1,243 
Change in fee basis(5)(819)— — — (824)
Balance at 9/30/2022$20,905 $5,217 $3,987 $4,426 $5,686 $40,221 
U.S. Real Estate EquityEuropean Real Estate EquityReal Estate
Debt		Infrastructure OpportunitiesInfrastructure DebtTotal Real Assets Group
Balance at 12/31/2020$3,659 $4,088 $2,505 $3,679 $— $13,931 
Acquisitions7,155 — — — — 7,155 
Commitments1,630 1,053 202 592 — 3,477 
Subscriptions/deployment/increase in leverage1,067 271 849 — — 2,187 
Capital reductions— — (32)— — (32)
Distributions(322)(298)(283)(341)— (1,244)
Redemptions(28)— (7)— — (35)
Change in fund value611 (162)118 — — 567 
Change in fee basis(132)(5)— (175)— (312)
Balance at 9/30/2021$13,640 $4,947 $3,352 $3,755 $— $25,694 
104
The charts below present FPAUM for the Real Assets Group by its fee basis ($ in billions):
ares-20220930_g24.jpg    ares-20220930_g25.jpg
FPAUM: $40.2FPAUM: $25.7
Market value(1)
Invested capital/other(2)
Capital commitments
(1)Amounts represent FPAUM from funds that primarily invest in illiquid strategies. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies.
(2)Other consists of ACRE's FPAUM, which is based on ACRE’s stockholders’ equity.
105
Real Assets Group—Fund Performance Metrics as of September 30, 2022

Four significant funds, Ares Industrial Real Estate Income Trust, Inc. (“AIREIT”), Ares Real Estate Income Trust, Inc. (“AREIT”), Infrastructure Debt Fund IV (“IDF IV”) and an open-ended industrial real estate fund, collectively contributed approximately 41% of the Real Assets Group’s management fees for the nine months ended September 30, 2022.

The following table presents the performance data for our significant funds that are not drawdown funds in the Real Assets Group as of September 30, 2022 ($ in millions):
   Returns(%) 
Year of InceptionAUMCurrent QuarterYear-To-Date
Since Inception(1)
Primary
Investment Strategy
FundGrossNetGrossNetGrossNet
AREIT(2)
2012$4,825 N/A1.4 N/A12.3 N/A8.1 U.S. Real Estate Equity
AIREIT(3)
20178,131 N/A1.7 N/A26.6 N/A14.9 U.S. Real Estate Equity
Open-ended industrial real estate fund(4)
20175,791 1.4 1.1 22.7 18.9 29.1 24.0 U.S. Real Estate Equity
(1)Since inception returns are annualized.
(2)Performance is measured by total return, which includes income and appreciation and reinvestment of all distributions for the respective time period. Returns are shown for institutional share class. Shares of other classes may have lower returns due to higher selling commissions and fees. Actual individual stockholder returns will vary. Net returns are calculated using the fund’s NAV and assume distributions are reinvested at the NAV on the date of distribution. The inception date used in the calculation of the since inception return is the date in which the first shares of common stock were sold after converting to a NAV-based REIT. Additional information related to AREIT can be found in its filings with the SEC, which are not part of this report.
(3)Performance is measured by total return, which includes income and appreciation and reinvestment of all distributions for the respective time period. Returns are shown for institutional share class. Shares of other classes may have lower returns due to higher selling commissions and fees. Actual individual stockholder returns will vary. Net returns are calculated using the fund’s NAV and assume distributions are reinvested at the NAV on the date of distribution. Additional information related to AIREIT can be found in its filings with the SEC, which are not part of this report.
(4)Returns are time-weighted rates of return and include the reinvestment of income and other earnings from securities or other investments and reflect the deduction of all trading expenses. Gross returns do not reflect the deduction of management fees, incentive fees, as applicable, or other expenses. Net returns are calculated by subtracting the applicable management fees, incentive fees, as applicable and other expenses from the gross returns on a quarterly basis.


The following table presents the performance data of our significant drawdown fund as of September 30, 2022 ($ in millions):
Year of InceptionAUMOriginal Capital CommitmentsCapital Invested to Date
Realized Value(1)
Unrealized Value(2)
Total ValueMoICIRR(%)Primary Investment Strategy
Fund
Gross(3)
Net(4)
Gross(5)
Net(6)
Fund Harvesting Investments
IDF IV(7)
2018$3,411 $4,012 $4,322 $1,628 $3,114 $4,742 1.2x1.1x7.95.7Infrastructure Debt
(1)Realized value includes distributions of operating income, sales and financing proceeds received.
(2)Unrealized value represents the fair market value of remaining investments. Unrealized value does not take into account any bridge financings. There can be no assurance that unrealized investments will be realized at the valuations indicated.
(3)The gross MoIC is calculated at the fund level and is based on the interests of the fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The gross MoIC is before giving effect to management fees, carried interest as applicable and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the gross fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.
(4)The net MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and, if applicable, excludes interests attributable to the non fee-paying limited partners and/or the general partner which does not pay management fees or carried interest. The net MoIC is after giving effect to management fees, carried interest, as applicable, credit facility interest expense, as applicable, and other expenses. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.
(5)The gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Gross IRR reflects returns to the fee-paying limited partners and, if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest and other expenses, but after giving effect to credit facility interest expenses, as applicable, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Gross fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.
(6)The net IRR is an annualized since inception net internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Net IRRs reflect returns to the fee-paying limited partners and, if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the net IRR calculations are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees and carried interest, other expenses and credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.
(7)IDF IV is made up of U.S. Dollar hedged, U.S. Dollar unhedged, Euro unhedged, Yen hedged parallel funds and a single investor U.S. Dollar parallel fund. The gross and net IRR and MoIC presented in the table are for the U.S. Dollar hedged parallel fund. The gross and net IRR for the U.S. Dollar unhedged parallel fund are 6.2% and 4.0%, 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 for the Euro unhedged parallel fund are 10.8% and 8.5%, respectively. The gross and net MoIC for the Euro unhedged parallel fund are 1.2x and 1.2x, respectively. The gross and net IRR for the Yen hedged parallel fund are 6.8% and 4.7%, respectively. The gross and net MoIC for the Yen hedged parallel fund are 1.1x and 1.1x, respectively. The gross and net IRR for the single investor U.S. Dollar parallel fund are 4.9% and 2.9%, respectively. The gross and net MoIC for the single investor U.S. Dollar parallel fund are 1.1x and 1.0x, respectively. Original capital commitments are converted to U.S. Dollars at the prevailing exchange rate at the time of fund's closing. All other values for IDF IV are for the combined fund and are converted to U.S. Dollars at the prevailing quarter-end exchange rate.


106
Secondaries Group—Three and Nine Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021 and the Period June 2, 2021 through September 30, 2021

The activity for the nine months ended September 30, 2021 represents results subsequent to the Landmark Acquisition that closed on June 2, 2021 and is not comparable to the results for the nine months ended September 30, 2022.

Fee Related Earnings:

The following table presents the components of the Secondaries Group's FRE ($ in thousands):

Three months ended
September 30,
Favorable (Unfavorable)Nine months ended September 30,For the period June 2 through September 30,
($ in thousands)20222021$ Change% Change20222021
Management fees$44,385 $41,064 $3,321 8%$135,090 $53,962 
Fee related performance revenues235 — 235 NM235 — 
Compensation and benefits(19,191)(11,955)(7,236)(61)(45,964)(16,244)
General, administrative and other expenses(3,215)(2,593)(622)(24)(9,250)(3,452)
Fee Related Earnings$22,214 $26,516 (4,302)(16)$80,111 $34,266 
NM - Not Meaningful

Management Fees. The chart below presents Secondaries Group management fees and effective management fee rates ($ in millions):

ares-20220930_g26.jpg
107
Excluding one-time catch-up fees of $4.0 million for the three months ended September 30, 2022 and $2.3 million for the three months ended September 30, 2021, management fees increased by $2.2 million for the three months ended September 30, 2022 compared to the same period in 2021 primarily due to new commitments to our 17th private equity secondaries fund and related vehicles. Our ninth real estate secondaries fund, excluding one-time catch up fees of $1.0 million, generated additional fees of $3.5 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. The increase in management fees was partially offset by the decrease in management fees from Landmark Equity Partners XV, L.P. (“LEP XV”) and LREP VIII of $3.4 million and $2.3 million, respectively, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021; the decrease was due to the changes in fee base of both funds to reported value, which largely reflects the NAV of each funds’ limited partnership interests, from called capital plus unfunded commitments for LEP XV and from committed capital for LREP VIII.
Fee Related Performance Revenues. The activity for the three and nine months ended September 30, 2022 was attributable to fee related performance revenues from APMF.
Compensation and Benefits. Compensation and benefits increased by $7.2 million, or 61%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. The increase in salaries and benefits was primarily driven by the increase in incentive compensation.
Realized Income:

The following table presents the components of the Secondaries Group's RI ($ in thousands):

Three months ended
September 30,		Favorable
(Unfavorable)		Nine months ended September 30,For the period June 2 through September 30,
($ in thousands)20222021$ Change% Change20222021
Fee Related Earnings$22,214 $26,516 $(4,302)(16)%$80,111 $34,266 
Performance income—realized— — — —4,156 — 
Performance related compensation—realized(1)— (1)NM(3,515)— 
Realized net performance income(1)— (1)NM641 — 
Interest and other investment income—realized424 699 (275)(39)3,268 701 
Interest expense(1,753)(427)(1,326)NM(3,775)(432)
Realized net investment income (loss)(1,329)272 (1,601)NM(507)269 
Realized Income$20,884 $26,788 (5,904)(22)$80,245 $34,535 

NM - Not Meaningful

Realized net performance income for the nine months ended September 30, 2022 was primarily attributable to tax distributions from LREP VIII.

Realized net investment income for the nine months ended September 30, 2022 included dividend income received from a real estate secondaries fund and an infrastructure secondaries fund. Interest expense, which is allocated based on the cost basis of investments, increased over the comparative periods primarily due to the issuance of the 2051 Subordinated Notes and the 2052 Senior Notes in June 2021 and January 2022, respectively.



108
Secondaries Group—Performance Income
In the Secondaries Group, we are entitled to carried interest from the funds with closings subsequent to the completion of the Landmark Acquisition and to carried interest we acquired through the purchase of ownership interests in certain Landmark GP entities. The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Secondaries Group. Accrued net performance income excludes net performance income that has been realized but not yet received as of the reporting date ($ in thousands):

 As of September 30, 2022As of December 31, 2021
Accrued Performance IncomeAccrued Performance CompensationAccrued Net Performance IncomeAccrued Performance IncomeAccrued Performance CompensationAccrued Net Performance Income
LEP XVI$154,019 $130,916 $23,103 $159,490 $135,566 $23,924 
LREP VIII114,970 97,724 17,246 80,772 68,656 12,116 
Other fee generating funds61,472 52,251 9,221 58,013 49,108 8,905 
Total Secondaries Group
$330,461 $280,891 $49,570 $298,275 $253,330 $44,945 

The following table presents the change in accrued performance income for the Secondaries Group ($ in thousands):

 As of December 31, 2021Activity during the periodAs of September 30, 2022
Waterfall TypeAccrued Carried InterestChange in UnrealizedRealizedAccrued Carried Interest
Accrued Carried Interest
LEP XVIEuropean$159,490 $(5,471)$— $154,019 
LREP VIIIEuropean80,772 37,848 (3,650)114,970 
Other fee generating fundsEuropean58,013 3,569 (110)61,472 
Total accrued carried interest298,275 35,946 (3,760)330,461 
Other secondaries funds
Incentive— 396 (396)— 
Total Secondaries Group
$298,275 $36,342 $(4,156)$330,461 
109
Secondaries Group—Assets Under Management

The table below presents the rollforward of AUM for the Secondaries Group ($ in millions):
Private Equity SecondariesReal Estate SecondariesInfrastructure Secondaries
Total Secondaries Group
Balance at 6/30/2022$14,707 $7,522 $1,663 $23,892 
Net new par/equity commitments239 202 — 441 
Distributions(891)(189)(4)(1,084)
Change in fund value(627)155 12 (460)
Balance at 9/30/2022$13,428 $7,690 $1,671 $22,789 
Private Equity SecondariesReal Estate SecondariesInfrastructure SecondariesTotal Secondaries Group
Balance at 6/30/2021$12,316 $5,570 $1,590 $19,476 
Net new par/equity commitments1,130 — — 1,130 
Distributions(250)(268)(17)(535)
Change in fund value463 184 25 672 
Balance at 9/30/2021$13,659 $5,486 $1,598 $20,743 
Private Equity SecondariesReal Estate SecondariesInfrastructure SecondariesTotal Secondaries Group
Balance at 12/31/2021$13,833 $6,662 $1,624 $22,119 
Acquisitions199 — — 199 
Net new par/equity commitments887 1,425 74 2,386 
Distributions(1,178)(876)(155)(2,209)
Change in fund value(313)479 128 294 
Balance at 9/30/2022$13,428 $7,690 $1,671 $22,789 
Private Equity SecondariesReal Estate SecondariesInfrastructure SecondariesTotal Secondaries Group
Balance at 12/31/2020$— $— $— $— 
Acquisitions12,275 5,641 1,597 19,513 
Net new par/equity commitments1,231 — — 1,231 
Distributions(301)(335)(23)(659)
Change in fund value454 180 24 658 
Balance at 9/30/2021$13,659 $5,486 $1,598 $20,743 
110
The components of our AUM for the Secondaries Group are presented below ($ in billions):

ares-20220930_g27.jpg    ares-20220930_g28.jpg
AUM: $22.8AUM: $20.8
FPAUMAUM not yet paying fees
Non-fee paying(1)
(1) Includes $0.4 billion of non-fee paying AUM based on our general partner commitment as of September 30, 2022 and 2021.

111
Secondaries Group—Fee Paying AUM
The table below presents the rollforward of fee paying AUM for the Secondaries Group ($ in millions):
Private Equity SecondariesReal Estate SecondariesInfrastructure SecondariesTotal Secondaries Group
Balance at 6/30/2022$11,201 $5,074 $1,279 $17,554 
Commitments212 200 — 412 
Subscriptions/deployment/increase in leverage9 78 9 96 
Distributions(29)(188)(4)(221)
Change in fund value(263)111 (18)(170)
Change in fee basis50 (1)— 49 
Balance at 9/30/2022$11,180 $5,274 $1,266 $17,720 
Private Equity SecondariesReal Estate SecondariesInfrastructure SecondariesTotal Secondaries Group
Balance at 6/30/2021$10,828 $4,928 $1,171 $16,927 
Commitments278 — — 278 
Subscriptions/deployment/increase in leverage— — 7 7 
Distributions(38)(28)(7)(73)
Change in fund value44 28 11 83 
Change in fee basis— (37)— (37)
Balance at 9/30/2021$11,112 $4,891 $1,182 $17,185 
Private Equity SecondariesReal Estate SecondariesInfrastructure SecondariesTotal Secondaries Group
Balance at 12/31/2021$11,787 $5,389 $1,188 $18,364 
Acquisitions131 — — 131 
Commitments806 1,039 74 1,919 
Subscriptions/deployment/increase in leverage67 323 25 415 
Distributions(88)(866)(127)(1,081)
Change in fund value(191)834 106 749 
Change in fee basis(1,332)(1,445)— (2,777)
Balance at 9/30/2022$11,180 $5,274 $1,266 $17,720 
Private Equity SecondariesReal Estate SecondariesInfrastructure SecondariesTotal Secondaries Group
Balance at 12/31/2020$— $— $— $— 
Acquisitions10,740 4,928 1,171 16,839 
Commitments378 — — 378 
Subscriptions/deployment/increase in leverage2 — 7 9 
Distributions(38)(28)(7)(73)
Change in fund value42 28 11 81 
Change in fee basis(12)(37)— (49)
Balance at 9/30/2021$11,112 $4,891 $1,182 $17,185 

112
The chart below presents FPAUM for the Secondaries Group by its fee basis ($ in billions):
ares-20220930_g29.jpg ares-20220930_g30.jpg
FPAUM: $17.7FPAUM: $17.2
Market value(1)
Invested capital/otherCapital commitments

(1)Amounts represent FPAUM from funds that primarily invest in illiquid strategies. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies.
113
Secondaries Group—Fund Performance Metrics as of September 30, 2022

Three significant funds, LEP XV, LEP XVI and LREP VIII, collectively contributed approximately 53% of the Secondaries Group’s management fees for the nine months ended September 30, 2022.
The following table presents the performance data of our significant drawdown funds as of September 30, 2022 ($ in millions):

Year of InceptionAUMOriginal Capital CommitmentsCapital Invested to Date
Realized Value(1)
Unrealized Value(2)
Total ValueMoICIRR(%)Primary Investment Strategy
Fund
Gross(3)
Net(4)
Gross(5)
Net(6)
Funds Harvesting Investments
LEP XV(7)
2013$1,457 $3,250 $2,629 $2,555 $1,192 $3,747 1.6x1.4x18.212.8Private Equity Secondaries
LEP XVI(7)
20165,321 4,896 2,962 1,739 2,839 4,578 1.7x1.6x45.330.9Private Equity Secondaries
LREP VIII(7)
20163,547 3,300 1,985 1,201 1,695 2,896 1.6x1.5x30.621.8Real Estate Secondaries
For all funds in the Secondaries Group, returns are calculated from results of the underlying portfolio that are generally reported on a three month lag and may not include the impact of economic and market activities occurring in the current reporting period.

(1)Realized value represents the sum of all cash distributions to all limited partners and if applicable, exclude tax and incentive distributions made to the general partner.
(2)Unrealized value represents the limited partners' share of fund's NAV reduced by the accrued incentive allocation, if applicable. There can be no assurance that unrealized values will be realized at the valuations indicated.
(3)The gross MoIC is calculated at the fund-level and is based on the interests of all partners. If applicable, limiting the gross MoIC to exclude interests attributable to the non-fee paying limited partners and/or the general partner who does not pay management fees or carried interest would have no material impact on the result. The gross MoIC is before giving effect to management fees, carried interest as applicable and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a short-term credit facility for general cash management purposes, as well as a long-term credit facility as permitted by the respective fund's governing documentation. The gross fund-level MoIC would have generally been lower had such fund called capital from its partners instead of utilizing the credit facility.
(4)The net MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes those interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The net MoIC is after giving effect to management fees and other expenses, carried interest and credit facility interest expense, as applicable. The funds may utilize a short-term credit facility for general cash management purposes, as well as a long-term credit facility as permitted by the respective fund's governing documentation. The net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.
(5)The gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Gross IRR reflects returns to all partners. If applicable, limiting the gross IRR to exclude interests attributable to the non-fee paying limited partners and/or the general partner who does not pay management fees or carried interest would have no material impact on the result. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a short-term credit facility for general cash management purposes, as well as a long-term credit facility as permitted by the respective fund's governing documents. The gross fund-level IRR would generally have been lower had such fund called capital from its partners instead of utilizing the credit facility.
(6)The net IRR is an annualized since inception net internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Net IRRs reflect returns to the fee-paying limited partners and, if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner who does not pay management fees or carried interest. The cash flow dates used in the net IRR calculations are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees and other expenses, carried interest and credit facility interest expenses, as applicable. The funds may utilize a short-term credit facility for general cash management purposes, as well as a long-term credit facility as permitted by the respective fund's governing documents. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.
(7)The results of each fund is presented on a combined basis with the affiliated parallel funds or accounts, given that the investments are substantially the same.


114
Strategic Initiatives—Three and Nine Months Ended September 30, 2022 Compared to Three and Nine Months Ended September 30, 2021
Fee Related Earnings:
The following table presents the components of Strategic Initiatives’ FRE ($ in thousands):

 Three months ended September 30,Favorable (Unfavorable)Nine months ended September 30,Favorable (Unfavorable)
20222021$ Change% Change20222021$ Change% Change
Management fees$18,183 $16,544 $1,639 10 %$52,377 $48,963 $3,414 7%
Other fees67 2 65 NM181 82 99 121
Compensation and benefits(7,859)(5,316)(2,543)(48)(22,059)(15,440)(6,619)(43)
General, administrative and other expenses(1,486)(1,774)288 16 (5,575)(5,580)5 —
Fee Related Earnings$8,905 $9,456 (551)(6)$24,924 $28,025 (3,101)(11)
NM - Not Meaningful

Management Fees. The chart below presents Strategic Initiatives management fees and effective management fee rates ($ in millions):
ares-20220930_g31.jpg
Management fees increased for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021 primarily driven by new commitments to our sixth Asian special situations fund and by additional managed assets in our insurance strategy. SLO III also contributed to the increase in management fees for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021 primarily due to deployment of capital. Following the launch of our sixth Asian special situations fund in the first quarter of 2022, SSG Capital Partners V, L.P. (“SSG Fund V”) had a reduction in fee base that partially offset the increase in management fees over the comparative periods.
The decreases in effective management fee rate for the three and nine months ended September 30, 2022 compared to
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the three and nine months ended September 30, 2021 were primarily driven by the growing fee base of our insurance strategy, which has an effective management fee rate of 0.30%. The effective management fee rate also decreased due to the launch of our sixth Asian special situations fund in the first quarter of 2022. Our sixth Asian special situations fund pays a fee on both committed and invested capital. As a result, our effective management fee rate decreases immediately following capital raising and increases as capital is subsequently deployed.
Compensation and Benefits. Compensation and benefits increased by $2.5 million, or 48%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $6.6 million, or 43%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increases in salaries and benefits for the three and nine months ended September 30, 2022 were primarily driven by i) our decision to acquire a team that was dedicated to supporting Ares SSG deal sourcing in India, leading to a corresponding decrease in general, administrative and other expenses; the impact of this decision is expected to continue in future periods, and ii) headcount growth across all strategies to support our strategic initiatives. Average headcount for the year-to-date period increased by 39% to 64 investment and investment support professionals, including 11 professionals from the expansion of our team in India, from 46 professionals for the same period in 2021.
General, Administrative and Other Expenses. General, administrative and other expenses remained relatively flat for the three and nine months ended September 30, 2022 compared to the same periods in 2021. As described previously, the decision to acquire the deal sourcing team in India contributed to a reduction in professional fees and was offset by increasing occupancy and information services costs to support our expanding workforce for the three and nine months ended September 30, 2022 compared to the same periods in 2021.
Realized Income:
The following table presents the components of Strategic Initiatives RI ($ in thousands):

Three months ended September 30,Favorable (Unfavorable)Nine months ended September 30,Favorable (Unfavorable)
20222021$ Change% Change20222021$ Change% Change
Fee Related Earnings$8,905 $9,456 $(551)(6)%$24,924 $28,025 $(3,101)(11)%
Investment income-realized— 1,025 (1,025)(100)858 1,347 (489)(36)
Interest and other investment income-realized1,096 163 933 NM6,613 2,824 3,789 134
Interest expense(5,244)(4,135)(1,109)(27)(16,687)(8,962)(7,725)(86)
Realized net investment loss(4,148)(2,947)(1,201)41(9,216)(4,791)(4,425)(92)
Realized Income$4,757 $6,509 (1,752)(27)$15,708 $23,234 (7,526)(32)
NM - Not Meaningful
Interest expense, which is allocated based on the cost basis of investments, increased over the comparative periods primarily due to the issuance of the 2051 Subordinated Notes and the 2052 Senior Notes in June 2021 and January 2022, respectively.
For the three and nine months ended September 30, 2022, we earned interest income from a fund invested in insurance companies. For the nine months ended September 30, 2021, we received distributions from an investment vehicle that manages a portfolio of non-performing loans.

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Strategic Initiatives—Assets Under Management
The tables below present rollforwards of AUM for Strategic Initiatives ($ in millions):
Asian Special SituationsAsian Secured LendingAPAC Direct LendingInsuranceSPACsTotal Strategic Initiatives
Balance at 6/30/2022$7,105 $2,378 $336 $1,702 $1,000 $12,521 
Net new par/equity commitments— — 100 1,008 — 1,108 
Net new debt commitments— 6 1,366 — — 1,372 
Distributions(394)(30)— (694)— (1,118)
Change in fund value74 30 (20)(81)— 3 
Balance at 9/30/2022$6,785 $2,384 $1,782 $1,935 $1,000 $13,886 
Asian Special SituationsAsian Secured LendingAPAC Direct LendingInsuranceSPACsTotal Strategic Initiatives
Balance at 6/30/2021$5,025 $2,467 $— $1,874 $1,000 $10,366 
Net new par/equity commitments— 70 — 143 — 213 
Capital reductions— (29)— — — (29)
Distributions252 (2)— (48)— 202 
Change in fund value94 (21)— 11 — 84 
Balance at 9/30/2021$5,371 $2,485 $— $1,980 $1,000 $10,836 
 Asian Special SituationsAsian Secured LendingAPAC Direct LendingInsuranceSPACsTotal Strategic Initiatives
Balance at 12/31/2021$6,239 $2,456 $— $1,928 $1,000 $11,623 
Net new par/equity commitments1,135 10 462 1,118 — 2,725 
Net new debt commitments— 6 1,366 — — 1,372 
Capital reductions— (5)— — — (5)
Distributions(598)(101)— (744)— (1,443)
Change in fund value9 18 (46)(367)— (386)
Balance at 9/30/2022$6,785 $2,384 $1,782 $1,935 $1,000 $13,886 
Asian Special SituationsAsian Secured LendingAPAC Direct LendingInsuranceSPACsTotal Strategic Initiatives
Balance at 12/31/2020$5,154 $1,864 $— $2,243 $— $9,261 
Net new par/equity commitments(1)
3 620 — (230)1,000 1,393 
Distributions(73)(2)— (103)— (178)
Change in fund value287 3 — 70 — 360 
Balance at 9/30/2021$5,371 $2,485 $— $1,980 $1,000 $10,836 
(1) Reallocation of capital among the segments may occur for pools of capital with investment mandates in more than one investment strategy. This reallocation activity is presented within net new par/equity commitments and may result in balances presented to be negative.
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The components of our AUM for Strategic Initiatives are presented below ($ in billions):
ares-20220930_g32.jpg    ares-20220930_g33.jpg
AUM: $13.9AUM: $10.8
FPAUMAUM not yet paying fees
Non-fee paying(1)
(1) Includes $0.3 billion and $0.1 billion of non-fee paying AUM based on our general partner commitment as of September 30, 2022 and 2021, respectively.

Strategic Initiatives—Fee Paying AUM

The tables below present rollforwards of fee paying AUM for Strategic Initiatives ($ in millions):

Asian Special SituationsAsian Secured LendingAPAC Direct LendingInsuranceTotal Strategic Initiatives
Balance at 6/30/2022$4,566 $1,134 $— $1,392 $7,092 
Commitments— 6 — 628 634 
Subscriptions/deployment/increase in leverage181 499 140 — 820 
Capital reductions(8)— — — (8)
Distributions(309)(208)— (418)(935)
Change in fund value(12)— — (141)(153)
Balance at 9/30/2022$4,418 $1,431 $140 $1,461 $7,450 
Asian Special SituationsAsian Secured LendingAPAC Direct LendingInsuranceTotal Strategic Initiatives
Balance at 6/30/2021$3,618 $1,055 $— $1,948 $6,621 
Commitments— — — 233 233 
Subscriptions/deployment/increase in leverage236 143 — — 379 
Capital reductions— (121)— — (121)
Distributions(163)(62)— (48)(273)
Change in fund value— — — 53 53 
Balance at 9/30/2021$3,691 $1,015 $— $2,186 $6,892 
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.Asian Special SituationsAsian Secured LendingAPAC Direct LendingInsuranceTotal Strategic Initiatives
Balance at 12/31/2021$3,605 $1,115 $— $2,067 $6,787 
Commitments1,747 6 — 761 2,514 
Subscriptions/deployment/increase in leverage570 1,138 140 (38)1,810 
Capital reductions(19)(223)— — (242)
Distributions(611)(485)— (422)(1,518)
Change in fund value(31)(120)— (669)(820)
Change in fee basis(843)— — (238)(1,081)
Balance at 9/30/2022$4,418 $1,431 $140 $1,461 $7,450 
Asian Special SituationsAsian Secured LendingAPAC Direct LendingInsuranceTotal Strategic Initiatives
Balance at 12/31/2020$3,614 $739 $— $2,243 $6,596 
Commitments(1)
— — — (66)(66)
Subscriptions/deployment/increase in leverage952 552 — — 1,504 
Capital reductions(180)(122)— — (302)
Distributions(695)(154)— (103)(952)
Change in fund value— — — 112 112 
Balance at 9/30/2021$3,691 $1,015 $— $2,186 $6,892 
(1) Reallocation of capital among the segments may occur for pools of capital with investment mandates in more than one investment strategy. This reallocation activity is presented within commitments and may result in balances presented to be negative.

The charts below present FPAUM for Strategic Initiatives by its fee basis ($ in billions):

ares-20220930_g34.jpg    ares-20220930_g35.jpg
FPAUM: $7.4FPAUM: $6.9
Market valueInvested capital/otherCapital commitments

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Operations Management Group—Three and Nine Months Ended September 30, 2022 Compared to Three and Nine Months Ended September 30, 2021

Fee Related Earnings:
The following table presents the components of the Operations Management Group’s FRE ($ in thousands):

Three months ended September 30,Favorable (Unfavorable)Nine months ended September 30,Favorable (Unfavorable)
20222021$ Change% Change20222021$ Change% Change
Other fees$7,547 $3,446 $4,101 119%$19,721 $3,446 $16,275 NM
Compensation and benefits(61,084)(66,107)5,023 8(196,492)(158,943)(37,549)(24)
General, administrative and other expenses(41,907)(28,142)(13,765)(49)(109,516)(69,872)(39,644)(57)
Fee Related Earnings$(95,444)$(90,803)(4,641)(5)$(286,287)$(225,369)(60,918)(27)
NM - Not Meaningful
Other Fees. Other fees increased by $4.1 million, or 119%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $16.3 million, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increase is primarily due to trade-based fees from the sale and distribution of our non-traded REITs, net of amounts reallowed to participating broker-dealers.
Compensation and Benefits. Compensation and benefits decreased by $5.0 million, or 8%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and increased by $37.5 million, or 24%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The decrease in salaries and benefits for the three months ended September 30, 2022 when compared to the same period in 2021 was primarily attributable to i) a reduction in incentive compensation from the prior year period of $10.2 million that may fluctuate on a quarterly basis before payments are determined during the fourth quarter, ii) a reduction of payroll taxes from the prior year period of $2.0 million, primarily from the vesting of non-recurring equity compensation awardsok and iii) our decision to engage a third party subject matter expert to support the reorganization of our income tax compliance function which contributed to a reduction in salaries and benefits of $2.8 million for the three months ended September 30, 2022, leading to a corresponding increase in general, administrative and other expenses. The impact of this reorganization is expected to continue in future periods.
Headcount growth attributable to the Black Creek Acquisition, including Ares Wealth Management Solutions, LLC (“AWMS”), Landmark Acquisition and Infrastructure Debt Acquisition collectively contributed $34.7 million to the increase in recurring employment related costs for the nine months ended September 30, 2022 compared to the same period in 2021. Additionally, in connection with the sale and distribution of fund shares in our non-traded REITs, we have incurred employee commission expense of $14.9 million during the nine months ended September 30, 2022 compared to the same period in 2021. The increase in salaries and benefits was further driven by (i) the expansion of our strategy and relationship management teams to support global fundraising and (ii) the expansion of our business operations teams to support the growth of our business and other strategic initiatives.
Average headcount for the third quarter of 2022 increased by 22% to 1,292 operations management professionals from 1,055 professionals for the same period in 2021, including approximately 10 professionals from the Infrastructure Debt Acquisition. Average headcount for the year-to-date period increased by 40% to 1,215 operations management professionals from 868 professionals for the same period in 2021, including 208 professionals from the Black Creek Acquisition, including AWMS, the Landmark Acquisition and the Infrastructure Debt Acquisition.
General, Administrative and Other Expenses. General, administrative and other expenses increased by $13.8 million, or 49%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 and by $39.6 million, or 57%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increase for the nine months ended September 30, 2022 compared to the same period in 2021 was primarily attributable to our strategic acquisitions and activity from AWMS. The nine months ended September 30, 2022 included $8.1 million of general, administrative and other expenses associated with our acquisitions that are not comparable to the prior year period because the Infrastructure Debt Acquisition closed in the first quarter of 2022, the Black Creek Acquisition closed at the beginning of the third quarter of 2021 and the Landmark Acquisition closed in the second quarter of 2021. AWMS facilitates product development, distribution, marketing and client management activities to support investment offerings in the global wealth management channel. As we build out our retail distribution infrastructure and capabilities to support prospective sales and AUM growth, we expect marketing and distribution expenses, including travel, to increase in future periods.
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Excluding the impact from the acquisitions, certain expenses have also increased during the current period to support the growing headcount. Occupancy costs, information services and information technology costs have increased by $3.2 million and $6.4 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. Additionally, professional service fees have increased by $6.6 million and $13.2 million for the three and nine months ended September 30, 2022, respectively, primarily due to recruiting fees to support the expanding platform and to the reorganization of our income tax compliance function.
Other operating expenses, most notably travel, marketing sponsorships and certain fringe benefits, collectively increased by $3.4 million and $9.3 million for the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021 as travel, marketing and company events have returned to pre-pandemic levels.
Realized Income:
The following table presents the components of the OMG's RI ($ in thousands):

Three months ended September 30,Favorable (Unfavorable)Nine months ended September 30,Favorable (Unfavorable)
20222021$ Change% Change20222021$ Change% Change
Fee Related Earnings$(95,444)$(90,803)$(4,641)(5)%$(286,287)$(225,369)$(60,918)(27)%
Interest and other investment income (loss)—realized(171)(270)99 (37)(1,450)170 (1,620)NM
Interest expense(128)(160)32 20(474)(397)(77)(19)
Realized net investment loss(299)(430)131 30(1,924)(227)(1,697)NM
Realized Income$(95,743)$(91,233)(4,510)(5)$(288,211)$(225,596)(62,615)(28)
NM - Not Meaningful

Liquidity and Capital Resources
Management assesses liquidity in terms of our ability to generate cash to fund operating, investing and financing activities. Management believes that the Company is well-positioned and its liquidity will continue to be sufficient for its foreseeable working capital needs, contractual obligations, dividend payments, pending acquisitions and strategic initiatives.

Sources and Uses of Liquidity
Our sources of liquidity are (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. As of September 30, 2022, our cash and cash equivalents were $361.5 million, and we had $445.0 million borrowings outstanding under our Credit Facility. Our ability to draw from the Credit Facility is subject to a leverage and other covenants. We remain in compliance with all covenants as of September 30, 2022. We believe that these sources of liquidity will be sufficient to fund our working capital requirements and to meet our commitments in the ordinary course of business and under the current market conditions for the foreseeable future. Cash flows from management fees may be impacted by a slowdown or declines in deployment, declines or write downs in valuations, or a slowdown or negatively impacted fundraising. In addition, management fees may be subject to deferral and fee related performance revenues may be subject to hold backs. Declines or delays and transaction activity may impact our fund distributions and net realized performance income which could adversely impact our cash flows and liquidity. Market conditions may make it difficult to extend the maturity or refinance our existing indebtedness or obtain new indebtedness with similar terms.
We expect that our primary liquidity needs will continue to be to (1) provide capital to facilitate the growth of our existing investment management businesses, (2) fund our investment commitments, (3) provide capital to facilitate our expansion into businesses that are complementary to our existing investment management businesses as well as other strategic growth initiatives, (4) pay operating expenses, including cash compensation to our employees, and make payments under the tax receivable agreement (“TRA”), (5) fund capital expenditures, (6) service our debt, (7) pay income taxes, (8) make dividend payments to our Class A and non-voting common stockholders in accordance with our dividend policy and (9) pay distributions to AOG unitholders.
In the normal course of business, we expect to pay dividends to our Class A and non-voting common stockholders that
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are aligned with our expected fee related earnings after an allocation of current taxes paid. For the purposes of determining this amount, we allocate the current taxes paid to FRE and to realized incentive and investment income in a manner that may be disproportionate to earnings generated by these metrics, and the actual taxes paid on these metrics should they be considered separately. Additionally, our methodology uses the tax benefits from certain expenses that are not included in these non-GAAP metrics, such as equity-based compensation from the vesting of restricted units and the exercise of stock options and from the amortization of intangible assets, among others. We allocate the taxes by multiplying the statutory tax rate currently in effect by our realized performance and net investment income and removing this amount from total current taxes. The remaining current tax paid is the amount that we allocate to FRE. We use this method to allocate the current provision for income taxes to approximate the amount of cash that is available to pay dividends to our stockholders. If cash flows from operations were insufficient to fund dividends over a sustained period of time, we expect that we would suspend or reduce paying such dividends. In addition, there is no assurance that dividends would continue at the current levels or at all.
Our ability to obtain debt financing and complete stock offerings provides us with additional sources of liquidity. For further discussion of financing transactions occurring in the current period, see “Cash Flows” within this section and “Note 8. Debt” and “Note 14. Equity and Redeemable Interest” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Our unaudited condensed consolidated financial statements reflect the cash flows of our operating businesses as well as those of our Consolidated Funds. The assets of our Consolidated Funds, on a gross basis, are significantly larger than the assets of our operating businesses and therefore have a substantial effect on our reported cash flows. The primary cash flow activities of our Consolidated Funds include: (1) raising capital from third-party investors, which is reflected as non-controlling interests of our Consolidated Funds, (2) financing certain investments by issuing debt, (3) purchasing and selling investment securities, (4) generating cash through the realization of certain investments, (5) collecting interest and dividend income and (6) distributing cash to investors. Our Consolidated Funds are generally accounted for as investment companies under GAAP; therefore, the character and classification of all Consolidated Fund transactions are presented as cash flows from operations. Liquidity available at our Consolidated Funds is not available for corporate liquidity needs, and debt of the Consolidated Funds is non–recourse to the Company except to the extent of the Company's investment in the fund.
Cash Flows
We consolidate funds where we are deemed to hold a controlling interest. The Consolidated Funds are not necessarily the same entities in each year presented due to changes in ownership, changes in limited partners' rights and the creation or termination of funds. The consolidation of these funds had no effect on cash flows attributable to us for the periods presented. As such, we evaluate the activity of the Consolidated Funds and the eliminations resulting from consolidation separately. The following tables and discussion summarize our condensed consolidated statements of cash flows by activities attributable to the Company and to our Consolidated Funds. For more details on the activity of the Company and Consolidated Funds, refer to “Note 16. Consolidation” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
 Nine months ended September 30,
($ in thousands)
20222021
Net cash provided by operating activities$640,805 $368,259 
Net cash used in the Consolidated Funds' operating activities, net of eliminations(1,184,410)(2,212,010)
Net cash used in operating activities(543,605)(1,843,751)
Net cash used in the Company's investing activities(330,046)(1,072,578)
Net cash provided by (used in) the Company's financing activities(266,540)476,110 
Net cash provided by the Consolidated Funds' financing activities, net of eliminations1,193,621 2,216,874 
Net cash provided by financing activities927,081 2,692,984 
Effect of exchange rate changes(35,585)(20,763)
Net change in cash and cash equivalents$17,845 $(244,108)

Operating Activities
In the table below cash flows from operations have been summarized to present (i) cash generated from our core operating activities, primarily consisting of profits generated principally from management fees and fee related performance revenues after covering for operating expenses and fee related performance compensation, (ii) net realized performance income and (iii) net cash from investment related activities including purchases, sales and net realized investment income. We generated meaningful cash flow from operations in each period presented.
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Nine months ended September 30,Favorable (Unfavorable)
20222021$ Change% Change
Core operating activities$722,508 $476,700 $245,808 52%
Net realized performance income85,646 37,628 48,018 128
Net cash used in investment related activities(167,349)(146,069)(21,280)15
Net cash provided by operating activities$640,805 $368,259 272,546 74
NM - Not Meaningful

Cash generated from our core operating activities continues to increase as a result of growing fee revenues and an expanding fee related earnings margin. Net realized performance income represents a source of cash and includes incentive fees that are realized annually at the end of the measurement period, which is typically at the end of the calendar year. Cash from these realizations are generally received in the period subsequent to the measurement period. Our incentive fee realizations were higher in the fourth quarter of 2021 compared to the fourth quarter of 2020, which resulted in an increase in cash payments received over the comparative period. Net cash used in investment related activities primarily represents net purchases associated with funding capital commitments in our investment portfolio, which represent a use of cash. Our capital commitments continue to increase with our growing assets under management. For further discussion of our capital commitments, see “Note 9. Commitments and Contingencies,” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Net cash used in the Consolidated Funds’ operating activities continues to be principally attributable to net purchases of investment securities by recently launched funds during both periods. Net cash used in the Consolidated Funds’ operating activities for the nine months ended September 30, 2021 included the purchase of U.S. Treasury securities following the initial public offering of our SPAC.
Our working capital needs are generally rising to support the growth of our business, while the capital requirements needed to support fund-related activities vary based upon the specific investment activities being conducted during such period.

Investing Activities
Nine months ended September 30,
20222021
Purchase of furniture, equipment and leasehold improvements, net of disposals$(28,388)$(15,152)
Acquisitions, net of cash acquired(301,658)(1,057,426)
Net cash used in investing activities$(330,046)$(1,072,578)

Net cash used in the Company's investing activities was principally composed of cash used to complete the Infrastructure Debt Acquisition in the current period and cash used to complete the Black Creek Acquisition and Landmark Acquisition in the prior year period. We also used cash to purchase furniture, fixtures, equipment and leasehold improvements during both years to support the growth in our staffing levels and expanding our global presence.

Financing Activities
Nine months ended September 30,
20222021
Net proceeds from issuance of Class A and non-voting common stock$— $827,430 
Net borrowings of Credit Facility30,000 150,000 
Proceeds from issuance of senior and subordinated notes488,915 450,000 
Class A and non-voting common stock dividends(334,864)(239,816)
AOG unitholder distributions(273,356)(198,752)
Series A Preferred Stock dividends— (10,850)
Redemption of Series A Preferred Stock
— (310,000)
Stock option exercises14,531 27,409 
Taxes paid related to net share settlement of equity awards(194,223)(221,287)
Other financing activities2,457 1,976 
Net cash provided by (used in) the Company's financing activities$(266,540)$476,110 

As a result of generating higher fee related earnings, we increased the level of dividends paid to a growing shareholder base of Class A and non-voting common stockholders and distributions paid to AOG unitholders, resulting in net cash used in the Company’s financing activities for the nine months ended September 30, 2022. Net proceeds from the issuance of the 2052
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Senior Notes contributed to additional cash inflow for the nine months ended September 30, 2022. These proceeds were used primarily to fund the Infrastructure Debt Acquisition.

In connection with the vesting of restricted units that are granted to our employees under the Equity Incentive Plan, we withhold shares equal to the fair value of our employee’s withholding tax liabilities and pay the taxes on their behalf. This use of cash decreased from the prior period primarily as a result of a lower number of restricted units that vested in the current period, partially offset by our higher stock price, which is the basis on which employee compensation is recognized. The net settlement of shares minimizes the dilutive impact of our Equity Incentive Plan as fewer shares are issued upon vesting. For the nine months ended September 30, 2022 and 2021, we retained and did not issue 2.5 million shares and 3.8 million shares, respectively.

Net cash provided by the Company's financing activities for the nine months ended September 30, 2021 was principally composed of net proceeds from the public offering of Class A common stock, private offering of Class A common stock and non-voting common stock to SMBC and the issuance of the 2051 Subordinated Notes. These proceeds were largely used to fund the Black Creek Acquisition, Landmark Acquisition and redeem the Series A Preferred Stock.

Nine months ended September 30,
20222021
Contributions from redeemable and non-controlling interests in Consolidated Funds, net of eliminations$298,646 $919,666 
Distributions to non-controlling interests in Consolidated Funds, net of eliminations(104,432)(84,770)
Borrowings under loan obligations by Consolidated Funds1,120,680 1,456,887 
Repayments under loan obligations by Consolidated Funds(121,273)(74,909)
Net cash provided by the Consolidated Funds' financing activities$1,193,621 $2,216,874 
Net cash provided by the Consolidated Funds’ financing activities for the nine months ended September 30, 2022 was primarily attributable to the borrowings of two newly issued CLOs.
Net cash provided by the Consolidated Funds’ financing activities for the nine months ended September 30, 2021 was principally attributable to contributions from shareholders in the initial public offering of our SPAC and to the borrowings of two newly issued CLOs.
Capital Resources
We intend to use a portion of our available liquidity to pay cash dividends to our Class A and non-voting common stockholders on a quarterly basis in accordance with our dividend policy. Our ability to make cash dividends is dependent on a myriad of factors, including among others: general economic and business conditions; our strategic plans and prospects; our business and investment opportunities; timing of capital calls by our funds in support of our commitments; our financial condition and operating results; working capital requirements and other anticipated cash needs; contractual restrictions and obligations; legal, tax and regulatory restrictions; restrictions on the payment of distributions by our subsidiaries to us and other relevant factors.

We are required to maintain minimum net capital balances for regulatory purposes for our broker-dealer entities. These net capital requirements are met in part by retaining cash, cash equivalents and investment securities. Additionally, certain of our subsidiaries operating outside the U.S. are also subject to capital adequacy requirements in each of its jurisdictions. As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions. As of September 30, 2022, we were required to maintain approximately $48.1 million in net assets within these subsidiaries to meet regulatory net capital and capital adequacy requirements. We remain in compliance with all regulatory requirements.

Holders of AOG Units, subject to the terms of the exchange agreement, may exchange their AOG Units for shares of our Class A common stock on a one-for-one basis. These exchanges are expected to result in increases in the tax basis of the tangible and intangible assets of AMC that otherwise would not have been available. These increases in tax basis may increase depreciation and amortization for U.S. income tax purposes and thereby reduce the amount of tax that we would otherwise be required to pay in the future. We entered into the TRA that provides payment to the TRA recipients of 85% of the amount of actual cash savings, if any, in U.S. federal, state, local and foreign income tax or franchise tax that we actually realize as a result of these increases in tax basis and of certain other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA and interest accrued thereon. Future payments under the TRA in respect of subsequent exchanges are expected to be substantial. The TRA liability balance was $99.0 million and $100.5 million as of September 30, 2022 and December 31, 2021, respectively.
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For a discussion of our debt obligations, including the debt obligations of our consolidated funds, see “Note 8. Debt,” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Critical Accounting Estimates

We prepare our unaudited condensed consolidated financial statements in accordance with GAAP. In applying many of these accounting principles, we need to make assumptions, estimates or judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our unaudited condensed consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates or judgments, however, are both subjective and subject to change, and actual results may differ from our assumptions and estimates. Actual results may also differ from our estimates and judgments due to risks and uncertainties. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known. For a summary of our significant accounting policies, see “Note 2. Summary of Significant Accounting Policies,” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021. For a summary of our critical accounting estimates, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates" in our Annual Report on Form 10-K.

Recent Accounting Pronouncements

Information regarding recent accounting pronouncements and their impact on the Company can be found in “Note 2. Summary of Significant Accounting Policies,” of our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Commitments and Contingencies

In the normal course of business, we enter into contractual obligations that may require future cash payments. We may also engage in off-balance sheet arrangements, including transactions in derivatives, guarantees, capital commitments to funds, indemnifications and potential contingent payment obligations. For further discussion of these arrangements, see “Note 7. Derivative Financial Instruments” and “Note 9. Commitments and Contingencies” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

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Item 3.  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, performance income and investment income.
Market Risk
The market price of investments may significantly fluctuate during the period of investment. Investments may decline in value due to factors affecting securities markets generally or particular industries represented in the securities markets. The value of an investment may decline due to general market conditions, which are not specifically related to such investment, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. It may also decline due to factors that affect a particular industry or industries, such as labor shortages or increased production costs, supply chain constraints and competitive conditions within an industry.
Our credit orientation has been a central tenet of our business across our debt and equity investment strategies. We believe the combination of high-quality proprietary information flow and a consistent, rigorous approach to managing investments across our strategies has been, and we believe will continue to be, a major driver of our strong risk-adjusted returns and the stability and predictability of our income.

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 such agreements, we depend on the counterparty to make payment or otherwise perform. We generally endeavor to minimize our risk of exposure by limiting to reputable financial institutions the counterparties with which we enter into financial transactions. In other circumstances, availability of financing from financial institutions may be uncertain due to market events, and we may not be able to access these financing markets.

In the ordinary course of business, we may extend loans to our funds or guarantee credit facilities held by our funds and could be subject to risk of loss or repayment if our funds do not perform.

Certain of our funds’ investments include lower-rated and comparable quality unrated distressed investments and other instruments. These issuers can be more sensitive to adverse market conditions, such as a recession or increasing interest rates, as compared to higher rated issuers. We seek to minimize risk exposure by subjecting each prospective investment to our rigorous, credit-oriented investment approach.

At September 30, 2022 and December 31, 2021, we had cash balances with financial institutions in excess of Federal Deposit Insurance Corporation insured limits. We seek to mitigate this exposure by monitoring the credit standing of these financial institutions.

There have been no material changes in our market risks for the nine months ended September 30, 2022. For additional information on our market risks, refer to our Annual Report on Form 10-K for the year ended December 31, 2021, which is accessible on the SEC's website at sec.gov.
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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2022. Based upon that evaluation and subject to the foregoing, our principal executive officer and principal financial officer concluded that, as of September 30, 2022, the design and operation of our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2022 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.

Item 1. 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 September 30, 2022 and December 31, 2021, we were not subject to any material pending legal proceedings. Our businesses are also subject to extensive regulation, which may result in regulatory proceedings against us.

Item 1A.  Risk Factors

There have been no material changes to the risk factors for the nine months ended September 30, 2022. For a discussion of our other potential risks and uncertainties, see “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, which is accessible on the SEC's website at sec.gov.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

We did not sell any equity securities during the period covered in this report that were not registered under the Securities Act.

Except as set forth below, all unregistered purchases of equity securities during the period covered by this Quarterly Report were previously disclosed in our current reports on Form 8-K or quarterly reports on Form 10-Q ($ in thousands; except share data):

PeriodTotal Number of Shares PurchasedAverage Price Paid Per ShareTotal 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)
July 1, 2022 - July 31, 2022
—$— —$150,000 
August 1, 2022 - August 31, 2022
—— —150,000 
September 1, 2022 - September 30, 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. 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. The program is scheduled to expire in March 2023. Repurchases under the program depend on the prevailing market conditions and other factors.

As permitted by our policies and procedures governing transactions in our securities by our directors, executive officers and other employees, from time to time some of these persons may establish plans or arrangements complying with Rule 10b5-1 under the Exchange Act, and similar plans and arrangements relating to our Class A common stock.

Item 3. Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures
Not applicable.

Item 5. Other Information
None.
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Table of Contents
Item 6.  Exhibits, Financial Statement Schedules
(a)Exhibits.
The following is a list of all exhibits filed or furnished as part of this report.
Exhibit No.Description
3.1
Second Amended and Restated Certificate of Incorporation of Ares Management Corporation.
3.2
Bylaws of Ares Management Incorporation (incorporated by reference to Exhibit 99.4 to the Registrant’s Current Report on Form 8-K (File No. 001-36429) filed with the SEC on November 15, 2018).
31.1
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a).
31.2
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a).
32.1*
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH Inline XBRL Taxonomy Extension Schema Document.
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104.0Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
* These certifications are not deemed filed by the SEC and are not to be incorporated by reference in any filing we make under the Securities Act of 1933 or the Securities Exchange Act of 1934, irrespective of any general incorporation language in any filings.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 ARES MANAGEMENT CORPORATION
   
   
Dated: November 7, 2022By:/s/ Michael J Arougheti
 Name:Michael J Arougheti
 Title:Co-Founder, Chief Executive Officer & President (Principal Executive Officer)
Dated: November 7, 2022By:/s/ Jarrod Phillips
Name:Jarrod Phillips
Title:Chief Financial Officer
(Principal Financial and Accounting Officer) 

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