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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10‑Q
10-Q
x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2021
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. 001‑36429001-36429
ares-20210331_g1.jpg
ARES MANAGEMENT L.P.CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware
80-0962035
(State or other jurisdiction of

incorporation or organization)
80‑0962035
(I.R.S. Employer

Identification Number)
2000 Avenue of the Stars, 12th12th Floor, Los Angeles, CA 90067
(Address of principal executive office) (Zip Code)
(310) 201‑4100201-4100
(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
7.00% Series A Preferred Stock, par value $0.01 per shareARES.PRANew 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S‑TS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑acceleratednon-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company.” and “emerging growth company” in Rule 12b‑212b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨Accelerated Filer
x
Accelerated filer x
Filer
Non‑accelerated filer ¨
(Do not check if a
smaller reporting company)
☐
Non-Accelerated Filer
☐Smaller reporting company ¨Reporting Company
☐
Emerging growth company ¨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 7(a)(2)(B)13(a) of the SecuritiesExchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑212b-2 of the Exchange Act). Yes ¨☐  No x
The numberAs of April 30, 2021 there were 162,282,379 of the registrant’s shares of Class A common units representing limited partner interestsstock outstanding, as3,489,911 of October 27, 2017 was 82,211,302.the registrant’s shares of non-voting common stock outstanding, 1,000 shares of the registrant's Class B common stock outstanding, and 112,163,894 of the registrant's Class C common stock outstanding.



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PART I—FINANCIAL INFORMATION
Item 1. Financial Information - Unaudited
Financial Information - Unaudited
78
Condensed Consolidated Statements of Financial Condition as of September 30, 2017March 31, 2021 and December 31, 20162020
78
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017March 31, 2021 and September 30, 20162020
89
Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017March 31, 2021 and September 30, 20162020
910
Condensed Consolidated Statements of Changes in Equity for the nine three months ended September 30, 2017March 31, 2021 and for the year ended December 31, 2020
1011
Condensed Consolidated Statements of Cash Flows for the nine three months ended September 30, 2017March 31, 2021 and September 30, 20162020
1113
Notes to the Condensed Consolidated Financial Statements
1214
Item 2.
Management’s Discussion andAnd Analysis ofOf Financial Condition andAnd Results ofOf Operations
5251
Item 3.
Quantitative and Qualitative Disclosures Aboutabout Market Risk
10088
Item 4.  Controls And Procedures
Controls and Procedures
10089
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
10190
Item 1.1A.  Risk Factors
Legal Proceedings
10190
Item 1A.
Risk Factors
101
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
10193
Item 3.
Defaults Upon Senior Securities
10193
Item 4.
Mine Safety DisclosuresDisclosure
10193
Item 5.
Other Information
10193
Item 6. Exhibits
Exhibits
10294
Signatures
10395


Forward‑Looking
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Cautionary Note Regarding Forward-Looking Statements
This report contains forward‑lookingforward-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‑lookingforward-looking statements by the use of forward‑lookingforward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of those words, other comparable words or other comparable words.statements that do not relate to historical or factual matters. The forward‑lookingforward-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‑lookingforward-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 reportReport on Form 10-K for the year ended December 31, 2016,2020, under the headings “Management’s“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk“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‑lookingforward-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‑lookingforward-looking statements. Any forward‑lookingforward-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‑lookingforward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. For a discussion of risks resulting from the coronavirus (“COVID-19”) pandemic and the impact on the U.S. and global economy, see “Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q.
References in this Quarterly Report on Form 10-Q to the “Ares Operating Group” refer to, collectively, Ares Holdings L.P. (“Ares Holdings”), Ares Offshore Holdings L.P. (“Ares Offshore”) and Ares Investments L.P. (“Ares Investments”). References in this Quarterly Report on Form 10-Q to an “Ares Operating Group Unit” or an “AOG Unit” refer to, collectively, a partnership unit in each of the Ares Operating Group entities. 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‑affiliatesAres-affiliates and affiliated funds and co‑investmentco-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, performance feesincome and other fees that we earn from the entity. However, the presentation of performance feerelated 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‑partythird-party investors in consolidated entities is presented as net income attributable to redeemable interests and non‑controllingnon-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 included in net income attributable to redeemable interest and non-controlling interests in Ares Operating Group entities.


In this form,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 these entitiesthe 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 thethese entities and (ii) “Stand Alone“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 threereportable segments, we have an Operations Management Group (the “OMG”) that. The OMG consists of five independent, shared resource groups to support our reportable segments by providing infrastructure and administrative support in the areas of accounting/finance, operations/operations, information technology, business development/corporate strategy legal/and relationship management, legal, compliance and human resources. The OMG’s expenses are not allocated to our three reportable segments but we consider the cost
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structure of the OMG when evaluating our financial performance. This information constitutes non‑GAAPnon-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 ourthe OMG, and we believe that this information enhances the ability of unitholdersshareholders to analyze our performance. For more information, see “Notes to the Condensed Consolidated Financial Statements - Note 14. Segment Reporting.”

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Glossary

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

•“ARCC Part III Fees” refers to a quarterly performance fee onfees that are paid in arrears as of the investment income fromend 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”, “we”, “us” and “our” refer to Ares CapitalManagement Corporation (NASDAQ: ARCC) (“ARCC”);and its subsidiaries;


•“Ares Operating Group Unit” or an “AOG Unit” referrefers to, collectively, a partnership unit in each of the Ares Operating Group entities;


•“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‑levelfund-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 our funds that arethe CLOs we manage, our AUM represents subordinated notes (equity) plus all drawnis 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 undrawn debt tranches;is eligible to earn management fees upon deployment;


"•“available capital"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 (also referredinvest;

•“catch-up fees” refers to as "dry powder").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;


•“Class B membership interests” refers to the interests that were retained by the former owners of Crestline Denali Capital LLC and represent the financial interests in the subordinated notes of the related CLOs;

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


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


“Co‑Founders” refers to Michael Arougheti, David Kaplan, John Kissick, Antony Ressler and Bennett Rosenthal;

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


•“distributable earnings” or “DE”, a non-GAAP measure, is an operating metric that assesses our performance withouteffective management fee rate” represents the effects of our consolidated funds andannualized fees divided by the average fee paying AUM for the period, excluding the impact of unrealized income and expenses, which generally fluctuate with fair value changes. Among other things, this metric also is used to assist in determining amounts potentially available for distribution. However, the declaration, payment, and determination of the amount of distributions to unitholders, if any, is at the sole discretion of our Board of Directors, which may change our distribution policy at any time. Distributable earnings is calculated as the sum of fee related earnings, realized performance fees, realized performance fee compensation, realized net investment and other income, and is reduced by expenses arising from transaction costs associated with acquisitions, placement fees and underwriting costs, expenses incurred in connection with corporate reorganization and depreciation. Distributable earnings differs from income before taxes computed in accordance with GAAP as it is typically presented before giving effect to unrealized performance fees, unrealized performance fee compensation, unrealized net investment income, amortization of intangibles, and equity compensation expense. DE is presented prior to the effect of income taxes attributable to Ares Holdings, Inc. and to distributions made to our preferred unitholders, unless otherwise noted;one-time catch-up fees;


“economic net income” or “ENI”, a non-GAAP measure, is an operating metric used by management to evaluate total operating performance, a decision tool for deployment of resources, and an assessment of the performance of our business segments. ENI differs from net income by excluding (a) income tax expense, (b) operating results of our Consolidated Funds, (c) depreciation and amortization expense, (d) the effects of changes arising from corporate actions, and (e) certain other items that we believe are not indicative of our total 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 transactions, placement fees and underwriting costs and expenses incurred in connection with corporate reorganization;

•“fee paying AUM” or “FPAUM” refers to the AUM onfrom which we directly earn management fees. Fee paying AUMFPAUM is equal to the sum of all the individual fee bases of our funds that directly contribute to our management fees;fees. For 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, refers to a component of ENI that is used to assess core operating performance by determining whether recurring revenue, primarily consisting of management fees, is sufficient to cover operating expenses and to generate profits. FRE differs from income before taxes computed in accordance with GAAP as it adjusts for the items included in the calculation
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excludes performance fees,

income, performance feerelated compensation, investment income from our Consolidated Funds and non-consolidated funds and certain other items that we believe are not indicative of our core operating performance;


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

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


•“Incentive eligible AUM” or “IEAUM” generally refers to the AUM of our funds and other entities from which performance income may be generated, regardless of whether or not they are currently generating performance income. 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 performance income, excluding capital committed by us and our professionals (from which we generally do not earn performance income), 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 performance income on a realized or unrealized basis, performance fee revenue.basis. It generally represents the NAV or total assets of our funds, as applicable, for which we are entitled to receive a performance fee,income, excluding capital committed by us and our professionals (which(from which we generally do not earn performance income). ARCC is not subject to a performance fee). With respect to ARCC, only included in IGAUM when ARCC Part II Fees can be generated from IGAUM;
are being generated;


“Incentive eligible AUM” or “IEAUM” refers to the AUM of our funds that are eligible to produce performance fee revenue, regardless of whether or not they are currently generating performance fees. It generally represents the NAV plus uncalled equity of our funds for which we are entitled to receive a performance fee, excluding capital committed by us and our professionals (which generally is not subject to a performance fee);

•“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 and alsous. Management fees include ARCC Part I Fees, that are classified as management fees as they are predictable and recurring in nature, not subject to contingent repayment and generally cash‑settled each quarter;a quarterly fee based on the net investment income of certain funds, among others;    


•“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 offeringsissuances by our publicly traded vehicles minus redemptions from our open-ended funds, managed accounts and sub-advised accounts.accounts;


•“net performance fees”income” refers to performance feesincome net of performance feerelated compensation. Performance related compensation which is the portion of the performance fees earned from certain fundsincome that is typically payable to our professionals;


•“our funds” refers to the funds, alternative asset companies, co-investment vehicles and other entities and accounts that are managed or co‑managedco-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 a registeredan SEC-registered investment adviser;


•“Part I Fees” refers to a quarterly performance income on the net investment income of Ares Capital Corporation (NASDAQ: ARCC) (“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 IGAUM of a fund and typically represents returns in excess of a preferred return as defined in the fund’s investment management or partnership agreement and may be either an incentive fee or carried interest;

•“permanent capital” refers to capital of our funds that do not have redemption provisions or a requirement to return capital to investors upon exiting the investments made with such capital, except as required by applicable law, whichlaw. Such funds currently consist of ARCC, Ares Commercial Real Estate Corporation (“ACRE”) and Ares Dynamic Credit Allocation Fund, Inc. (“ARDC”). Such funds may be required, or elect, to return all or a portion
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of capital gains and investment income;income. In addition, permanent capital includes certain insurance related assets that are owned or related to Aspida Life Re Ltd (“Aspida”);


•“performance fees” refers to fees we earn based on the performance of a fund, which are generally based on certain specific hurdle rates as defined in the fund’s investment managementrealized income” or partnership agreements and may be either an incentive fee or carried interest;

“performance related earnings” or “PRE”“RI”, a non-GAAP measure, is an operating metric used by management to assess our investmentevaluate performance net of the business based on operating performance fee compensation. PREand 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 (loss) before taxes computed in accordance with GAAP as it only includes performance fees, performance fee compensation and total investment and other income that we earn fromby excluding (a) operating results of our Consolidated Funds, (b) depreciation and non-consolidated funds;amortization expense, (c) the effects of changes arising from corporate actions, (d) unrealized gains and losses related to performance income and investment performance and (e) 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 transactions, underwriting costs and expenses incurred in connection with corporate reorganization;


•“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;

•“2024 Senior Notes” or the "AFC Notes" refers to senior notes ofissued by a wholly owned subsidiary of Ares Holding;Holdings in October 2014 with a maturity in October 2024; and


•“Term Loans”2030 Senior Notes” refers to term loans ofsenior notes issued by a wholly owned subsidiary of AM LLC.Ares Holdings in June 2020 with a maturity in June 2030.


Many of the terms used in this report, including AUM, FPAUM, ENI, FRE PRE and DE,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.party or definitions used by the SEC or other regulatory bodies. Further, ENI, FRE PRE and DERI are not measures of performance calculated in accordance with GAAP. We use ENI, FRE PRE and DERI as measures of operating performance, not as measures of liquidity. ENI, FRE PRE and DERI 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 ENI, FRE PRE and DERI without consideration of related GAAP measures is not adequate due to the adjustments described above. Our management compensates for these limitations by using ENI, FRE PRE and DERI 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.

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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements

Ares Management L.P.Corporation
Condensed Consolidated Statements of Financial Condition 
(Amounts in Thousands, ExceptUnitShareData)
As of March 31,As of December 31,
As of September 30, As of December 31,
2017 2016 20212020
(unaudited)  (unaudited)
Assets 
  
Assets  
Cash and cash equivalents$186,437
 $342,861
Cash and cash equivalents$609,872 $539,812 
Investments (includes fair value investments of $581,614 and $448,336 at September 30, 2017 and December 31, 2016, respectively)584,695
 468,471
Performance fees receivable997,578
 759,099
Investments (includes accrued carried interest of $1,369,684 and $1,145,853 at March 31, 2021 and December 31, 2020, respectively)Investments (includes accrued carried interest of $1,369,684 and $1,145,853 at March 31, 2021 and December 31, 2020, respectively)1,931,978 1,682,759 
Due from affiliates161,432
 162,936
Due from affiliates335,450 405,887 
Deferred tax asset, net36,661
 6,731
Other assets103,885
 65,565
Other assets779,941 812,419 
Intangible assets, net44,115
 58,315
Goodwill143,880
 143,724
Right-of-use operating lease assetsRight-of-use operating lease assets157,908 154,742 
Assets of Consolidated Funds:   Assets of Consolidated Funds:
Cash and cash equivalents799,609
 455,280
Cash and cash equivalents557,271 522,377 
U.S. Treasury securities, at fair valueU.S. Treasury securities, at fair value1,000,040 0 
Investments, at fair value4,915,029
 3,330,203
Investments, at fair value10,948,173 10,877,097 
Due from affiliates8,047
 3,592
Due from affiliates16,240 17,172 
Dividends and interest receivable10,061
 8,479
Receivable for securities sold25,926
 21,955
Receivable for securities sold166,960 121,225 
Other assets2,082
 2,501
Other assets32,096 35,502 
Total assets$8,019,437
 $5,829,712
Total assets$16,535,929 $15,168,992 
Liabilities   Liabilities  
Accounts payable, accrued expenses and other liabilities$94,351
 $83,336
Accounts payable, accrued expenses and other liabilities$119,578 $115,289 
Accrued compensation133,799
 131,736
Accrued compensation89,791 103,010 
Due to affiliates17,207
 17,564
Due to affiliates77,817 100,186 
Performance fee compensation payable780,201
 598,050
Performance related compensation payablePerformance related compensation payable968,582 813,378 
Debt obligations486,007
 305,784
Debt obligations811,279 642,998 
Operating lease liabilitiesOperating lease liabilities186,594 180,236 
Liabilities of Consolidated Funds:   Liabilities of Consolidated Funds:
Accounts payable, accrued expenses and other liabilities50,992
 21,056
Accounts payable, accrued expenses and other liabilities98,473 46,824 
Due to affiliatesDue to affiliates622 0 
Payable for securities purchased481,055
 208,742
Payable for securities purchased781,845 514,946 
CLO loan obligations, at fair value4,476,643
 3,031,112
CLO loan obligations, at fair value9,839,639 9,958,076 
Fund borrowings121,261
 55,070
Fund borrowings110,409 121,909 
Total liabilities6,641,516
 4,452,450
Total liabilities13,084,629 12,596,852 
Commitments and contingencies
 
Commitments and contingencies00
Preferred equity (12,400,000 units issued and outstanding at September 30, 2017 and December 31, 2016)298,761
 298,761
Non-controlling interest in Consolidated Funds459,723
 338,035
Non-controlling interest in Ares Operating Group entities348,513
 447,615
Controlling interest in Ares Management, L.P.: 
  
Partners' capital (82,211,302 units and 80,814,732 units issued and outstanding at September 30, 2017 and at December 31, 2016, respectively)275,410
 301,790
Accumulated other comprehensive loss, net of tax(4,486) (8,939)
Total controlling interest in Ares Management, L.P.270,924
 292,851
Redeemable interest in Consolidated FundsRedeemable interest in Consolidated Funds930,924 0 
Redeemable interest in Ares Operating Group entitiesRedeemable interest in Ares Operating Group entities99,808 100,366 
Non-controlling interests in Consolidated FundsNon-controlling interests in Consolidated Funds552,688 539,720 
Non-controlling interests in Ares Operating Group entitiesNon-controlling interests in Ares Operating Group entities706,381 738,369 
Stockholders' EquityStockholders' Equity
Series A Preferred Stock, $0.01 par value, 1,000,000,000 shares authorized (12,400,000 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively)Series A Preferred Stock, $0.01 par value, 1,000,000,000 shares authorized (12,400,000 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively)298,761 298,761 
Class A common stock, $0.01 par value, 1,500,000,000 shares authorized (149,840,978 shares and 147,182,562 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively)Class A common stock, $0.01 par value, 1,500,000,000 shares authorized (149,840,978 shares and 147,182,562 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively)1,498 1,472 
Class B common stock, $0.01 par value, 1,000 shares authorized (1,000 shares issued and outstanding at March 31, 2021 and December 31, 2020)Class B common stock, $0.01 par value, 1,000 shares authorized (1,000 shares issued and outstanding at March 31, 2021 and December 31, 2020)0 0 
Class C common stock, $0.01 par value, 499,999,000 shares authorized (112,163,894 shares and 112,447,618 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively)Class C common stock, $0.01 par value, 499,999,000 shares authorized (112,163,894 shares and 112,447,618 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively)1,122 1,124 
Additional paid-in-capitalAdditional paid-in-capital1,033,735 1,043,669 
Retained earningsRetained earnings(173,555)(151,824)
Accumulated other comprehensive income (loss), net of taxAccumulated other comprehensive income (loss), net of tax(62)483 
Total stockholders' equityTotal stockholders' equity1,161,499 1,193,685 
Total equity1,377,921
 1,377,262
Total equity2,420,568 2,471,774 
Total liabilities and equity$8,019,437
 $5,829,712
Total liabilities, redeemable interest, non-controlling interests and equityTotal liabilities, redeemable interest, non-controlling interests and equity$16,535,929 $15,168,992 
See accompanying notes to the condensed consolidated financial statements.

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Ares Management L.P.Corporation
Condensed Consolidated Statements of Operations
(Amounts in Thousands, Except UnitShare Data)
(unaudited)
 Three months ended March 31,
 20212020
Revenues
Management fees$320,273 $263,849 
Carried interest allocation297,535 (230,876)
Incentive fees2,820 (3,249)
Principal investment income (loss)25,100 (26,723)
Administrative, transaction and other fees12,660 10,408 
Total revenues658,388 13,409 
Expenses
Compensation and benefits231,850 180,084 
Performance related compensation221,432 (167,899)
General, administrative and other expenses67,656 62,331 
Expenses of Consolidated Funds4,171 7,443 
Total expenses525,109 81,959 
Other income (expense)
Net realized and unrealized gains (losses) on investments5,433 (8,034)
Interest and dividend income960 1,790 
Interest expense(6,695)(5,306)
Other income (expense), net(4,149)5,464 
Net realized and unrealized gains (losses) on investments of Consolidated Funds16,422 (254,761)
Interest and other income of Consolidated Funds115,839 113,225 
Interest expense of Consolidated Funds(71,025)(80,241)
Total other income (expense)56,785 (227,863)
Income (loss) before taxes190,064 (296,413)
Income tax expense (benefit)25,754 (20,616)
Net income (loss)164,310 (275,797)
Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds49,858 (166,406)
Net income (loss) attributable to Ares Operating Group entities114,452 (109,391)
Less: Net income attributable to redeemable interest in Ares Operating Group entities32 0 
Less: Net income (loss) attributable to non-controlling interests in Ares Operating Group entities56,042 (78,355)
Net income (loss) attributable to Ares Management Corporation58,378 (31,036)
Less: Series A Preferred Stock dividends paid5,425 5,425 
Net income (loss) attributable to Ares Management Corporation Class A common stockholders$52,953 $(36,461)
Net income (loss) per share of Class A common stock:
Basic$0.33 $(0.33)
Diluted$0.32 $(0.33)
Weighted-average shares of Class A common stock:
Basic149,271,822 118,366,539 
Diluted163,664,384 118,366,539 

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
        
Revenues       
Management fees (includes ARCC Part I Fees of $24,036, $76,436 and $33,260, $90,884 for the three and nine months ended September 30, 2017 and 2016, respectively)$183,177
 $163,609
 $535,990
 $480,563
Performance fees87,008
 164,482
 480,204
 337,686
Administrative and other fees13,486
 7,369
 43,024
 22,761
Total revenues283,671
 335,460
 1,059,218
 841,010
Expenses       
Compensation and benefits129,347
 111,916
 384,905
 335,249
Performance fee compensation58,637
 123,173
 361,044
 253,739
General, administrative and other expenses47,104
 38,197
 145,193
 116,845
Transaction support expense—
 —
 275,177
 —
Expenses of the Consolidated Funds19,039
 10,088
 27,472
 11,014
Total expenses254,127
 283,374
 1,193,791
 716,847
Other income (expense)       
Investment income and net interest expense (includes interest expense of $5,343, $15,576 and $4,136, $13,819 for the three and nine months ended September 30, 2017 and 2016, respectively)(1,831) (1,681) (6,218) (47)
Other income (expense), net(2,492) 23,042
 16,826
 33,956
Net realized and unrealized gain on investments7,209
 19,358
 39,943
 21,349
Investment income and net interest income of the Consolidated Funds (includes interest expense of $28,127, $86,324 and $26,413, $67,469 for the three and nine months ended September 30, 2017 and 2016, respectively)20,054
 8,737
 41,675
 25,759
Net realized and unrealized gain (loss) on investments of the Consolidated Funds35,940
 23,883
 55,263
 (5,723)
Total other income58,880
 73,339
 147,489
 75,294
Income before taxes88,424
 125,425
 12,916

199,457
Income tax expense (benefit)4,552
 7,641
 (28,459) 7,868
Net income83,872
 117,784
 41,375
 191,589
Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds18,195
 7,861
 25,403
 (3,064)
Less: Net income attributable to redeemable interests in Ares Operating Group entities—
 107
 —
 456
Less: Net income (loss) attributable to non-controlling interests in Ares Operating Group entities37,839
 66,511
 (20,610) 116,404
Net income attributable to Ares Management, L.P.27,838
 43,305
 36,582

77,793
Less: Preferred equity distributions paid5,425
 6,751
 16,275
 6,751
Net income attributable to Ares Management, L.P. common unitholders$22,413
 $36,554
 $20,307

$71,042
Net income attributable to Ares Management, L.P. per common unit:       
Basic$0.26
 $0.45
 $0.22
 $0.87
Diluted$0.26
 $0.43
 $0.22
 $0.86
Weighted-average common units:       
Basic82,166,852
 80,793,984
 81,704,815
 80,741,460
Diluted82,166,852
 84,464,591
 81,704,815
 82,667,049
Distribution declared and paid per common unit$0.31
 $0.28
 $0.72
 $0.63



Substantially all revenue is earned from affiliated funds of the Company. See accompanying notes to the condensed consolidated financial statements.

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Ares Management L.P.Corporation
Condensed Consolidated Statements of Comprehensive Income
(Amounts in Thousands)
(unaudited)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Net income$83,872
 $117,784
 $41,375
 $191,589
Other comprehensive income:       
Foreign currency translation adjustments6,043
 (2,241) 11,514
 (12,566)
Total comprehensive income89,915
 115,543
 52,889
 179,023
Less: Comprehensive income (loss) attributable to non-controlling interests in Consolidated Funds18,017
 7,861
 25,055
 (3,064)
Less: Comprehensive income attributable to redeemable interests in Ares Operating Group entities—
 105
 —
 409
Less: Comprehensive income (loss) attributable to non-controlling interests in Ares Operating Group entities41,143
 65,125
 (13,201) 108,651
Comprehensive income attributable to Ares Management, L.P.$30,755

$42,452
 $41,035
 $73,027
Three months ended March 31,
 20212020
Net income (loss)$164,310 $(275,797)
Other comprehensive income (loss):  
Foreign currency translation adjustments, net of tax(10,573)(14,208)
Total comprehensive income (loss)153,737 (290,005)
Less: Comprehensive loss attributable to redeemable interest in Ares Operating Group entities(558)0 
Less: Comprehensive income (loss) attributable to non-controlling interests in Consolidated Funds40,786 (171,093)
Less: Comprehensive income (loss) attributable to non-controlling interests in Ares Operating Group entities55,676 (83,074)
Comprehensive income (loss) attributable to Ares Management Corporation$57,833 $(35,838)
 
See accompanying notes to the condensed consolidated financial statements.

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    Ares Management Corporation
Condensed Consolidated Statements of Changes in Equity 
(Amounts in Thousands)

Series A Preferred StockClass A Common StockClass C Common StockAdditional Paid-in-CapitalRetained EarningsAccumulated 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— — — — — — 0 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 

See accompanying notes to the condensed consolidated financial statements.
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Ares Management L.P.Corporation
Condensed Consolidated Statements of Changes in Equity 
(Amounts in Thousands)
(unaudited)

Series A Preferred StockClass A Common StockClass C Common StockAdditional Paid-in-CapitalRetained EarningsAccumulated Other Comprehensive Income (loss)Non-Controlling Interest in Ares Operating Group EntitiesNon-Controlling Interest in Consolidated FundsTotal Equity
Balance at December 31, 2019$298,761 $1,152 $0 $525,244 $(50,820)$(6,047)$472,288 $618,020 $1,858,598 
Consolidation and deconsolidation of funds, net— — — — — — — (3,882)(3,882)
Changes in ownership interests and related tax benefits— 40 — (196,670)— — 122,551 — (74,079)
Issuances of common stock— 121 1,152 382,061 — — — — 383,334 
Capital contributions— — — — — — 42,012 133,265 175,277 
Dividends/Distributions(5,425)— — — (51,090)— (55,748)(13,492)(125,755)
Net loss5,425 — — — (36,461)— (78,355)(166,406)(275,797)
Currency translation adjustment, net of tax— — — — — (4,802)(4,719)(4,687)(14,208)
Equity compensation— — — 16,420 — — 16,137 — 32,557 
Stock option exercises— 11 — 19,540 — — — — 19,551 
Balance at March 31, 2020298,761 1,324 1,152 746,595 (138,371)(10,849)514,166 562,818 1,975,596 
Consolidation and deconsolidation of funds, net— — — — — — — 1,475 1,475 
Changes in ownership interests and related tax benefits— 4 (4)(9,702)— — 9,796 — 94 
Expenses incurred upon issuance of common stock— — — (181)— — — — (181)
Capital contributions— — — — — — 229 (9,570)(9,341)
Dividends/Distributions(5,425)— — — (57,620)— (59,949)(136,837)(259,831)
Net income5,425 — — — 50,946 — 75,119 85,186 216,676 
Currency translation adjustment, net of tax— — — — — (388)(54)3,129 2,687 
Equity compensation— — — 15,500 — — 13,183 — 28,683 
Stock option exercises— 25 — 47,865 — — — — 47,890 
Balance at June 30, 2020298,761 1,353 1,148 800,077 (145,045)(11,237)552,490 506,201 2,003,748 
Changes in ownership interests and related tax benefits— 2 (2)(122,555)— — 118,804 — (3,751)
Issuances of common stock— 77 0 305,261 — — — — 305,338 
Capital contributions— — — 481 — — 0 18 499 
Dividends/Distributions(5,425)— — — (61,159)— (49,391)(19,418)(135,393)
Net income5,425 — — — 42,120 — 52,162 42,627 142,334 
Currency translation adjustment, net of tax— — — — — 4,450 4,128 7,673 16,251 
Equity compensation— — — 16,921 — — 13,416 — 30,337 
Stock option exercises— 6 — 11,512 — — — — 11,518 
Balance at September 30, 2020298,761 1,438 1,146 1,011,697 (164,084)(6,787)691,609 537,101 2,370,881 
Changes in ownership interests and related tax benefits— 27,000 (22,000)508,000 — — (21,922)— (21,409)
Issuances of common stock— 0 0 1 — — — — 1 
Capital contributions— — — — — — 2,558 8,717 11,275 
Dividends/Distributions(5,425)— — — (61,577)— (50,246)(81,760)(199,008)
Net income5,425 — — — 73,837 — 96,308 66,678 242,248 
Currency translation adjustment, net of tax— — — — — 7,270 6,206 8,984 22,460 
Equity compensation— — — 17,553 — — 13,856 — 31,409 
Stock option exercises— 7 — 13,910 — — — — 13,917 
Balance at December 31, 2020$298,761 $1,472 $1,124 $1,043,669 $(151,824)$483 $738,369 $539,720 $2,471,774 

 Preferred
Equity		 Partners'
Capital		 Accumulated
Other
Comprehensive
Loss		 Non-controlling
Interest in
Ares Operating
Group Entities		  Non-controlling
Interest in Consolidated
Funds		 Total
Equity
Balance at December 31, 2016$298,761
 $301,790
 $(8,939) $447,615
  $338,035
 $1,377,262
Changes in ownership interests—
 (7,482) —
 (8,994)  —
 (16,476)
Contributions—
 —
 —
 1,884
  145,717
 147,601
Distributions(16,275) (58,881) —
 (110,127)  (49,084) (234,367)
Net income (loss)16,275
 20,307
 —
 (20,610)  25,403
 41,375
Currency translation adjustment—
 —
 4,453
 7,409
  (348) 11,514
Equity compensation—
 19,676
 —
 31,336
  —
 51,012
Balance at September 30, 2017$298,761

$275,410

$(4,486)
$348,513


$459,723

$1,377,921

See accompanying notes to the condensed consolidated financial statements.

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Ares Management L.P.Corporation
Condensed Consolidated Statements of Cash Flows
(Amounts in Thousands)
(unaudited)
 For the Nine Months Ended September 30,
 2017 2016
    
Cash flows from operating activities:   
Net income$41,375
 $191,589
Adjustments to reconcile net income to net cash (used in) provided operating activities(52,314) 24,989
Adjustments to reconcile net income to net cash used in operating activities allocable to non-controlling interests in Consolidated Funds(1,157,088) (506,849)
Cash flows due to changes in operating assets and liabilities(78,593) (30,485)
Cash flows due to changes in operating assets and liabilities allocable to non-controlling interest in Consolidated Funds54,370
 61,397
Net cash used in operating activities(1,192,250) (259,359)
Cash flows from investing activities: 
  
Purchase of furniture, equipment and leasehold improvements, net(27,926) (8,167)
Net cash used in investing activities(27,926) (8,167)
Cash flows from financing activities: 
  
Proceeds from credit facility245,000
 147,000
Proceeds from term notes70,009
 —
Repayments of credit facility(135,000) (257,000)
Proceeds from the issuance of preferred equity, net of issuance costs—
 298,637
Distributions (169,008) (150,424)
Preferred equity distributions(16,275) (6,751)
Net settlement of vested common units(13,910) —
Stock option exercise1,036
 —
Excess tax benefit related to stock option exercise81
 —
Other financing activities1,541
 (701)
Allocable to non-controlling interest in Consolidated Funds: 
  
Contributions from non-controlling interests in Consolidated Funds145,717
 93,128
Distributions to non-controlling interests in Consolidated Funds(49,084) (61,270)
Borrowings under loan obligations by Consolidated Funds2,438,491
 530,731
Repayments under loan obligations by Consolidated Funds(1,466,951) (103,648)
Net cash provided by financing activities1,051,647
 489,702
Effect of exchange rate changes12,105
 (6,876)
Net change in cash and cash equivalents(156,424)
215,300
Cash and cash equivalents, beginning of period342,861
 121,483
Cash and cash equivalents, end of period$186,437
 $336,783
 Three months ended March 31,
 20212020
Cash flows from operating activities:  
Net income (loss)$164,310 $(275,797)
Adjustments to reconcile net income (loss) to net cash used in operating activities44,284 125,070 
Adjustments to reconcile net income (loss) to net cash used in operating activities allocable to redeemable and non-controlling interests in Consolidated Funds(1,208,180)(453,015)
Cash flows due to changes in operating assets and liabilities(7,044)51,995 
Cash flows due to changes in operating assets and liabilities allocable to redeemable and non-controlling interest in Consolidated Funds265,512 188,510 
Net cash used in operating activities(741,118)(363,237)
Cash flows from investing activities:  
Purchase of furniture, equipment and leasehold improvements, net of disposals(3,284)(3,062)
Acquisitions, net of cash acquired0 (35,844)
Net cash used in investing activities(3,284)(38,906)
Cash flows from financing activities:  
Net proceeds from issuance of Class A common stock0 383,334 
Proceeds from Credit Facility168,000 790,000 
Repayments of Credit Facility0 (60,000)
Dividends and distributions (141,768)(106,838)
Series A Preferred Stock dividends(5,425)(5,425)
Stock option exercises0 19,551 
Taxes paid related to net share settlement of equity awards(84,590)(73,500)
Other financing activities341 (2,125)
Allocable to redeemable and non-controlling interests in Consolidated Funds:
Contributions from redeemable and non-controlling interests in Consolidated Funds941,935 133,265 
Distributions to non-controlling interests in Consolidated Funds(38,829)(13,492)
Borrowings under loan obligations by Consolidated Funds7,000 454,391 
Repayments under loan obligations by Consolidated Funds(29,453)(73,609)
Net cash provided by financing activities817,211 1,445,552 
Effect of exchange rate changes(2,749)(14,120)
Net change in cash and cash equivalents70,060 1,029,289 
Cash and cash equivalents, beginning of period539,812 138,384 
Cash and cash equivalents, end of period$609,872 $1,167,673 
 
See accompanying notes to the condensed consolidated financial statements.

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Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
(Dollars in Thousands, Except Share Data and As Otherwise Noted)




1. ORGANIZATION
Ares Management L.P. ("the Company"Corporation (the “Company”), a Delaware limited partnership,corporation, together with its subsidiaries, is a leading global alternative asset management firm that operates three distinct but complementary investment groups: themanager operating integrated groups across Credit, Group, the Private Equity, Group and the Real Estate Group.and Strategic Initiatives. Information about segments should be read together with Note 14, “Segment“Note 14. 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”), which are generally organized as pass-through entities for income tax purposes. Such. These subsidiaries provide investment advisory services to the Ares Funds in exchange for management fees. Ares is managed

The accompanying unaudited financial statements include the condensed consolidated results of the Company and operated by its general partner, Ares Management GP LLC. Unless the context requires otherwise, references to “Ares” or the “Company” refer to Ares Management, L.P. together with its subsidiaries.
The Company is a holding partnership,company, and the Company’s soleCompany's assets areinclude equity interests in Ares Holdings Inc. (“AHI”), Ares Offshore Holdings, Ltd., and Ares AI Holdings L.P. In this quarterly report, the following of the Company’s subsidiaries are collectively referred to as the “Ares Operating Group” or “AOG”: Ares Offshore Holdings L.P. (“Ares Offshore”), Ares Holdings L.P. (“Ares Holdings”), and Ares Investments L.P.L.P (“Ares Investments”). The Company, indirectly through its wholly owned subsidiaries, is the general partner of each of the Ares Operating Group entities. 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.

In addition, the Company and its wholly owned subsidiaries manages or controls certain entities that have been consolidated in the accompanying financials statements as described in “Note 2. Summary of Significant Accounting Policies”. These entities include Ares funds, co-investment entities, collateralized loan obligations (“CLOs”) and a special purpose acquisition company (“SPAC”) (collectively, the “Consolidated Funds”). In February 2021, the Company’s first sponsored SPAC, Ares Acquisition Corporation (NYSE: AAC) (“AAC”), consummated its initial public offering that generated gross proceeds of $1.0 billion. Prior to the completion of a business combination, the sponsor, a wholly owned subsidiary of the Company, owns the majority of the Class B ordinary shares outstanding of AAC, and consolidates AAC under the voting interest model. 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. 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 Consolidated Statements of Cash Flows.

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

The non-controlling interests in Ares Operating Group (“AOG”)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. 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 based on their historical ownership percentage for the proportional number of days in the reporting period.


On February 21, 2020, the Company completed its acquisition (“Crestline Acquisition”) of the Class A membership interests (the “Class A membership interests”) in Crestline Denali Capital LLC (“Crestline Denali”). The Class A membership interests entitle the Company to the fees associated with managing 7 collateral management contracts. The Class B membership interests of Crestline Denali (the “Class B membership interests”) were retained by the former owners of Crestline Denali and represent the financial interests in the subordinated notes of the collateralized loan obligations. In connection with the Company's control over Crestline Denali, the Company also consolidates investments and financial results that are attributable to the Class B membership interests to which the Company has no economic rights or obligations. Equity and income (loss) attributable to the Class B membership interests is included within non-controlling interests in AOG entities.

On July 1, 2020, the Company completed its acquisition of a majority interest in SSG Capital Holdings Limited and its operating subsidiaries (“SSG”) in accordance with the purchase agreement entered into on January 21, 2020 (“SSG Acquisition”). Following the acquisition, SSG began operating under the Ares SSG brand. Ares SSG is an alternative investment manager in the Asia Pacific that is focused on leveraging its broad Pan-Asian presence, extensive infrastructure and local origination network to make credit, private equity and special situation investments across Asia and Australia.

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Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
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.prudent, and that all such adjustments are of a normal recurring 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 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, 20162020 filed with the SEC.Securities and Exchange Commission (“SEC”).
As of March 31, 2021, the impact of the outbreak of the coronavirus pandemic (“COVID-19”) continues to unfold. As a result, management's estimates and assumptions may be subject to a higher degree of variability and volatility that may result in material differences from the current period.
The condensed consolidated financial statements include the accounts and activities of the AOG entities, their consolidated subsidiaries and certain Consolidated Funds.These Consolidated Funds include certain Ares-affiliated funds, related co-investment entities and collateralized loan obligations (“CLOs”) (collectively, the “Consolidated Funds”) managed by Ares Management LLC (“AM LLC”) and its wholly owned subsidiaries. Including the results of the Consolidated Funds significantly increases the reported amounts of the assets, liabilities, revenues, expenses and cash flows in the accompanying condensed consolidated financial statements; however, the Consolidated Funds results included herein have no direct effect on the net income attributable to controlling interests or on total controlling equity. Instead, economic ownership interests of the investors in the Consolidated Funds are reflected as non-controlling interests in Consolidated Funds in the accompanying condensed consolidated financial statements. Further, cash flows allocable to non-controlling interest in Consolidated Funds are specifically identifiable in the Condensed Consolidated Statements of Cash Flows. 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.



U.S. Treasury Securities, at Fair Value

U.S. Treasury securities, at fair value represents U.S Treasury bills that were purchased with funds raised through the initial public offering of AAC, a consolidated SPAC that is presented within Consolidated Funds. The funds raised are held in a trust account that is restricted for use and may only be used for purposes of completing an initial business combination or redemption of public shares as set forth in the trust agreement. The U.S. Treasury bills have original maturities greater than three months when purchased and therefore is recorded at fair value. Interest income received on such securities is separately presented from the overall change in fair value and is recognized within interest and other income of Consolidated Funds in the Condensed Consolidated Statements of Operations. Any remaining change in fair value of such securities, that is not recognized as interest income, is recognized in net realized and unrealized gains (losses) on investments of Consolidated Funds in the Condensed Consolidated Statements of Operations.

Redeemable Interest in Consolidated Funds

Redeemable interest in Consolidated Funds represent the shares issued by 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. Although AAC has not specified a maximum redemption threshold, its amended and restated memorandum and articles of association provide that in no event will it redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001. At each balance sheet date, the carrying value of the redeemable interest is presented at the redemption amount. The Company recognizes changes in the redemption amount with corresponding adjustments against additional paid-in-capital that is reflected within non-controlling interest in Consolidated Funds in the Condensed Consolidated Statements of Financial Condition. At March 31, 2021, approximately 93,092,438 of the 100,000,000 Class A ordinary shares of AAC were classified outside of permanent equity.

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






Transaction Support Expense
On January 3, 2017, ARCC and American Capital, Ltd. (“ACAS”) consummated a merger transaction valued at approximately $4.2 billion (the "ARCC-ACAS Transaction"). To support the ARCC-ACAS Transaction, the Company, through its subsidiary Ares Capital Management LLC, which serves as the investment adviser to ARCC, paid $275.2 million to ACAS shareholders in accordance with the terms and conditions set forth in the merger agreement.
Recent Accounting Pronouncements
The Company considers the applicability and impact of all accounting standard updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB"FASB”) Accounting Standards Updates ("ASU") issued.. ASUs not listed below were assessed and either determined to be not applicable or expected to have minimal impact on the Company'sits condensed consolidated financial statements.
Revenue Recognition:
In May 2014,March 2020, the FASB issued ASU 2014-09,Revenue from Contracts with Customers2020-04, Reference Rate Reform (Topic 606)848).ASU 2014-09 requires entitiesThe amendments in this update provide optional expedients and exceptions for applying generally accepted accounting principles to recognize revenuecontracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in a waythis update apply only to contracts, hedging relationships, and other transactions that depictsreference the transfer of promised goodsLondon Interbank Offered Rate ("LIBOR") or services to customers in an amount that reflects the consideration to which the entity expectsanother reference rate expected to be entitled to in exchange for those goods or services. The guidance includes a five-step framework that requires an entity to: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when the entity satisfies a performance obligation. This ASU provides alternative methodsdiscontinued because of adoption.reference rate reform. In August 2015,January 2021, the FASB issued ASU 2015-14,Revenue fromContracts with Customers, DeferralNo. 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 Effective Date. amendments in ASU 2015-14 defers2020-04 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 effective date of ASU 2014-09 by one yearamendments do not apply to December 15, 2017 for fiscal years,contract modifications and interim periods within those years, beginning after that date and permits early adoption of the standard, but not before the original effective date for fiscal years beginninghedging relationships entered into or evaluated after December 15, 2016. In March, April and May 2016, the FASB issued additional ASUs clarifying certain aspects31, 2022, except for hedging transactions as of ASU 2014-09. The core principle of ASU 2014-09 was not changed by the additional guidance.
During 2016, four ASUs: ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations; ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing; ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients; and ASU2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, were issued to provide clarification to previously issued revenue recognition guidance (ASU 2014-09) that has not yet been implemented. These updates are required to be adopted with ASU 2014-09, but are not expected to change its application by the Company.
The Company has substantially completed its assessment of the impact of the revenue recognition guidance. The assessment includes a detailed review of investment management agreements, establishing which agreements are expected to be in place, and understanding when revenue would be recognized under those agreements.
Accordingly, the Company has preliminarily concluded that carried interests, which are a performance-based capital allocation to the Company based on cumulative fund performance to date, represent equity method investments that are not in the scope of the amended revenue recognition guidance. Effective January 1, 2018, the Company will change its policy for recognition and measurement of carried interest. This accounting policy change will not change the timing or amount of revenue recognized related to carried interest. These amounts are currently recognized within performance fees in the Condensed Consolidated Statements of Operations. Under the equity method of accounting the Company will recognize its allocations of carried interest or incentive fees along with the allocations proportionate to the Company’s ownership in each fund. The Company will apply a full retrospective application and prior periods presented will be recast. The impact of adoption will be a reclassification of carried interest to equity income and will have no impact on net income (loss) attributable to Ares Management, L.P.
The Company has preliminarily concluded that the majority of its performance-based incentive fees are within the scope of the amended revenue recognition guidance. This accounting change will delay recognition of unrealized incentive fees compared to our current accounting treatment, and it is not expected to have a material impact on the Company’s financial statements.
The Company has evaluated the impact of the amended revenue recognition guidance on other revenue streams including management fees and it is not expected to have a material impact on its financial statements. The Company is still evaluating considerations for reporting certain revenues gross versus net.

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Ares Management, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)





Other Guidance:
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The objective of the guidance in ASU 2016-02 is to increase transparency and comparability among organizations by recognizing lease assets and liabilities in the balance sheet and disclosing key information. ASU 2016-02 amends previous lease guidance, which required a lessee to categorize and account for leases as either operating leases or capital leases, and instead requires a lessee to recognize a lease liability and a right-of-use asset on the entity’s balance sheet for all leases with terms that exceed one year. The lease liability and right-of-use asset are to be carried at the present value of remaining expected future lease payments. The guidance should be applied using a modified retrospective approach. ASU 2016-02 is effective for public entities for annual reporting periods beginning after December 15, 2018 and interim periods within those reporting periods, with early adoption permitted. The Company is currently compiling all leases and right–of–use terms to evaluate the impact of this guidance on its condensed consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist with evaluating whether a transaction should be accounted for as an acquisition or a disposal of a business. This ASU provides specific evaluation process, and factors that should be used in this determination. The guidance should be applied prospectively. ASU 2017-01 is effective for public entities for annual reporting periods beginning after December 15, 2017 and interim periods within those reporting periods, with early adoption permitted. This guidance will not have a material impact on the Company's condensed consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. Currently, goodwill impairment requires an entity to perform a two-step test to determine the amount of goodwill impairment. In Step 1, an entity compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, the entity performs Step 2 and compares the implied fair value of goodwill with the carrying amount of that goodwill for that reporting unit. An impairment charge equal to the amount by which the carrying amount of goodwill for the reporting unit exceeds the implied fair value of that goodwill is recorded, limited to the amount of goodwill allocated to that reporting unit. ASU 2017-04 simplifies the goodwill impairment test by removing Step 2 of the test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. The guidance should be applied prospectively. ASU 2017-04 is effective for public entities for annual reporting periods beginning after December 15, 2019 and interim periods within those reporting periods, with early adoption permitted. This guidance will not have a material impact on the Company's condensed consolidated financial statements.
In February 2017, the FASB issued ASU 2017-05, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. ASU 2017-05 clarifies the application of current accounting guidance to the derecognition of nonfinancial assets, including partial sales of nonfinancial assets. This ASU specifies31, 2022, that an entity should allocatehas elected certain optional expedients for and that are retained through the consideration to each distinct asset using the guidance established in ASC 606 on allocating the transaction price to performance obligations. For partial sales of nonfinancial assets, ASU 2017-05 also requires an entity to derecognize a portionend of the nonfinancial asset when the entity no longer has a controlling financial interest in the legal entity holding the asset and the entity has transferred control of the asset in accordance with ASC 606. Any noncontrolling or retained interest should be measured at fair value. The guidance should be adopted using either a full or modified retrospective approach. ASU 2017-05 is effective for public entities for annual reporting periods beginning after December 15, 2017 and interim periods within those reporting periods, with early adoption permitted.hedging relationship. The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 clarifies the application of current accounting guidance to the modification of share-based compensation awards. This ASU specifies that an entity should account for the impact of an award modification in accordance with ASC Topic 718 unless all of the following conditions are met: (i) the fair value of the modified award is the same as the fair value of the original award prior to the modification; (ii) the vesting conditions of the modified award are the same as the original award prior to the modification; and (iii) the classification of the modified award as an equity instrument or liability instrument is the same as the original award. The guidance should be applied prospectively to awards modified on or after the adoption date. ASU 2017-09 is effective for public entities for annual reporting periods beginning after December 15, 2017 and interim periods within those

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Ares Management, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)




reporting periods, with early adoption permitted. This guidance will not have a material impact on the Company's condensed consolidated financial statements.

3. GOODWILL AND INTANGIBLE ASSETS
Finite Lived Intangible Assets, Net
The Company's intangible assets include acquired management contracts, client relationships, a trade name, and the future benefits of managing new assets for existing clients that were recognized at fair value as of their acquisition dates.
The following table summarizes the carrying value, net of accumulated amortization, forof the Company's intangible assets:assets that are included within other assets in the Condensed Consolidated Statements of Financial Condition:
Weighted Average Amortization Period as of March 31, 2021As of March 31,As of December 31,
20212020
Management contracts5.2 years$210,857 $210,857 
Client relationships8.8 years25,141 25,141 
Trade name9.1 years11,079 11,079 
Intangible assets247,077 247,077 
Foreign currency translation1,873 3,093 
Total intangible assets248,950 250,170 
Less: accumulated amortization(38,539)(28,082)
Intangible assets, net$210,411 $222,088 
 Weighted Average Amortization Period as of September 30, 2017 As of September 30, As of December 31,
  2017 2016
Management contracts1.9 years $67,306
 $111,939
Client relationships10.8 years 38,600
 38,600
Trade name4.8 years 3,200
 3,200
Intangible assets  109,106

153,739
Foreign currency translation  —
 (3,205)
Total intangible assets  109,106

150,534
Less: accumulated amortization  (64,991) (92,219)
Intangible assets, net  $44,115

$58,315

Amortization expense associated with intangible assets was $3.7$10.6 million and $6.4$1.0 million for the three months ended September 30, 2017March 31, 2021 and 2016, respectively, and $14.2 million and $20.8 million for the nine months ended September 30, 2017 and 2016,2020, respectively, and is presented within general, administrative and other expenses within the Condensed Consolidated Statements of Operations. During the first quarter of 2017, the Company removed $41.4 million of intangible assets that were fully amortized.

Goodwill

The following table summarizes the carrying value of the Company's goodwill assets:assets that are included within other assets in the Condensed Consolidated Statements of Financial Condition:
Credit GroupPrivate
Equity Group		Real
Estate Group		Strategic InitiativesTotal
Balance as of December 31, 2020$32,196 $58,600 $53,120 $227,131 $371,047 
Foreign currency translation0 0 16 (1,043)(1,027)
Balance as of March 31, 2021$32,196 $58,600 $53,136 $226,088 $370,020 

16
 Credit Private
Equity		 Real
Estate		 Total
Balance as of December 31, 2016$32,196
 $58,600
 $52,928

$143,724
Foreign currency translation—
 —
 156
 156
Balance as of September 30, 2017$32,196
 $58,600
 $53,084
 $143,880
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Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
(Dollars in Thousands, Except Share Data and As Otherwise Noted)


There was no0 impairment of goodwill recorded during the ninethree months ended September 30, 2017March 31, 2021 and 2016.2020. The impact of foreign currency translation is reflected within other comprehensive income.


4. INVESTMENTS

The Company’s investments are composed of: (i) investments presented at fair value as a resultcomprised of the election of the fair value option or in accordance with investment company accounting, (ii) equity method investments (using equity method or fair value option) and (iii) held-to-maturity investments. following:

Percentage of total investments
March 31,December 31,March 31,December 31,
2021202020212020
Equity method investments:
Equity method private investment partnership interests - principal (1)
$388,820 $366,471 20.1 %21.8 %
Equity method - carried interest (1)
1,369,684 1,145,853 70.9 68.1 
Equity method private investment partnership interests and other (held at fair value)(1)
93,017 92,196 4.8 5.5 
Equity method private investment partnership interests and other(1)
25,917 23,883 1.3 1.4 
Total equity method investments1,877,438 1,628,403 97.1 96.8 
Collateralized loan obligations (2)
31,947 31,766 1.7 1.9 
Other fixed income21,583 21,583 1.1 1.3 
Collateralized loan obligations and other fixed income, at fair value53,530 53,349 2.8 3.2 
Common stock, at fair value1,010 1,007 0.1 0.1 
Total investments$1,931,978 $1,682,759 
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Ares Management, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)




Fair Value Investments, excluding Equity Method Investments Held at Fair Value 
 Fair value at 
Fair value as a
percentage of total investments at
 September 30, December 31, September 30, December 31,
 2017 2016 2017 2016
Private Investment Partnership Interests:       
AREA Sponsor Holdings, LLC$26,002
 $28,898
 4.6% 6.8%
ACE II Master Fund, L.P. (1)(2)19,141
 22,042
 3.4% 5.2%
Ares Corporate Opportunities Fund III, L.P.114,674
 97,549
 20.3% 22.9%
Ares Corporate Opportunities Fund IV, L.P. (2)34,990
 37,308
 6.2% 8.7%
Resolution Life L.P.36,439
 33,410
 6.5% 7.8%
Other private investment partnership interests (1)(3)168,732
 118,075
 30.0% 27.7%
Total private investment partnership interests (cost: $293,804 and $256,638 at September 30, 2017 and December 31, 2016, respectively)399,978

337,282
 71.0% 79.1%
Collateralized loan obligations (cost: $163,011 and $89,743 at September 30, 2017 and December 31, 2016, respectively) (3)162,261
 89,111
 28.8% 20.9%
Common stock (cost: $1,132 and $124 at September 30, 2017 and December 31, 2016, respectively) (3)1,304
 100
 0.2% 0.0%
Total fair value investments (cost: $457,947 and $346,505 at September 30, 2017 and December 31, 2016, respectively)$563,543

$426,493







(1)Investment or portion of the investment is denominated in foreign currency; fair value is translated into U.S. dollars at each reporting date.
(2)Represents underlying security that is held through various legal entities.
(3)No single issuer or investment had a fair value that exceeded 5% of the Company's total assets.
(1)Investment or portion of the investment is denominated in foreign currency and is translated into U.S. dollars at each reporting date.
(2)As of March 31, 2021 and December 31, 2020, includes $3.5 million and $3.4 million, respectively, of collateralized loan obligations that are attributable to the Class B Membership Interests.

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'sCompany evaluates each of its equity method investments including those whereto determine if any were significant as defined by guidance from the fair value option was elected, are summarized below:
 As of September 30, As of December 31,
 2017 2016
Equity method investment$3,081
 $3,616
Equity method investments at fair value18,071
 21,843
Total equity method investments$21,152

$25,459
SEC. As of and for the three months ended March 31, 2021 and 2020, no individual equity method investment held by the Company met the significance criteria.
The material assetsCompany recognized net gains of $26.6 million for the three months ended March 31, 2021 and net losses of $28.8 million for the three months ended March 31, 2020 related to its equity method investments. The net gains and losses were included within principal investment income, net realized and unrealized gains (losses) on investments, and interest and dividend income within the Condensed Consolidated Statements of Operations.

With respect to the Company's equity method investments, the material assets are investments for which long termexpected to generate either long-term capital appreciation is expected,and/or interest income, the material liabilities are debt instruments collateralized by, or related to, the financing of the assets and net income is primarily composedmaterially comprised of the changes in fair value of these net assets.

Held-to-Maturity Investments
The Company classifies certain investments as held-to-maturity investments when the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are reported as investments and are recorded at amortized cost. A summary of the cost and fair value of CLO notes classified as held-to maturity investments is as follows:
17
 As of September 30, As of December 31,
 2017 2016
Amortized cost$—
 $16,519
Unrealized loss, net—
 (116)
Fair value$—
 $16,403

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






Based on the Company's ability and intent to hold the investments until maturity and the underlying credit performance of such investments, the Company has determined that the net unrealized losses are temporary impairments as of December 31, 2016.
During the third quarter ended September 30, 2017, the Company redeemed its remaining held-to-maturity investments balance of $18.5 million at par, which approximated the amortized cost, with no gain or loss recognized. Redemption occurred in connection with the restructuring and refinancing of the underlying collateral facility during the third quarter ended September 30, 2017.
Investments of the Consolidated Funds

Investments held in the Consolidated Funds are summarized below:
Fair Value atPercentage of total investments as of
March 31,December 31,March 31,December 31,
2021202020212020
Fixed income investments:
Bonds$396,455 $397,494 3.3 %3.6%
Loans10,037,808 10,012,948 84.0 92.1
U.S. Treasury securities1,000,040 0 8.4 0
Investments in CLO warehouse25,350 0 0.2 0
Total fixed income investments11,459,653 10,410,442 95.9 95.7
Equity securities236,953 227,031 2.0 2.1
Partnership interests251,607 239,624 2.1 2.2
Total investments, at fair value$11,948,213 $10,877,097 
 Fair value at Fair value as a percentage of total investments at
 September 30, December 31, September 30, December 31,
 2017 2016 2017 2016
United States:       
Fixed income securities:       
Consumer discretionary$1,124,210
 $665,773
 22.6% 20.0%
Consumer staples55,357
 64,840
 1.1% 1.9%
Energy138,687
 45,409
 2.8% 1.4%
Financials234,828
 139,285
 4.8% 4.2%
Healthcare, education and childcare396,747
 246,403
 8.0% 7.4%
Industrials298,186
 149,632
 6.1% 4.5%
Information technology138,390
 194,394
 2.8% 5.8%
Materials163,728
 139,994
 3.3% 4.2%
Telecommunication services337,695
 261,771
 6.9% 7.9%
Utilities54,548
 47,800
 1.1% 1.4%
Total fixed income securities (cost: $2,949,788 and $1,945,977 at September 30, 2017 and December 31, 2016, respectively)2,942,376

1,955,301
 59.5%
58.7%
Equity securities:       
Energy158
 421
 0.0% 0.0%
Partnership and LLC interests224,010
 171,696
 4.6% 5.2%
Total equity securities (cost: $192,265 and $149,872 at September 30, 2017 and December 31, 2016, respectively)224,168

172,117
 4.6%
5.2%


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TableAt March 31, 2021, the SPAC’s investment in U.S. Treasury bills exceeded 5% of Contents
Ares Management, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(DollarsCompany’s total assets. The U.S. Treasury bills mature in Thousands, Except Share DataMay 2021 and As Otherwise Noted)




 Fair value at Fair value as a percentage of total investments at
 September 30, December 31, September 30, December 31,
 2017 2016 2017 2016
Europe:       
Fixed income securities:       
Consumer discretionary$523,953
 $274,678
 10.6% 8.2%
Consumer staples72,446
 39,197
 1.5% 1.2%
Financials43,702
 28,769
 0.9% 0.9%
Healthcare, education and childcare199,823
 111,589
 4.1% 3.4%
Industrials106,808
 118,466
 2.2% 3.6%
Information technology46,512
 49,507
 0.9% 1.5%
Materials235,505
 124,629
 4.8% 3.7%
Telecommunication services143,972
 118,632
 2.9% 3.6%
Utilities9,427
 4,007
 0.2% 0.1%
Total fixed income securities (cost: $1,383,866 and $892,108 at September 30, 2017 and December 31, 2016, respectively)1,382,148

869,474
 28.1%
26.2%
Equity securities:       
Consumer staples—
 1,517
 —% 0.0%
Healthcare, education and childcare57,562
 41,329
 1.2% 1.2%
Telecommunication services—
 24
 —% 0.0%
Total equity securities (cost: $67,198 and $67,290 at September 30, 2017 and December 31, 2016, respectively)57,562

42,870
 1.2%
1.2%
Asia and other:       
Fixed income securities:       
Consumer discretionary27,950
 24,244
 0.6% 0.7%
Financials22,402
 1,238
 0.5% 0.0%
Healthcare, education and childcare—
 10,010
 —% 0.3%
Telecommunication services22,830
 8,696
 0.5% 0.3%
Total fixed income securities (cost: $73,146 and $46,545 at September 30, 2017 and December 31, 2016, respectively)73,182

44,188
 1.6%
1.3%
Equity securities:       
Consumer discretionary48,161
 44,642
 1.0% 1.3%
Consumer staples47,208
 50,101
 1.0% 1.5%
Healthcare, education and childcare44,637
 32,598
 0.9% 1.0%
Industrials16,578
 16,578
 0.3% 0.5%
Total equity securities (cost: $122,418 and $122,418 at September 30, 2017 and December 31, 2016, respectively)156,584

143,919
 3.2%
4.3%

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Ares Management, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)




 Fair value at Fair value as a percentage of total investments at
 September 30, December 31, September 30, December 31,
 2017 2016 2017 2016
Canada:       
Fixed income securities:       
Consumer discretionary$4,093
 $—
 0.1% —%
Consumer staples10,387
 5,256
 0.2% 0.2%
Energy28,459
 12,830
 0.6% 0.4%
Healthcare, education and childcare—
 15,509
 —% 0.5%
Industrials12,464
 1,401
 0.3% 0.0%
Telecommunication services9,725
 13,852
 0.2% 0.4%
Total fixed income securities (cost: $64,567 and $48,274 at September 30, 2017 and December 31, 2016, respectively)65,128

48,848
 1.4%
1.5%
Equity securities:       
Consumer discretionary7,862
 164
 0.2% 0.0%
Total equity securities (cost: $17,202 and $408 at September 30, 2017 and December 31, 2016, respectively)7,862
 164
 0.2% 0.0%
Australia:       
Fixed income securities:       
Consumer discretionary3,142
 5,627
 0.1% 0.2%
Energy2,877
 6,046
 0.1% 0.2%
Industrials—
 2,926
 —% 0.1%
Utilities—
 21,154
 —% 0.6%
Total fixed income securities (cost: $6,910 and $37,975 at September 30, 2017 and December 31, 2016, respectively)6,019

35,753
 0.2%
1.1%
Equity securities:       
Utilities—
 17,569
 —% 0.5%
Total equity securities (cost: $0 and $18,442 at September 30, 2017 and December 31, 2016, respectively)—

17,569
 —%
0.5%
Total fixed income securities4,468,853
 2,953,564
 90.8% 88.8%
Total equity securities446,176
 376,639
 9.2% 11.2%
Total investments, at fair value$4,915,029

$3,330,203






approximately 0.3%. At September 30, 2017 and December 31, 2016, 2020, no single issuer or investments,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.


19
Table of Contents
Ares Management, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)




5. FAIR VALUE
Fair Value Measurements
GAAP establishes a hierarchalhierarchical 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‑derivedmodel-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 rates, yield curves, volatilities, prepayment risks, loss severities, credit risks and default rates.
•Level III—Valuations that rely on one or more significant unobservable inputs. These inputs reflect the Company’s assessment of the assumptions that market participants would use to value the instrument based on the best information available.
In some instances, an instrument may fall into 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.period

18
Table of Contents
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
(Dollars in Thousands, Except Share Data and As Otherwise Noted)


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

The following tables below summarize the financial assets and financial liabilities measured at fair value for the Company and the Consolidated Funds as of September 30, 2017:March 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$0 $0 $53,530 $— $53,530 
Common stock and other equity securities0 1,010 89,233 — 90,243 
Partnership interests0 0 2,575 1,209 3,784 
Total investments, at fair value0 1,010 145,338 1,209 147,557 
Derivatives-foreign exchange contracts0 2,897 0 — 2,897 
Total assets, at fair value$0 $3,907 $145,338 $1,209 $150,454 
Liabilities, at fair value
Derivatives-foreign exchange contracts$0 $(746)$0 $— $(746)
Total liabilities, at fair value$0 $(746)$0 $— $(746)

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$0 $395,834 $621 $— $396,455 
Loans0 9,478,049 559,759 — 10,037,808 
U.S. Treasury securities1,000,040 0 0 — 1,000,040 
Investments in CLO warehouse0 25,350 0 — 25,350 
Total fixed income investments1,000,040 9,899,233 560,380 — 11,459,653 
Equity securities5,008 1,311 230,634 — 236,953 
Partnership interests0 0 243,452 8,155 251,607 
Total investments, at fair value1,005,048 9,900,544 1,034,466 8,155 11,948,213 
Total assets, at fair value$1,005,048 $9,900,544 $1,034,466 $8,155 $11,948,213 
Liabilities, at fair value
Derivatives:
Warrants$(17,500)$0 $0 $— $(17,500)
Asset swaps-other0 0 (2,101)$— (2,101)
Loan obligations of CLOs0 (9,839,639)0 — (9,839,639)
Total liabilities, at fair value$(17,500)$(9,839,639)$(2,101)$— $(9,859,240)
19
Financial Instruments of the Company Level I  Level II  Level III  Investments
Measured
at NAV		 Total 
Assets, at fair value          
Investments:          
Fixed income-collateralized loan obligations $—
 $—
 $162,261
 $—
 $162,261
Equity securities 300
 1,004
 —
 —
 1,304
Partnership interests —
 —
 36,439
 381,610
 418,049
Total investments, at fair value 300

1,004

198,700

381,610

581,614
Derivatives—foreign exchange contracts —
 1,310
 —
 —
 1,310
Total assets, at fair value $300

$2,314

$198,700

$381,610

$582,924
Liabilities, at fair value          
Derivatives—foreign exchange contracts $—
 $(4,194) $—
 $—
 $(4,194)
Total liabilities, at fair value $—

$(4,194)
$—

$—

$(4,194)

20
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)






Financial Instruments of the Consolidated Funds Level I  Level II  Level III  Total 
Assets, at fair value        
Investments:        
Fixed income investments:        
Bonds $—
 $91,683
 $7,373
 $99,056
Loans —
 4,037,594
 312,203
 4,349,797
Collateralized loan obligations —
 20,000
 —
 20,000
Total fixed income investments —

4,149,277

319,576

4,468,853
Equity securities 65,150
 158
 156,858
 222,166
Partnership interests —
 —
 224,010
 224,010
Total investments, at fair value 65,150

4,149,435

700,444

4,915,029
Derivatives—other —
 —
 1,328
 1,328
Total assets, at fair value $65,150

$4,149,435

$701,772

$4,916,357
Liabilities, at fair value        
Derivatives—other $—
 $—
 $(201) $(201)
Loan obligations of CLOs —
 (4,476,643) —
 (4,476,643)
Total liabilities, at fair value $—

$(4,476,643)
$(201)
$(4,476,844)
The following tables below summarize the financial assets and financial liabilities measured at fair value for the Company and the Consolidated Funds as of December 31, 2016:2020:
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$0 $0 $53,349 $— $53,349 
Common stock and other equity securities0 1,007 88,412 — 89,419 
Partnership interests0 0 2,575 1,209 3,784 
Total investments, at fair value0 1,007 144,336 1,209 146,552 
Derivatives-foreign exchange contracts0 1,440 0 — 1,440 
Total assets, at fair value$0 $2,447 $144,336 $1,209 $147,992 
Liabilities, at fair value
Derivatives-foreign exchange contracts$0 $(1,565)$0 $— $(1,565)
Total liabilities, at fair value$0 $(1,565)$0 $— $(1,565)

Financial Instruments of the Consolidated FundsLevel ILevel IILevel IIIInvestments Measured
at NAV		Total
Assets, at fair value
Investments:
Fixed income investments:
Bonds$0 $397,485 $9 $— $397,494 
Loans0 9,470,651 542,297 — 10,012,948 
Total fixed income investments0 9,868,136 542,306 — 10,410,442 
Equity securities5,749 239 221,043 — 227,031 
Partnership interests0 0 231,857 7,767 239,624 
Total investments, at fair value5,749 9,868,375 995,206 7,767 10,877,097 
Derivatives:
Asset swaps-other0 0 1,104 — 1,104 
Total assets, at fair value$5,749 $9,868,375 $996,310 $7,767 $10,878,201 
Liabilities, at fair value
Derivatives:
Asset swaps-other$0 $0 $(44)$— $(44)
Loan obligations of CLOs0 (9,958,076)0 — (9,958,076)
Total liabilities, at fair value$0 $(9,958,076)$(44)$— $(9,958,120)
20
Financial Instruments of the Company Level I  Level II  Level III  Investments
Measured
at NAV		 Total 
Assets, at fair value          
Investments:          
Fixed income-collateralized loan obligations $—
 $—
 $89,111
 $—
 $89,111
Equity securities 100
 —
 —
 —
 100
Partnership interests —
 —
 33,410
 325,715
 359,125
Total investments, at fair value 100

—

122,521

325,715

448,336
Derivatives—foreign exchange contracts —
 3,171
 —
 —
 3,171
Total assets, at fair value $100

$3,171

$122,521

$325,715

$451,507
Liabilities, at fair value  
  
  
  
  
Contingent considerations $—
 $—
 $(22,156) $—
 $(22,156)
Total liabilities, at fair value $—

$—

$(22,156)
$—

$(22,156)

21
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)






Financial Instruments of the Consolidated Funds Level I Level II Level III Total
Assets, at fair value        
Investments:        
Fixed income investments:        
Bonds $—
 $104,886
 $37,063
 $141,949
Loans —
 2,606,423
 199,217
 2,805,640
Collateralized loan obligations —
 —
 5,973
 5,973
Total fixed income investments —

2,711,309

242,253

2,953,562
Equity securities 56,662
 17,569
 130,690
 204,921
Partnership interests —
 —
 171,696
 171,696
Other —
 24
 —
 24
Total investments, at fair value 56,662

2,728,902

544,639

3,330,203
Derivatives:        
Foreign exchange contracts —
 529
 —
 529
Other —
 —
 291
 291
Total derivative assets, at fair value —

529

291

820
Total assets, at fair value $56,662

$2,729,431

$544,930

$3,331,023
Liabilities, at fair value        
Derivatives—other $—
 $—
 $(2,999) $(2,999)
Loan obligations of CLOs —
 (3,031,112) —
 (3,031,112)
Total liabilities, at fair value $—

$(3,031,112)
$(2,999)
$(3,034,111)
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, 2017:March 31, 2021:
Level III Assets
Level III Assets of the CompanyEquity 
Securities		Fixed IncomePartnership InterestsTotal
Balance, beginning of period$88,412 $53,349 $2,575 $144,336 
Sales/settlements(2)
0 (1,539)0 (1,539)
Realized and unrealized appreciation, net821 1,720 0 2,541 
Balance, end of period$89,233 $53,530 $2,575 $145,338 
Change in net unrealized appreciation included in earnings related to financial assets still held at the reporting date$821 $1,720 $0 $2,541 

Level III Net Assets of Consolidated FundsEquity 
Securities		Fixed 
Income		Partnership
Interests		Derivatives, NetTotal
Balance, beginning of period$221,043 $542,305 $231,857 $1,060 $996,265 
Transfer in2,289 221,555 0 0 223,844 
Transfer out(33)(209,002)0 0 (209,035)
Purchases(1)
8,308 137,655 1,000 0 146,963 
Sales/settlements(2)
(424)(127,350)0 185 (127,589)
Amortized discounts/premiums0 770 0 0 770 
Realized and unrealized appreciation (depreciation), net(549)(5,553)10,595 (3,346)1,147 
Balance, end of period$230,634 $560,380 $243,452 $(2,101)$1,032,365 
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date$(582)$(863)$10,594 $(2,705)$6,444 

(1)Purchases include paid-in-kind interest and securities received in connection with restructuring.
(2)Sales/settlements include distributions, principal redemptions and securities disposed of in connection with restructurings.
21
  Level III Assets Level III Liabilities
Level III Assets and Liabilities of the Company Fixed Income Partnership 
Interests		 Total Contingent Considerations
Balance, beginning of period $164,807
 $33,410
 $198,217
 $1,940
Purchases(1) 29,911
 —
 29,911
 —
Sales/settlements(2) (33,062) —
 (33,062) (1,000)
Expired contingent considerations —
 —
 —
 (1,000)
Realized and unrealized appreciation, net 605
 3,029
 3,634
 60
Balance, end of period $162,261

$36,439

$198,700

$—
Increase in unrealized appreciation/depreciation included in earnings related to financial assets and liabilities still held at the reporting date $442
 $3,029
 $3,471
 $—

22
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)






Level III Assets of Consolidated Funds Equity Securities Fixed Income Partnership
Interests		 Derivatives, Net Total
Balance, beginning of period $146,274
 $187,579
 $217,740
 $2,809
 $554,402
Transfer in —
 86,420
 —
 —
 86,420
Transfer out (271) (60,550) —
 (4) (60,825)
Purchases(1) —
 139,903
 15,000
 —
 154,903
Sales(2) (3,701) (49,783) (15,000) —
 (68,484)
Additions(3) —
 14,479
 —
 1,393
 15,872
Settlements, net —
 —
 —
 (3,127) (3,127)
Amortized discounts/premiums —
 63
 —
 101
 164
Realized and unrealized appreciation, net 14,556
 1,465
 6,270
 (45) 22,246
Balance, end of period $156,858

$319,576

$224,010

$1,127

$701,571
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date $12,830
 $920
 $6,270
 $(2,021) $17,999
(1)Purchases include paid‑in‑kind interest and securities received in connection with restructurings.
(2)Sales include distributions, principal redemptions and securities disposed of in connection with restructurings.
(3)Additions relate a CLO that was refinanced and restructured that is now consolidated.
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, 2016:March 31, 2020:
Level III Assets
Level III Assets of the CompanyEquity 
Securities		Fixed IncomePartnership InterestsTotal
Balance, beginning of period$14,704 $69,183 $35,192 $119,079 
Transfer in due to changes in consolidation0 3,686 0 3,686 
Purchases(1)
0 643 0 643 
Sales/settlements(2)
0 (402)(32,430)(32,832)
Realized and unrealized depreciation, net0 (7,766)(187)(7,953)
Balance, end of period$14,704 $65,344 $2,575 $82,623 
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date$0 $(6,731)$5,511 $(1,220)
  Level III Assets Level III Liabilities
Level III Assets and Liabilities of the Company Fixed Income Partnership 
Interests		 Total Contingent Considerations
Balance, beginning of period $54,155
 $44,746
 $98,901
 $41,035
Purchases(1) 4
 833
 837
 —
Sales/settlements(2) (943) —
 (943) (1,000)
Realized and unrealized appreciation (depreciation), net 2,721
 (12,169) (9,448) (17,690)
Balance, end of period $55,937
 $33,410
 $89,347
 $22,345
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets and liabilities still held at the reporting date $2,479
 $(6,237) $(3,758) $(17,690)

Level III Net Assets of Consolidated FundsEquity 
Securities		Fixed 
Income		Partnership InterestsDerivatives, NetTotal
Balance, beginning of period$85,988 $339,136 $296,012 $(4,106)$717,030 
Transfer in (out) due to changes in consolidation(635)392,672 0 0 392,037 
Transfer in0 607,588 0 0 607,588 
Transfer out0 (61,774)0 0 (61,774)
Purchases(1)
249 355,592 8,000 0 363,841 
Sales/settlements(2)
(351)(178,159)0 (1,278)(179,788)
Amortized discounts/premiums0 499 0 48 547 
Realized and unrealized appreciation (depreciation), net(42,499)(175,998)3,013 5,356 (210,128)
Balance, end of period$42,752 $1,279,556 $307,025 $20 $1,629,353 
Change in net unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date$(42,500)$(170,496)$3,012 $2,874 $(207,110)
Level III Assets of Consolidated Funds Equity Securities Fixed Income Partnership Interests Derivatives, Net Total
Balance, beginning of period $143,334
 $237,372
 $115,440
 $(2,076) $494,070
Transfer in 18,135
 54,202
 —
 —
 72,337
Transfer out —
 (70,910) —
 —
 (70,910)
Purchases(1) 6,171
 94,527
 21,433
 —
 122,131
Sales(2) (290) (45,002) (2,933) —
 (48,225)
Settlements, net —
 —
 —
 (543) (543)
Amortized discounts/premiums —
 374
 —
 214
 588
Realized and unrealized appreciation (depreciation), net (2,374) 2,077
 5,260
 2,275
 7,238
Balance, end of period $164,976
 $272,640
 $139,200
 $(130) $576,686
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date $(59) $(2,977) $5,261
 $2,143
 $4,368

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

(1)Purchases include paid-in-kind interest and securities received in connection with restructurings.
23
Table(2)Sales/settlements include distributions, principal redemptions and securities disposed of Contentsin connection with restructurings.
Ares Management, L.P.
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, 2017:
  Level III Assets Level III Liabilities
Level III Assets and Liabilities of the Company Fixed Income Partnership 
Interests		 Total Contingent Considerations
Balance, beginning of period $89,111
 $33,410
 $122,521
 $22,156
Purchases(1) 110,595
 169
 110,764
 —
Sales/settlements(2) (38,303) —
 (38,303) (1,000)
Expired contingent considerations —
 —
 —
 (1,000)
Realized and unrealized appreciation (depreciation), net 858
 2,860
 3,718
 (20,156)
Balance, end of period $162,261
 $36,439
 $198,700
 $—
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets and liabilities still held at the reporting date $29
 $3,029
 $3,058
 $—
Level III Assets of Consolidated Funds Equity Securities Fixed Income Partnership
Interests		 Derivatives, Net Total
Balance, beginning of period $130,690
 $242,253
 $171,696
 $(2,708) $541,931
Transfer in —
 48,646
 —
 —
 48,646
Transfer out (6,581) (100,228) —
 (4) (106,813)
Purchases(1) 6,692
 224,600
 88,000
 —
 319,292
Sales(2) (3,701) (114,286) (45,000) —
 (162,987)
Additions(3) —
 14,479
 —
 1,393
 15,872
Settlements, net —
 —
 —
 (976) (976)
Amortized discounts/premiums —
 132
 —
 317
 449
Realized and unrealized appreciation, net 29,758
 3,980
 9,314
 3,105
 46,157
Balance, end of period $156,858
 $319,576
 $224,010
 $1,127
 $701,571
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date $19,175
 $(429) $9,314
 $(787) $27,273
(1)Purchases include paid‑in‑kind interest and securities received in connection with restructurings.
(2)Sales include distributions, principal redemptions and securities disposed of in connection with restructurings.
(3)Additions relate to a CLO that was refinanced and restructured that is now consolidated.
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, 2016:
  Level III Assets Level III Liabilities
Level III Assets and Liabilities of the Company Fixed Income Partnership 
Interests		 Total Contingent Considerations
Balance, beginning of period $55,752
 $51,703
 $107,455
 $40,831
Purchases(1) 11
 9,000
 9,011
 —
Sales/settlements(2) (3,236) —
 (3,236) (1,000)
Realized and unrealized appreciation (depreciation), net 3,410
 (27,293) (23,883) (17,486)
Balance, end of period $55,937
 $33,410
 $89,347
 $22,345
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets and liabilities still held at the reporting date $2,043
 $(7,293) $(5,250) $(17,486)

24
Table of Contents
Ares Management, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)




Level III Assets of Consolidated Funds Equity Securities Fixed Income Partnership Interests Derivatives, Net Total
Balance, beginning of period $129,809
 $249,490
 $86,902
 $(10,307) $455,894
Transfer in 15,760
 64,796
 —
 —
 80,556
Transfer out (344) (75,192) —
 —
 (75,536)
Purchases(1) 15,839
 132,958
 34,533
 —
 183,330
Sales(2) (290) (85,430) (3,233) —
 (88,953)
Settlements, net —
 —
 —
 45
 45
Amortized discounts/premiums —
 1,103
 —
 298
 1,401
Realized and unrealized appreciation (depreciation), net 4,202
 (15,085) 20,998
 9,834
 19,949
Balance, end of period $164,976
 $272,640
 $139,200
 $(130) $576,686
Increase (decrease) in unrealized appreciation/depreciation included in earnings related to financial assets still held at the reporting date $4,385
 $(10,760) $20,998
 $8,617
 $23,240
(1)Purchases include paid‑in‑kind interest and securities received in connection with restructurings.
(2)Sales include distributions, principal redemptions and securities disposed of in connection with restructurings.

The Company recognizes transfers between the levels as of the beginning of the period. 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. Two of the Company's investments were transferred from a Level II to a Level I fair value measurement as of June 30, 2017 at their fair values totaling $7.5 million as of the transfer date. The investments transferred are equity securities that were previously thinly traded that began to have significant levels of market activity to support quoted market prices during the second quarter of 2017. For the nine months ended September 30, 2016, there were no transfers between Level I and Level II fair value measurements.
The following table summarizes the quantitative inputs and assumptions used for the Company’s Level III measurements as of September 30, 2017:
22
 Fair Value Valuation Technique(s) Significant Unobservable Input(s) Range
Assets       
Partnership interests$36,439
 Other N/A N/A
Collateralized loan obligations162,261
 Broker quotes and/or 3rd party pricing services N/A N/A
Total$198,700
      

25
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)







The following table summarizestables summarize the quantitative inputs and assumptions used for the Company’s and the Consolidated Funds' Level III measurements as of DecemberMarch 31, 2016:2021:
Level III Measurements of the CompanyFair ValueValuation Technique(s)Significant Unobservable Input(s)RangeWeighted Average
Assets
Equity securities$14,704 
   Transaction price(1)
N/AN/AN/A
32,120 Discounted Cash FlowDiscount Rates14.0% - 20.0%14.4%
42,409 Market ApproachMultiple of Book Value1.5xN/A
Partnership interests2,575 OtherN/AN/AN/A
Collateralized loan obligations31,947 Broker quotes and/or 3rd party pricing servicesN/AN/AN/A
Other fixed income21,583 OtherN/AN/AN/A
Total$145,338 
 Fair Value  Valuation Technique(s)  Significant Unobservable Input(s) Range
Assets       
Partnership interests$33,410
 Other N/A N/A
Collateralized loan obligations89,111
 Broker quotes and/or 3rd party pricing services N/A N/A
Total$122,521
      
Liabilities       
Contingent consideration liabilities       
 $20,278
 Other N/A N/A
 1,878
 Discounted cash flow Discount rate 6.5%
Total$22,156
      


Level III Measurements of the Consolidated FundsFair ValueValuation Technique(s)Significant Unobservable Input(s)RangeWeighted Average
Assets
Equity securities
$236 Market approach
EBITDA multiple(2)
1.6x - 22.2x16.3x
775 Broker quotes and/or 3rd party pricing servicesN/AN/AN/A
 229,623 
   Transaction price(1)
N/AN/AN/A
Partnership interest243,452 Discounted cash flowDiscount rate23.8%23.8%
Fixed income securities
433,803 Broker quotes and/or 3rd party pricing servicesN/AN/AN/A
3,929 Market approach
   EBITDA multiple(2)
6.5x - 7.8x7.2x
96,092 Income approachYield2.7% - 37.2%7.6%
26,556    OtherN/AN/AN/A
Total assets$1,034,466 
Liabilities
Derivative instruments$(2,101)Broker quotes and/or 3rd party pricing servicesN/AN/AN/A
Total liabilities$(2,101)
The following table summarizes the quantitative inputs and assumptions used for the Consolidated Funds’ Level III measurements as of September 30, 2017:
 Fair Value Valuation Technique(s) Significant Unobservable Input(s) Range Weighted
Average
Assets         
Equity securities         
 $57,562
 Enterprise value market multiple analysis EBITDA multiple(2) 2.8x 2.8x
 61,215
 Market approach (comparable companies) Net income multiple
Illiquidity discount		 30.0x - 45.0x
25.0%		 34.7x
25.0%
 224,010
 Discounted cash flow Discount rate 18.5% 18.5%
 38,081
 Recent transaction price(1) N/A N/A N/A
Fixed income securities         
 238,764
 Broker quotes and/or 3rd party pricing services N/A N/A N/A
 80,590
 Income approach Yield 4.9% - 14.3% 9.4%
 222
 Market approach (comparable companies) EBITDA multiple(2) 5.6x 5.6x
Derivative instruments of Consolidated Funds1,328
 Broker quotes and/or 3rd party pricing services N/A N/A N/A
Total assets$701,772
        
Liabilities         
Derivatives instruments of Consolidated Funds$(201) Broker quotes and/or 3rd party pricing services N/A N/A N/A
Total liabilities$(201)        

(1)Recent transaction price consists of securities recently 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.

(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.
26
23
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)






The following table summarizestables summarize the quantitative inputs and assumptions used for the Company’s and the Consolidated Funds’Funds' Level III measurements as of December 31, 2016:
 Fair Value  Valuation Technique(s)  Significant Unobservable Input(s)  Range 
Weighted
Average
Assets         
Equity securities         
 $43,011
 Enterprise value market multiple analysis EBITDA multiple(2) 2.0x - 11.2x 2.3x
 32,598
 Market approach (comparable companies) Net income multiple
Illiquidity discount		 30.0x - 40.0x
25.0%		 35.0x
25.0%
 421
 Broker quotes and/or 3rd party pricing services N/A N/A N/A
 171,696
 Discounted cash flow Discount rate 20% 20%
 54,660
 Recent transaction price(1) N/A N/A N/A
Fixed income securities         
 170,231
 Broker quotes and/or 3rd party pricing services N/A N/A N/A
 6,693
 Enterprise value market multiple analysis EBITDA multiple(2) 7.1x 7.1x
 5,473
 Income approach Collection rates 1.2x 1.2x
 28,595
 Income approach Yield 6.0% - 13.6% 10.9%
 24,052
 Discounted cash flow Discount rate 7.8% - 15.3% 11.1%
 1,776
 Market approach (comparable companies) EBITDA multiple(2) 6.5x 6.5x
 4,887
 Recent transaction price(1) N/A N/A N/A
 546
 Market approach EBITDA multiple(2) 6.1x 6.1x
Derivative instruments of Consolidated Funds291
 Broker quotes and/or 3rd party pricing services N/A N/A N/A
Total assets$544,930
        
Liabilities         
Derivatives instruments of Consolidated Funds$(2,999) Broker quotes and/or 3rd party pricing services N/A N/A N/A
Total liabilities$(2,999)        
2020:
Level III Measurements of the CompanyFair Value Valuation Technique(s) Significant Unobservable Input(s)Range
Assets
Equity securities$14,704 
Transaction price(1)
N/AN/A
32,905 Discounted Cash FlowDiscount Rates14.0% - 20.0%
40,803 Market ApproachMultiple of Book Value1.6x
Partnership interests2,575 OtherN/AN/A
Collateralized loan obligations31,766 Broker quotes and/or 3rd party pricing servicesN/AN/A
Other fixed income21,583 OtherN/AN/A
Total$144,336

Level III Measurements of the Consolidated FundsFair Value Valuation Technique(s) Significant Unobservable Input(s) RangeWeighted Average
Assets
Equity securities
$438 Market approach
EBITDA multiple(2)
2.9x - 19.5x13.4x
32,528 OtherNet income multiple30.0x30.0x
Illiquidity discount25.0%25.0%
33 Broker quotes and/or 3rd party pricing servicesN/AN/AN/A
 188,044 
Transaction price(1)
N/AN/AN/A
Partnership interests231,857 Discounted cash flowDiscount rate23.8%23.8%
Fixed income securities
384,419 Broker quotes and/or 3rd party pricing servicesN/AN/AN/A
6,605 Market approach
EBITDA multiple(2)
6.5x - 7.8x6.9x
122,962 Income approachYield2.7% - 48.1%7.9%
28,320 OtherN/AN/AN/A
Derivative instruments1,104 Broker quotes and/or 3rd party pricing servicesN/AN/AN/A
Total assets$996,310 
Liabilities
Derivative instruments$(44)Broker quotes and/or 3rd party pricing servicesN/AN/AN/A
Total liabilities$(44)

(1)Recent 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.

(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's investmentsCompany has an insurance-related investment in a private fund managed by a third party that is valued using net asset value (“NAV”)NAV per share haveshare. The terms and conditions thatof this fund do not allow for redemptionredemptions without certain events or approvals that are outside the Company's control. A summary ofThis investment had a fair value by segmentof $1.2 million as of March 31, 2021 and the remainingDecember 31, 2020. The Company has 0 unfunded commitments are presented below:for this investment.
24
  As of September 30, 2017 As of December 31, 2016
Segment Fair Value  Unfunded 
Commitments		 Fair Value Unfunded 
Commitments
Credit Group $77,220
 $79,303
 $53,131
 $30,896
Private Equity Group 188,615
 91,311
 181,096
 96,687
Real Estate Group 83,484
 48,816
 71,669
 35,708
Non-core investments(1) 32,291
 20,023
 19,819
 34,500
Totals $381,610

$239,453

$325,715

$197,791
(1) Non-core investments are reported within the Company's Operations Management Group ("OMG").

27
Table of Contents
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)






6. 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 credit 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 asFunds:
As of March 31, 2021As of December 31, 2020
Assets Liabilities Assets Liabilities 
The Company
Notional(1)
Fair Value
Notional(1)
Fair Value
Notional(1)
Fair Value
Notional(1)
Fair Value
Foreign exchange contracts$49,594 $2,897 $23,039 $746 $30,040 $1,440 $39,362 $1,565 
Total derivatives, at fair value(2)
$49,594 $2,897 $23,039 $746 $30,040 $1,440 $39,362 $1,565 

As of March 31, 2021As of December 31, 2020
AssetsLiabilitiesAssets Liabilities 
Consolidated Funds 
Notional(1)
Fair Value
Notional(1)
Fair Value
Notional(1)
Fair Value
Notional(1)
Fair Value
Warrants$0 $0 $230,000 $17,500 $0 $0 $0 $0 
Asset swap - other47,775 0 42,688 2,101 7,600 1,104 540 44 
Total derivatives, at fair value(3)
$47,775 $0 $272,688 $19,601 $7,600 $1,104 $540 $44 

(1)Represents the total contractual amount of September 30, 2017derivative assets and liabilities outstanding.
(2)As of March 31, 2021 and December 31, 2016:  2020, the Company had the right to, but elected not to, offset $0.7 million and $1.6 million of its derivative liabilities.
(3)As of March 31, 2021 and December 31, 2020, the Consolidated Funds offset $0.2 million and $0.4 million of their derivative assets and liabilities, respectively.

25
  As of September 30, 2017 As of December 31, 2016
  Assets  Liabilities  Assets  Liabilities 
The Company Notional(1) Fair Value Notional(1) Fair Value Notional(1) Fair Value Notional(1) Fair Value
Foreign exchange contracts $37,907
 $1,310
 $124,536
 $4,194
 $62,830
 $3,171
 $—
 $—
Total derivatives, at fair value(2) $37,907
 $1,310
 $124,536
 $4,194
 $62,830
 $3,171
 $—
 $—
  As of September 30, 2017 As of December 31, 2016
  Assets Liabilities Assets  Liabilities 
Consolidated Funds  Notional(1) Fair Value Notional(1) Fair Value Notional(1) Fair Value Notional(1) Fair Value
Foreign exchange contracts $—
 $—
 $—
 $—
 $25,304
 $529
 $—
 $—
Other financial instruments 6,071
 1,328
 (2,368) (201) 3,575
 291
 (204) (2,999)
Total derivatives, at fair value(3) 6,071

1,328

(2,368)
(201)
28,879

820

(204)
(2,999)
Other—equity(4) —
 —
 —
 —
 253
 24
 —
 —
Total $6,071

$1,328

$(2,368)
$(201)
$29,132

$844

$(204)
$(2,999)
(1)Represents the total contractual amount of derivative assets and liabilities outstanding.
(2)As of September 30, 2017, the Company had the right to, but elected not to, offset $1.3 million of its derivative assets and liabilities. As of December 31, 2016, the Company did not have any derivative liabilities to offset its derivative assets.
(3)As of September 30, 2017 and December 31, 2016, the Consolidated Funds offset $0.7 million and $1.4 million of their derivative assets and liabilities, respectively.
(4)Represents the fair value of warrants which are presented as equity securities within investments of the Consolidated Funds in the Condensed Consolidated Statements of Financial Condition.


28
Table of Contents
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)






7. DEBT
The following table summarizes the Company’s and its subsidiaries’ debt obligations:
As of March 31, 2021As of December 31, 2020
Debt Origination DateMaturityOriginal Borrowing AmountCarrying
Value		Interest RateCarrying
Value		Interest Rate
Credit Facility(1)
Revolver3/31/2026N/A$168,000 3.38%$0 0%
2024 Senior Notes(2)
10/8/201410/8/2024$250,000 247,455 4.21247,285 4.21
2030 Senior Notes(3)
6/15/20206/15/2030400,000 395,824 3.28395,713 3.28
Total debt obligations$811,279 $642,998 
       As of September 30, 2017 As of December 31, 2016
 Debt Origination Date Maturity Original Borrowing Amount Carrying
Value		 Interest Rate Carrying
Value		 Interest Rate
Credit Facility(1)Revolver 2/24/2022 N/A
 $110,000
 2.75% $—
 —%
Senior Notes(2)10/8/2014 10/8/2024 $250,000
 245,149
 4.21% 244,684
 4.21%
2015 Term Loan(3)9/2/2015 7/29/2026 $35,205
 35,032
 2.79% 35,063
 2.74%
2016 Term Loan(4)12/21/2016 1/15/2029 $26,376
 25,999
 3.02% 26,037
 2.66%
2017 Term Loan A(4)3/22/2017 1/22/2028 $17,600
 17,474
 2.70% N/A
 N/A
2017 Term Loan B(4)5/10/2017 10/15/2029 $35,198
 35,147
 2.63% N/A
 N/A
2017 Term Loan C(4)6/22/2017 7/30/2029 $17,211
 17,206
 2.75% N/A
 N/A
Total debt obligations      $486,007
   $305,784
  

(1)
The AOG entities are borrowers under the Credit Facility, which, as amended in February 2017 and increased in September 2017, provides a $1.065 billion revolving line of credit. It has a variable interest rate based on LIBOR or a base rate plus an applicable margin with an unused commitment fee paid quarterly, which is subject to change with the Company’s underlying credit agency rating. As of September 30, 2017, base rate loans bear interest calculated based on the base rate plus 0.50% and the LIBOR rate loans bear interest calculated based on LIBOR plus 1.50%. The unused commitment fee is 0.20% per annum. There is a base rate and LIBOR floor of zero.
(2)
The Senior Notes were issued in October 2014 by Ares Finance Co. LLC, a subsidiary of the Company, at 98.268% of the face amount with interest paid semi-annually. The Company may redeem the Senior Notes prior to maturity, subject to the terms of the indenture.
(3)
The 2015 Term Loan was entered into in August 2015 by a subsidiary of the Company that acts as a manager to a CLO. The 2015 Term Loan is secured by collateral in the form of CLO senior tranches owned by the Company. To the extent the assets are not sufficient to cover the Term Loan, there is no further recourse to the Company to fund or repay the remaining balance. Interest is paid quarterly, and the Company also pays a fee of 0.025% of a maximum investment amount.
(4)
The 2016 and 2017 Term Loans ("Term Loans") were entered into by a subsidiary of the Company that acts as a manager to a CLO. The Term Loans are secured by collateral in the form of CLO senior tranches and subordinated notes owned by the Company. Collateral associated with one of the Term Loans may be used to satisfy outstanding liabilities of another term loan should the collateral fall short. To the extent the assets associated with these Term Loans are not sufficient, there is no further recourse to the Company to fund or repay the remaining balance. Interest is paid quarterly, and the Company also pays a fee of 0.03% of a maximum investment amount.

(1)The AOG entities are borrowers under the Credit Facility, which provides a $1.065 billion revolving line of credit. It has a variable interest rate based on LIBOR or a base rate plus an applicable margin with an unused commitment fee paid quarterly, which is subject to change with the Company’s underlying credit agency rating. On March 31, 2021, the Company amended the Credit Facility to, among other things, extend the maturity date from March 2025 to March 2026. As of September 30, 2017,March 31, 2021, base rate loans bear interest calculated based on the base rate plus 0.125% and the LIBOR rate loans bear interest calculated based on LIBOR plus 1.125%. The unused commitment fee is 0.10% per annum. There is a base rate and LIBOR floor of 0.     
(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.

As of March 31, 2021, the Company and its subsidiaries were in compliance with all covenants under the Credit Facility, Senior Notes and Term Loandebt obligations.
Debt obligations of the Company and its subsidiaries are reflected at cost. 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 Company's2024 and 2030 Senior Notes and Term Loans(the “Senior 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. obligation into interest expense in the Condensed Consolidated Statements of Operations.
The following table showspresents the activity of the Company's debt issuance costs:
Credit FacilitySenior Notes
Unamortized debt issuance costs as of December 31, 2020$5,232 $4,283 
Debt issuance costs incurred1,189 0 
Amortization of debt issuance costs(310)(149)
Unamortized debt issuance costs as of March 31, 2021$6,111 $4,134 
 Credit Facility Senior Notes Term Loans
Unamortized debt issuance costs as of December 31, 2016$4,800
 $1,803
 $526
Debt issuance costs incurred3,387
 —
 253
Amortization of debt issuance costs(1,258) (174) (48)
Unamortized debt issuance costs as of September 30, 2017$6,929
 $1,629
 $731



29
Table of Contents
Ares Management, L.P.
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"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. Several
26
Ares Management Corporation
Notes to the Consolidated CLOs issued preferred shares representing the subordinated interests that are mandatorily redeemable upon the maturity dates of the senior secured loan obligations. As a result, these shares have been classified as liabilities and are included in CLO loan obligations in theUnaudited Condensed Consolidated Statements of Financial Condition.Statements
(Dollars in Thousands, Except Share Data and As of September 30, 2017 and December 31, 2016 theOtherwise Noted)


The following loan obligations were outstanding and classified as liabilities of the Company’s Consolidated CLOs:
As of March 31, 2021As of December 31, 2020
Loan
Obligations		Fair Value of
Loan Obligations		Weighted 
Average
 Remaining Maturity 
In Years 		Loan
Obligations		Fair Value of Loan ObligationsWeighted
Average
Remaining
Maturity 
In Years 
Senior secured notes(1)
$9,614,038 $9,553,375 9.9$9,796,442 $9,665,804 10.1
Subordinated notes(2)
469,415 286,264 10.0482,391 292,272 10.2
Total loan obligations of Consolidated CLOs$10,083,453 $9,839,639 $10,278,833 $9,958,076 
 As of September 30, 2017 As of December 31, 2016
 
Loan
Obligations
 
Fair Value of
Loan Obligations
 Weighted 
Average
Remaining Maturity 
In Years 		 Loan
Obligations		 Fair Value of Loan Obligations 
Weighted
Average
Remaining
Maturity 
In Years 
Senior secured notes(1)$4,298,009
 $4,279,766
 10.56 $2,839,779
 $2,841,440
 9.68
Subordinated notes(2)274,341
 196,877
 11.15 284,046
 189,672
 9.97
Total loan obligations of Consolidated CLOs$4,572,350
 $4,476,643
   $3,123,825
 $3,031,112
  

(1)Original borrowings under the senior secured notes totaled $4.3 billion, with various maturity dates ranging from October 2024 to April 2030. The weighted average interest rate as of September 30, 2017 was 4.25%.
(2)Original borrowings under the subordinated notes totaled $274.3 million, with various maturity dates ranging from October 2024 to April 2030. They do not have contractual interest rates, but instead receive distributions from the excess cash flows generated by each Consolidated CLO.
(1)Original borrowings under the senior secured notes totaled $9.6 billion, with various maturity dates ranging from July 2028 to October 2033. The weighted average interest rate as of March 31, 2021 was 1.89%.
(2)Original borrowings under the subordinated notes totaled $469.4 million, with various maturity dates ranging from July 2028 to October 2033. 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 exceptand only have recourse to a subsidiary of the Company to the extent the debt is guaranteed by a subsidiary or if a general partner is liable for the Consolidated Fund’s liabilities under the applicable law. Credit facilities of the Consolidated Funds are reflected at cost in the Condensed Consolidated Statements of Financial Condition.such subsidiary. As of September 30, 2017March 31, 2021 and December 31, 2016,2020, the Consolidated Funds were in compliance with all covenants under such credit facilities.

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Table of Contents
Ares Management, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)




The Consolidated Funds had the following revolving bank credit facilities and term loan outstanding as of September 30, 2017 and December 31, 2016:outstanding:
As of March 31, 2021As of December 31, 2020
Consolidated Funds' Debt FacilitiesMaturity DateTotal Capacity
Outstanding
Loan(1)
Effective Rate
Outstanding Loan(1)
Effective Rate
Credit Facilities:
3/4/2022$71,500 $71,500 1.59%$71,500 1.59%
1/1/202318,000 17,909 1.6917,909 1.75
10/14/202175,000 21,000 2.7032,500 2.75
Total borrowings of Consolidated Funds$110,409 $121,909 
      As of September 30, 2017 As of December 31, 2016 
Consolidated Funds' Debt Facilities Maturity Date Total Capacity 
Outstanding
Loan(1)
 Effective Rate Outstanding Loan(1) Effective Rate 
Credit Facilities:             
  1/1/2023 $18,000
 $12,942
 2.75% $12,942
 2.38% 
  6/30/2018 47,284
 30,599
 1.55%(2)42,128
 1.55%(2)
  3/7/2018 71,500
 71,500
 2.62% N/A
 N/A 
Revolving Term Loan 8/19/2019 11,429
 6,220
 5.74% N/A
 N/A 
Total borrowings     $121,261
   $55,070
   

(1)The fair values of the borrowings approximate the carrying value as the interest rate on the borrowings is a floating rate.
(2)The effective rate is based on the three month EURIBOR or zero, whichever is higher, plus an applicable margin.
(1)The fair values of the borrowings approximate the carrying value as the interest rate on the borrowings is a floating rate.




27
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
(Dollars in Thousands, Except Share Data and As Otherwise Noted)


8. 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, 2017,March 31, 2021, 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, 2017March 31, 2021 and December 31, 2016,2020, the Company had aggregate unfunded commitments to invest in funds it manages or to support certain strategic initiatives of $316.5$759.7 million and $535.3$784.2 million, respectively, including commitments to both non-consolidated funds and Consolidated Funds. Total unfunded commitments included $20.0 million and $89.2 million in commitments to funds not managedrespectively.
Performance Income
Performance income is affected by the Company as of September 30, 2017 and December 31, 2016, respectively.
 In connection with the acquisition of EIF, contingent consideration was payable to EIF’s former membership interest holders if certain funds and co-investment vehicles met certain revenue and fee paying commitment targets during their commitment period. Since the revenue and fee paying targets were not met, the liability associated with the EIF contingent consideration, which was $20.3 million as of December 31, 2016, was reversedchanges in the first quarterfair values of 2017, resulting in a $20.3 million gain recorded within other income (expense) on the Company's Condensed Consolidated Statements of Operations.
ARCC Fee Waiver
In conjunction with the ARCC-ACAS Transaction, the Company agreed to waive up to $10 million per quarter of ARCC's Part I Fees for ten calendar quarters, which beganunderlying investments in the second quarterfunds that we advise. Valuations, on an unrealized basis, can be significantly affected by a variety of 2017. ARCC Part I Fees will only be waivedexternal factors including, but not limited to, the extent they are paid. If Part I Fees are less than $10 million in any single quarter the shortfall will not carryover to the subsequent quarters. As of September 30, 2017, there are eight remaining quarters as part of the fee waiver agreement, with a maximum of $80 million in potential waivers. ARCC Part I Fees are shown net of the fee waiver.
Performance Fees
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

31
Table of Contents
Ares Management, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)




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 performance income 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, 2017March 31, 2021 and December 31, 2016,2020, if the Company assumed all existing investments were worthless, the amount of performance feesincome subject to potential repayment, net of tax distributions, which may differ from the recognition of revenue, would have been approximately $471.8$303.2 million and $418.3$326.4 million, respectively, of which approximately $366.6$235.9 million and $323.9$252.4 million, respectively, is reimbursable to the Company by certain professionals who are the recipients of such performance fees.income. Management believes the possibility of all of the investments becoming worthless is remote. As of September 30, 2017March 31, 2021 and December 31, 2016,2020, if the funds were liquidated at their fair values, there would be no0 contingent repayment obligation and accordingly, the Company did not record a contingent repayment liability as of either date.or liability.
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
28
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
(Dollars in Thousands, Except Share Data and As Otherwise Noted)


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 nine years. The tables below present certain supplemental quantitative disclosures regarding the Company's leases:
As of March 31,As of December 31,
Classification20212020
Operating lease assetsRight-of-use operating lease assets$157,908 $154,742 
Finance lease assets
Other assets(1)
1,260 1,386 
Total lease assets$159,168 $156,128 
Operating lease liabilitiesOperating lease liabilities$186,594 $180,236 
Finance lease obligationsAccounts payable, accrued expenses and other liabilities912 1,273 
Total lease liabilities$187,506 $181,509 

(1) Finance lease assets are recorded net of accumulated amortization of $1.1 million and $1.0 million as of March 31, 2021 and December 31, 2020, respectively.

Maturity of lease liabilitiesOperating LeasesFinance Leases
2021$27,311 $150 
202239,825 485 
202335,795 158 
202432,844 156 
202531,717 6 
After 202538,665 0 
Total future payments206,157 955 
Less: interest19,563 43 
Total lease liabilities$186,594 $912 

Three months ended March 31,
Classification20212020
Operating lease expenseGeneral, administrative and other expenses$8,493 $7,632 
Finance lease expense:
Amortization of finance lease assetsGeneral, administrative and other expenses126 94 
Interest on finance lease liabilitiesInterest expense10 11 
Total lease expense$8,629 $7,737 

Three months ended March 31,
Other information20212020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$8,419 $8,178 
Operating cash flows for finance leases25 6 
Financing cash flows for finance leases341 36 
Leased assets obtained in exchange for new operating lease liabilities13,374 8,744 
29
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
(Dollars in Thousands, Except Share Data and As Otherwise Noted)


As of March 31,As of December 31,
Lease term and discount rate20212020
Weighted-average remaining lease terms (in years):
Operating leases5.76.0
Finance leases2.72.6
Weighted-average discount rate:
Operating leases3.43 %3.59 %
Finance leases3.21 %3.26 %

9. RELATED PARTY TRANSACTIONS
Substantially all of the Company’s revenue is earned from its affiliates, including management fees, performancecarried interest allocation, incentive fees, other fees,principal investment income and administrative expense reimbursements. The related accounts receivable are included within due from affiliates within the Condensed Consolidated Statements of Financial Condition, except that performance fees receivable areaccrued 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 various funds and accountsthe Ares Funds that it manages. In accordance with these agreements, the Consolidatedthese Ares Funds may bear certain operating costs and expenses which are initially paid by the Company and subsequently reimbursed by the ConsolidatedAres Funds.
The Company also has entered into agreements with related parties to be reimbursed for its expenses incurred for providing administrative services to suchcertain related parties, including AAC, ARCC, ACRE, ARDC, Ivy Hill Asset Management, L.P., ACF FinCo I L.P,L.P. and CION Ares Diversified Credit Fund.
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 employee co-investment vehicles generally do not require the participantsthese individuals to pay management or performance fees.income.
Performance feesincome from the funds can be distributed to professionals or their related entities on a current basis, subject, in the case of carried interest programs, to repayment by the subsidiary of the Company that acts as general partner of the relevant fund in the event that certain specified return thresholds are not ultimately achieved. The professionals have personally guaranteed, subject to certain limitations, the obligations of these subsidiaries in respect of this general partner obligation. Such guarantees are several, and not joint, and are limited to distributions received by the relevant recipient.

3230
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)






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 March 31,As of December 31,
 20212020
Due from affiliates:  
Management fees receivable from non-consolidated funds$244,018 $308,581 
Incentive fee receivable from non-consolidated funds17,214 21,495 
Payments made on behalf of and amounts due from non-consolidated funds and employees74,218 75,811 
Due from affiliates—Company$335,450 $405,887 
Amounts due from portfolio companies and non-consolidated funds$16,240 $17,172 
Due from affiliates—Consolidated Funds$16,240 $17,172 
Due to affiliates: 
Management fee received in advance and rebates payable to non-consolidated funds$3,280 $4,808 
Tax receivable agreement liability61,125 62,505 
Undistributed carried interest and incentive fees7,933 27,322 
Payments made by non-consolidated funds on behalf of and payable by the Company5,479 5,551 
Due to affiliates—Company$77,817 $100,186 
Amounts due to portfolio companies and non-consolidated funds$622 $0 
Due to affiliates—Consolidated Funds$622 $0 
 As of September 30, As of December 31,
 2017 2016
Due from affiliates:   
Management fees receivable from non-consolidated funds$120,242
 $123,781
Payments made on behalf of and amounts due from non-consolidated funds and employees41,190
 39,155
Due from affiliates—Company$161,432
 $162,936
Amounts due from portfolio companies and non-consolidated funds$8,047
 $3,592
Due from affiliates—Consolidated Funds$8,047
 $3,592
Due to affiliates: 
  
Management fee rebate payable to non-consolidated funds$4,822
 $7,914
Management fees received in advance4,608
 1,788
Tax receivable agreement liability4,748
 4,748
Payments made by non-consolidated funds on behalf of and payable by the Company3,029
 3,114
Due to affiliates—Company$17,207
 $17,564

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.


10. INCOME TAXES
A substantial portion of the Company’s earnings flow through to owners of the Company without being subject to entity level income taxes. Consequently, a significant portion of the Company’s earnings reflects no provision for income taxes except those for foreign, state, city and local income taxes incurred at the entity level. A portion of the Company’s operations is held through AHI, as well as corporate subsidiaries of Ares Holdings and Ares Investments, which are U.S. corporations for tax purposes. AHI is subject to U.S. corporate tax on earnings that flow through from Ares Holdings with respect to both AOG Units and preferred units. The income of these U.S. corporations is subject to U.S. federal, state and local income taxes and certain of its foreign subsidiaries are subject to foreign income taxes (for which a foreign tax credit can generally offset U.S. corporate taxes imposed on the same income). The Company’s income tax provision includes corporate level 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. TheFor the three months ended March 31, 2021,the Company had anrecorded income tax expense of $4.6 millionand$7.6 million for$25.8 million. For the three months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017,March 31, 2020, the Company had anrecorded income tax benefit of $28.5$20.6 million, primarily driven by the one-time ARCC-ACAS transaction support payment compared to an income tax expense of $7.9 million for the nine months ended September 30, 2016.respectively.
The Company’s effective income tax rate is dependent on many factors, including the estimated nature and amounts of many amounts and the mix of revenuesincome and expenses between U.S. corporate subsidiaries that areallocated to the non-controlling interests without being subject to federal, state and local income taxes and those subsidiaries that are not. Forat the three and nine months ended September 30, 2017 and 2016, the Company has utilized the discrete effective tax rate method to calculate its interim income tax provision. The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year to date period as if it was the annual period and determines the income tax expense or benefit on that basis.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 thesethe Company's condensed consolidated financial statements. Consequently,For the effectivethree months ended March 31, 2021 and 2020, the Company recorded its interim income tax rate is subjectprovision utilizing the estimated annual effective tax rate.
The income tax effects of temporary differences give rise to significant variation from period to period.

33
Tableportions of Contents
Ares Management, L.P.
Notes todeferred tax assets and liabilities, which are presented on a net basis. As of March 31, 2021 and December 31, 2020, the UnauditedCompany recorded a net deferred tax asset of $46.0 million and $70.0 million, respectively, within other assets in the Condensed Consolidated Statements of Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)




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 regulators. As of September 30, 2017,authorities. With limited exceptions, the Company’s U.S. federalCompany is no longer subject to income tax returnsaudits by taxing authorities for theany years 2014 through 2017 are open under the normal statute of limitations and therefore subject to examination. State and local tax returns are generally subject to audit from 2013 to 2017. Foreign tax returns are generally subject to audit from 2012prior to 2017. 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.


31
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
(Dollars in Thousands, Except Share Data and As Otherwise Noted)


11. EARNINGS PER COMMON UNITSHARE
Basic earnings per share of Class A common unit arestock is computed by dividing income available to common unitholders byusing the weighted‑average number of common units outstanding during the period.two-class method. Diluted earnings per share of Class A common unit arestock 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, 2017, the two-class method was the more dilutive method for the unvested restricted units. For the three and nine months ended September 30, 2016,March 31, 2021, the treasury stock method was the more dilutive method. For the three months ended March 31, 2020, the two-class method forwas the unvested restricted units. No participating securities had rights to undistributed earnings during any period presented.more dilutive method.

The computation of diluted earnings per common unitshare for the three and nine months ended September 30, 2017 and 2016March 31, 2021 excludes the following AOG Units, as their effect would have been anti-dilutive. For the three months ended March 31, 2020, the following options, restricted units and AOG Units as their effect would have been anti-dilutive:represent the securities not included in the two-class method:

For the Three Months Ended 
 September 30,		 For the Nine Months Ended 
 September 30,		Three months ended March 31,
2017 2016 2017 201620212020
Options21,022,924
 22,164,772
 21,170,880
 23,008,147
Options0 12,859,532 
Restricted units13,742,856
 —
 14,223,345
 62,909
Restricted units0 16,377,716 
AOG units130,192,448
 130,852,861
 130,280,878
 131,858,404
AOG UnitsAOG Units112,353,043 116,328,089 
The following table presents the computation of basic and diluted earnings per common unit:share:
Three months ended March 31,
20212020
Basic earnings per share of Class A common stock:
Net income (loss) attributable to Ares Management Corporation Class A common stockholders$52,953 $(36,461)
Distributions on unvested restricted units(3,255)(2,290)
Net income (loss) available to Class A common stockholders$49,698 $(38,751)
Basic weighted-average shares of Class A common stock149,271,822 118,366,539 
Basic earnings (loss) per share of Class A common stock$0.33 $(0.33)
Diluted earnings per share of Class A common stock:
Net income (loss) available to Class A common stockholders$52,953 $(36,461)
Net income (loss) attributable to Ares Management Corporation Class A common stockholders$52,953 $(36,461)
Effect of dilutive shares:
Restricted units9,218,424 0 
Options5,174,138 0 
Diluted weighted-average shares of Class A common stock163,664,384 118,366,539 
Diluted earnings (loss) per share of Class A common stock$0.32 $(0.33)
Dividend declared and paid per Class A common stock$0.47 $0.40 
 For the Three Months Ended 
 September 30,		 For the Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Net income attributable to Ares Management, L.P. common unitholders$22,413
 $36,554
 $20,307
 $71,042
Earnings distributed to participating securities (restricted units)(1,003) (480) (2,248) (895)
Preferred stock dividends(1)—
 —
 —
 (8)
Net income available to common unitholders$21,410
 $36,074
 $18,059
 $70,139
Basic weighted-average common units82,166,852
 80,793,984
 81,704,815
 80,741,460
Basic earnings per common unit$0.26
 $0.45
 $0.22
 $0.87
Net income attributable to Ares Management, L.P. common unitholders$22,413
 $36,554
 $20,307
 $71,042
Earnings distributed to participating securities (restricted units)(1,003) —
 (2,248) —
Preferred stock dividends(1)—
 —
 —
 (8)
Net income available to common unitholders$21,410
 $36,554
 $18,059

$71,034
Effect of dilutive units:       
Restricted units—
 3,670,607
 —
 1,925,589
Diluted weighted-average common units82,166,852
 84,464,591
 81,704,815
 82,667,049
Diluted earnings per common unit$0.26
 $0.43
 $0.22
 $0.86

(1)Dividends relate to the preferred shares that were issued by Ares Real Estate Holdings LLC and were redeemed on July 1, 2016.

34
Table of Contents
Ares Management, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)




12. EQUITY COMPENSATION
Equity Incentive Plan
In 2014,Equity-based compensation is granted under the Company adopted the Ares Management, L.P.Company's 2014 Equity Incentive Plan (the(as amended, the "Equity Incentive Plan"). Based on a formula as defined in the Equity Incentive Plan, theThe total number of unitsshares 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. Accordingly, onOn January 1, 2017,2021, the total number of unitsshares available for issuance under the Equity Incentive Plan increasedreset to 30,397,280 units,44,510,451 shares, and as of September 30, 2017, 24,550,987 unitsMarch 31, 2021, 40,639,397 shares remain available for issuance.
32
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
(Dollars in Thousands, Except Share Data and As Otherwise Noted)


Generally, unvested phantom units, restricted units and options 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 included in the following table:
For the Three Months Ended 
 September 30,		 For the Nine Months Ended 
 September 30,		Three months ended March 31,
2017 2016 2017 2016 20212020
Restricted units$14,555
 $5,350
 $40,375
 $14,797
Restricted units$44,087 $28,381 
Restricted units with a market conditionRestricted units with a market condition11,562 4,133 
Options3,224
 2,693
 10,637
 11,153
Options0 43 
Phantom units312
 433
 1,085
 1,235
Equity-based compensation expense$18,091
 $8,476
 $52,097
 $27,185
Equity-based compensation expense$55,649 $32,557 
Restricted Units
Each restricted unit represents an unfunded, unsecured right of the holder to receive a share of the Company's Class A common unitstock on a specific date. The restricted units generally vest and are settled in shares of Class A common unitsstock either (i) at a rate of one-third per year, beginning on the third anniversary of the grant date, (ii) in their entirety on the fifth anniversary of the grant date, or (iii) 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 (iv) at a rate of one third per year, beginning on the first anniversary of the grant date.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 three months ended March 31, 2021, 4.2 million restricted units vested and 2.4 million shares of Class A common stock were delivered to the holders. For the three months ended March 31, 2020, 4.6 million restricted units vested and 2.6 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 distributiondividend paid with respect to a share of Class A common unitstock multiplied by (ii) the number of restricted units held at the time such distributionsdividends are declared (“DistributionDividend Equivalent”). During the three months ended March 31, 2021, the Company declared dividends of $0.47 per share to Class A common stockholders at the close of business on March 17, 2021. For the three and nine months ended September 30, 2017, DistributionMarch 31, 2021, Dividend Equivalents were made to the holders of restricted units in the aggregate amount of $4.3$7.5 million, and $10.3 million, respectively, which are presented as distributionsdividends within the Condensed Consolidated StatementStatements of Changes in Equity. When units are forfeited, the cumulative amount of distribution equivalentsDividend Equivalents previously paid is reclassified to compensation and benefits expense in the Condensed Consolidated Statements of Operations.

During the first quarter of 2021, in addition to grants awarded in 2021, the Company approved the future grant of restricted units to certain senior executives in each of 2022, 2023 and 2024, 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.

The following table presents unvested restricted units’ activity duringunits' activity:
 Restricted UnitsWeighted Average
Grant Date Fair
Value Per Unit
Balance - January 1, 202116,299,664 $24.30 
Granted9,012,823 45.63 
Vested(4,191,773)21.85 
Forfeited(4,269)50.75 
Balance - March 31, 202121,116,445 $33.80 
33
Ares Management Corporation
Notes to the nine months ended September 30, 2017:Unaudited Condensed Consolidated Financial Statements
(Dollars in Thousands, Except Share Data and As Otherwise Noted)
 Restricted Units 
Weighted Average
Grant Date Fair
Value Per Unit
Balance - January 1, 20178,058,372
 $16.38
Granted7,944,144
 18.61
Vested(1,833,422) 16.56
Forfeited(426,238) 17.82
Balance - September 30, 201713,742,856
 $17.58


The total compensation expense expected to be recognized in all future periods associated with the restricted units is approximately $183.2$593.8 million as of September 30, 2017March 31, 2021 and is expected to be recognized over the remaining weighted average period of 3.694.3 years.


Performance-Based Restricted Unit Awards with a Market Condition
During the first quarter of 2021, the Company granted certain restricted units with a vesting condition contingent upon the volume-weighted, average closing price of the Company’s Class A common stock meeting or exceeding a stated price for 30 consecutive calendar days on or prior to January 22, 2029, referred to as the market condition. 537,500 restricted units with a market condition of $55.00 per share (“Tranche I”), 537,500 restricted units with a market condition of $60.00 per share (“Tranche II”), 537,500 restricted units with a market condition of $65.00 per share (“Tranche III”) and 537,500 restricted units with a market condition of $75.00 per share (“Tranche IV”) were granted. Vesting is also generally subject to continued employment at the time such market condition is achieved, subject to certain exceptions upon certain qualifying terminations of employment. Under the terms of the awards, if the target price of the applicable market condition is not achieved by the close of business on January 22, 2029, the unvested market condition awards will be automatically canceled and forfeited for no consideration. Restricted units subject to a market condition are not eligible to receive a Dividend Equivalent.
The grant date fair values for Tranche I, Tranche II, Tranche III and Tranche IV awards were $37.28, $34.47, $31.92 and $27.75 per unit, respectively, based on a probability distributed Monte-Carlo simulation. Due to the existence of the market condition, the vesting period for the awards is not explicit, and as such, compensation expense is recognized on a straight-line basis over the median vesting period derived from the positive iterations of the Monte Carlo simulation where the market condition was achieved. The median vesting period is 0.7 years, 1.2 years, 1.6 years and 2.3 years for Tranche I, Tranche II, Tranche III and Tranche IV, respectively.

Below is a summary of the significant assumptions used to estimate the grant date fair value of market condition awards:

Closing price of the Company's common shares as of valuation date$45.76
Risk-free interest rate0.88%
Volatility35.0%
Dividend yield3.5%
Cost of equity10.0%

The following table presents the unvested market condition awards' activity:
 Market Condition Awards UnitsWeighted Average
Grant Date Fair
Value Per Unit
Balance - January 1, 20210 $0 
Granted2,150,000 32.86 
Vested0 0 
Forfeited0 0 
Balance - March 31, 20212,150,000 $32.86 

The total compensation expense expected to be recognized in all future periods associated with the market condition awards is approximately $59.1 million as of March 31, 2021 and is expected to be recognized over the remaining weighted average period of 7.81 years.
35
34
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)






Options
A summary of options activity during the ninethree months ended September 30, 2017March 31, 2021 is presented below:
 OptionsWeighted Average Exercise PriceWeighted Average
Remaining Life
(in years)		Aggregate Intrinsic Value
Balance - January 1, 20218,312,203 $18.99 3.4$233,251 
Granted0 0 — — 
Exercised0 0 — — 
Expired0 0 — — 
Forfeited0 0 — — 
Balance - March 31, 20218,312,203 18.99 3.1$307,895 
Exercisable at March 31, 20218,312,203 $18.99 3.1$307,895 
 Options Weighted Average Exercise Price 
Weighted Average
Remaining Life
(in years)
 Aggregate Intrinsic Value
Balance - January 1, 201722,232,134
 $18.99
 7.35  
Granted—
 —
 —  
Exercised(54,500) 19.00
 —  
Expired(433,609) 19.00
 —  
Forfeited(721,101) 19.00
 —  
Balance - September 30, 201721,022,924
 $18.99
 6.56 $—
Exercisable at September 30, 20177,106,989
 $19.00
 6.56 $—

As of September 30, 2017, there was $26.5 million of total unrecognized compensation expense that is expected to be recognized over the remaining weighted average period of 1.60 years.
Phantom Units
A summary of unvested phantom unit activity during the nine months ended September 30, 2017 is presented below:
  Phantom Units Weighted Average
Grant Date Fair
Value Per Unit
Balance - January 1, 2017 266,138
 $19.00
Vested (87,222) 19.00
Forfeited (20,872) 19.00
Balance - September 30, 2017 158,044
 $19.00
The fair value of the phantom unit awards is remeasured at each reporting period and was $18.65 per unit as of September 30, 2017. Based on the fair value of the awards at September 30, 2017,  $2.3 million of unrecognized compensation expense in connection with phantom units outstanding is expected to be recognized over a weighted average period of 1.59 years. During the nine months ended September 30, 2017, the Company paid $1.7 million to settle any vested phantom units.

36
Table of Contents
Ares Management, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)




13. EQUITY
Ares Management, L.P.

AND REDEEMABLE INTEREST
Common Units:Stock
Common units represent limited partnership interests in the Company.  
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 Class B common stock and Class C common stock are non-economic and holders of common units are not entitled to participate pro rata in distributionsdividends from the Company andor to exercisereceive any assets of the rightsCompany in the event of any dissolution, liquidation or privileges that are available to common unitholders underwinding up of the Company’s partnership agreement. The common unitholders have limited voting rights and have no right to remove the Company’s general partner,Company. Ares Management GP LLC or, except in limited circumstances, to electis the directorssole holder of the general partner.Class B common stock and Ares Voting LLC (“Ares Voting”) is the sole holder of the Class C common stock.
In February 2021, 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 February 2022. Repurchases under the program, if any, will depend on the prevailing market conditions and other factors. During the three months ended March 31, 2021 and 2020, 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 StockClass B Common StockClass C Common StockTotal
Balance - January 1, 2021147,182,562 1,000 112,447,618 259,631,180 
Exchanges of AOG Units283,724 0 (283,724)0 
Vesting of restricted stock awards, net of shares withheld for tax2,374,692 0 0 2,374,692 
Balance - March 31, 2021149,840,978 1,000 112,163,894 262,005,872 


The following table presents each partner's AOG unitsUnits and corresponding ownership interest in each of the Ares Operating Group entities, as of September 30, 2017 and December 31, 2016, as well as its daily average ownership of AOG Units in each of the Ares Operating Group entities forentities:

Daily Average Ownership
As of March 31, 2021As of December 31, 2020Three months ended March 31,
AOG UnitsDirect Ownership InterestAOG UnitsDirect Ownership Interest20212020
Ares Management Corporation149,840,978 57.19 %147,182,562 56.69 %57.06 %50.43 %
Ares Owners Holding L.P.112,163,894 42.81 112,447,618 43.31 42.94 49.57 
Total262,004,872 100.00 %259,630,180 100.00 %
35
Ares Management Corporation
Notes to the threeUnaudited Condensed Consolidated Financial Statements
(Dollars in Thousands, Except Share Data and nine months ended September 30, 2017 and 2016.As Otherwise Noted)

          Daily Average Ownership
  As of September 30, 2017 As of December 31, 2016 For the Three Months Ended September 30, For the Nine Months Ended September 30,
  AOG Units Direct Ownership Interest AOG Units Direct Ownership Interest 2017 2016 2017 2016
Ares Management, L.P. 82,211,302
 38.71% 80,814,732
 38.26% 38.69% 38.17% 38.54% 37.98%
Ares Owners Holding L.P. 117,673,223
 55.40% 117,928,313
 55.82% 55.42% 55.92% 55.56% 56.14%
Affiliate of Alleghany Corporation 12,500,000
 5.89% 12,500,000
 5.92% 5.89% 5.91% 5.90% 5.88%
Total 212,384,525
 100.00% 211,243,045
 100.00%        

Preferred EquityStock

As of September 30, 2017March 31, 2021 and December 31, 2016,2020, the Company had 12,400,000 unitsshares of the Series A Preferred Equity (the “Preferred Equity”)Stock outstanding. When, as and if declared by the Company’s board of directors, distributionsdividends on the Series A Preferred EquityStock are payable quarterly at a rate per annum equal to 7.00%. The Series A Preferred EquityStock may be redeemed at the Company’s option, in whole or in part, at any time on or after June 30, 2021, at a price per share of $25.00 per unit.$25.00.


Secondary OfferingRedeemable Interest

Pursuant to a prospectus supplement dated March 2, 2017, AREC Holdings Ltd., a wholly owned subsidiary of Abu Dhabi Investment Authority ("ADIA" or “the selling unitholder”) sold 7,500,000 units ofThe following table summarizes the Company's common units through a public secondary offering. activities associated with the redeemable interest in Ares Operating Group entities:
Total
Balance - January 1, 2021$100,366
Net income32 
Currency translation adjustment, net of tax(590)
Balance - March 31, 2021$99,808

The Company did not receive any offollowing table summarizes the proceeds fromactivities associated with the offering. The transaction closed on March 2, 2017. The Company incurred approximately $0.7 million of expenses related to the secondary offering transaction. The fees related to the secondary offering were non-operating expenses and are includedredeemable interest in other income (expense), net in the Condensed Consolidated Statements of Operations. The selling unitholder paid the underwriting discounts and commissions and/or similar charges incurred for the sale of the common units.Funds:

Total
Balance - January 1, 2021$0
Redemption value930,924 
Balance - March 31, 2021$930,924




37
36
Table of Contents
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)






14. SEGMENT REPORTING
The Company operates through its three distinct operating segments. During the nine months ended September 30, 2017, the Company reclassified certain expenses from OMG to its operating segments. Historical results have been modified to conform to the current period presentation.segments that are summarized below:
The Company’s three operating segments are:
Credit Group: The Company’s Credit Group is a leading manager of credit strategies across the non-investment grade credit universe in the U.S. and Europe, with approximately $70.5 billion of assets under management and 142 funds as of September 30, 2017. The Credit Group offers a range ofmanages credit strategies across the liquid and illiquid spectrum, including syndicated loans, high yield bonds, multi-asset credit, opportunities, structuredalternative credit investments and U.S. and European direct lending. The Credit Group provides solutions for traditional fixed income investors seeking to access the syndicated loans and high yield bond markets and capitalizes on opportunities across traded corporate credit. It additionally provides investors access to directly originated fixed and floating rate credit assets and the ability to capitalize on illiquidity premiums across the credit spectrum. The Credit Group’s syndicated loans strategy focuses on liquid, tradedevaluating individual credit opportunities related primarily to non-investment grade senior secured loans to corporate issuers.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. Credit opportunitiesMulti-asset credit is a “go anywhere” strategy seekingdesigned 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 market inefficienciesasset-focused investment opportunities that fall outside of traditional, well-defined markets such as corporate debt, real estate and relative value opportunities across the capital structure.private equity. The structuredalternative credit strategy invests acrossemphasizes downside protection and capital preservation through a focus on investments that tend to share the capital structures of syndicated collateralized loan obligation vehicles (CLOs)following key attributes: asset security, covenants, structural protections and in directly-originated asset-backed instruments composed of diversified portfolios of consumer and commercial assets.cash flow velocity. The Company hasdirect lending strategy is one of the largest self-originating direct lending platforms inlenders 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 markets, providing one-stop financing solutions for small-to-medium sized companies,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 the Company believes are increasingly underserved by traditional lenders. The Company provides investors access to these capabilities through several vehicles, including commingled funds, separately managed accountsloans that combine senior and mezzanine debt, generally in a publicly traded vehicle. The Credit Group conducts itsfirst 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 primarilyare managed through ARCC, the largesta publicly traded business development company, as of September 30, 2017, by both market capitalization and total assets. In addition, the Credit Group manages a commercial finance business that provides asset-based and cash flow loans to small and middle-market companies,ARCC, as well as asset-based facilities to specialty finance companies. The Credit Group’s European direct lending platform is one of the most significant participants in the European middle-market, focusing on self-originated investments in illiquid middle-market credits.through private commingled funds and SMAs.

Private Equity Group:The Company’s Private Equity Group has approximately $24.6 billion of assets under management as of September 30, 2017,manages investment strategies broadly categorizingcategorizes its investment strategies as corporate private equity, U.S. poweractivities into three strategies: Corporate Private Equity, Special Opportunities and energy infrastructureInfrastructure and special situations. As of September 30, 2017Power. In the group managed five corporate private equity commingled funds focused on North America and Europe and two focused on greater China, five commingled funds and six related co-investment vehicles focused on U.S. power and energy infrastructure and three special situations funds. In its North American and European flexible capitalCorporate Private Equity strategy, the Company targets opportunistic majority or shared-controlfour principal transactions types: prudently leveraged control buyouts, growth equity, rescue/deleveraging capital and distressed buyouts/discounted debt accumulation together with the broad resources of potential investment opportunities. This flexible capital approach, together with the broad resources of the Ares platform, widens our universe of potential investment opportunities and allows us to remain active in different markets and to be highly selective in making investments in businesses with strong franchises and attractive growth opportunities in North America and Europe. The U.S. power and energy infrastructureacross various market environments. In Special Opportunities strategy, targets U.S. energy infrastructure-related assets across the power generation, transmission and midstream sectors, seeking attractive risk-adjusted equity returns with current cash flow andCompany employs a flexible capital appreciation. The special situations strategy seeks to invest opportunisticallytarget non-control positions across a broad spectrum of stressed, distressed or mispriced investments, including corporate debt, rescueand opportunistic situations. The Infrastructure and Power strategy targets value-added approach that seeks to source and structure essential infrastructure assets with strong downside protection and potential for capital private asset-backed investments, post-reorganization securitiesappreciation throughout the climate infrastructure, natural gas generation, and non-performing portfolios.energy transportation sectors.

Real Estate Group: The Company’s Real Estate Group manages comprehensive public and privatereal estate equity and debt strategies, with approximately $10.6 billion of assets under management across 42 funds as of September 30, 2017.strategies. Real Estate equity strategies focus on applying hands-on value creation initiatives to mismanaged and capital-starved assets, as well as new development, ultimately selling stabilized assets back into the market. The Real Estate Group manages both a value-add strategy and an opportunistic strategy. The value-add strategy seeks to create value by buyinginvestment activities focus on the acquisition of underperforming, income-producing, institutional-quality assets at attractive valuations andthat can be improved through active asset management of income-producing propertiesselect value-creation initiatives across the U.S. and Western Europe. The opportunistic strategy focuses on manufacturing corecapitalizing on distressed and special situations, repositioning underperforming assets throughand undertaking select development and redevelopment and fixing distressed capital structuresprojects across major properties in the U.S. and Europe. The Company’s debt strategies leverage the Real Estate Group’s diverse sources of capital to directly originate and manage commercial mortgage investments on properties thatinvest in a wide range from stabilized to requiring hands-on value creation.of financing opportunities in the U.S. In addition to managing private debtcommingled funds and SMAs, the Real Estate Group makes debt investments through ACRE, a publicly traded commercial mortgage real estate investment trust, ACRE. REIT.


38
TableStrategic Initiatives: The Company began reflecting the Strategic Initiatives category beginning in the third quarter of Contents2020. It 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 including Ares SSG, Ares Insurance Solutions (“AIS”) and AAC.
Ares Management, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)





The Company has an Operations Management Group (the “OMG”) thatOMG consists of five shared resource groups to support the Company’s operating segments by providing infrastructure and administrative support in the areas of accounting/finance, operations/operations, information technology, business development/corporate strategy legal/and relationship management, legal, compliance and human resources. Additionally, the OMG provides services to certain of the Company’s investment companies and partnerships, which reimburse the OMG for expenses equal to the costs of services provided. The OMG’s expenses are not allocated to the Company’s three reportable segments but the Company does consider the cost structure of the OMG when evaluating its financial performance.
Non-GAAP
37
Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements
(Dollars in Thousands, Except Share Data and As Otherwise Noted)


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.
Economic net income (“ENI”), a non-GAAP measure, is an operating metric used by management to evaluate total operating performance, a decision tool for deployment of resources, and an assessment of the performance of the Company’s business segments. ENI differs from net income by excluding (a) income tax expense, (b) operating results of the Consolidated Funds, (c) depreciation and amortization expense, (d) placement fees and underwriting costs, (e) the effects of changes arising from corporate actions, and (f) certain other items that the Company believes are not indicative of its total operating performance. Changes arising from corporate actions include equity-based compensation expenses, the amortization of intangible assets, transaction costs associated with mergers and acquisitions and capital transactions, and expenses incurred in connection with corporate reorganization.  
Fee related earnings (“FRE”), a non-GAAP measure, refers to a component of ENI that is used to assess core operating performance by determining whether recurring revenue, primarily consisting of management fees, is sufficient to cover operating expenses and to generate profits. FRE differs from income before taxes computed in accordance with GAAP as it adjusts for the items included in the calculation of ENI and excludes performance fees,income, performance feerelated compensation, 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.
Performance related earningsRealized income (“PRE”RI”), a non-GAAP measure, is used to assess the Company’s investment performance net of performance fee compensation. PRE differs from income (loss) before taxes computed in accordance with GAAP as it only includes performance fees, performance fee compensation and total investment and other income earned from the Consolidated Funds and non-consolidated funds.
Distributable earnings (“DE”), a non-GAAP measure, is an operating metric that assesses the Company’sused by management to evaluate performance without the effects of the Consolidated Fundsbusiness based on operating performance and the impactcontribution of each of the business segments to that performance, while removing the fluctuations of unrealized income and expenses, which generally fluctuate with fair value changes. Among other things, this metric also is used to assist in determining amounts potentially available for distribution. However,may or may not be eventually realized at the declaration, payment,levels presented and determinationwhose realizations depend more on future outcomes than current business operations. RI differs from income before taxes by excluding (a) operating results of the amountConsolidated Funds, (b) depreciation and amortization expense, (c) the effects of distributionschanges arising from corporate actions, (d) unrealized gains and losses related to unitholders, if any, is at the sole discretion of the Company’s Board of Directors, which may change the distribution policy at any time. Distributable earnings is calculated as the sum of fee related earnings, realized performance fees, realized performance fee compensation, realized net investment and other income and is reduced byinvestment performance and (e) certain other items that the Company believes are not indicative of operating performance. Changes arising from corporate actions include equity-based compensation expenses, arising fromthe amortization of intangible assets, transaction costs associated with mergers, acquisitions placement fees and capital transactions, underwriting costs and expenses incurred in connection with corporate reorganization and depreciation. Distributable earnings differs from income before taxes computed in accordance with GAAP as itreorganization. Management believes RI is typically presented before giving effecta more appropriate metric to unrealized performance fees, unrealized performance fee compensation, unrealized net investment income, amortization of intangibles and equity compensation expense. DE is presented prior toevaluate the effect of income taxes attributable to Ares Holdings, Inc. and to distributions made to the Company’s preferred unitholders, unless otherwise noted.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‑consolidatednon-consolidated funds.


39
38
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)






The following table presentstables present the financial results for the Company’s operating segments, as well as the OMG, for the three months ended September 30, 2017:OMG:
Three months ended March 31, 2021
Credit GroupPrivate Equity GroupReal
Estate Group		Strategic InitiativesTotal
Segments		OMGTotal
Management fees$232,877 $49,331 $29,632 $15,623 $327,463 $0 $327,463 
Other fees5,969 108 648 79 6,804 0 6,804 
Compensation and benefits(80,365)(20,685)(15,941)(4,740)(121,731)(44,407)(166,138)
General, administrative and other expenses(10,809)(4,868)(3,295)(2,035)(21,007)(18,656)(39,663)
Fee related earnings147,672 23,886 11,044 8,927 191,529 (63,063)128,466 
Performance income—realized3,816 71,218 1,947 0 76,981 0 76,981 
Performance related compensation—realized(2,893)(57,026)(1,177)0 (61,096)0 (61,096)
Realized net performance income923 14,192 770 0 15,885 0 15,885 
Investment loss—realized0 (7,170)(222)0 (7,392)0 (7,392)
Interest and other investment income—realized3,669 444 2,028 33 6,174 355 6,529 
Interest expense(1,515)(1,663)(1,125)(2,302)(6,605)(90)(6,695)
Realized net investment income (loss)2,154 (8,389)681 (2,269)(7,823)265 (7,558)
Realized income$150,749 $29,689 $12,495 $6,658 $199,591 $(62,798)$136,793 
Three months ended March 31, 2020
Credit GroupPrivate Equity GroupReal Estate GroupStrategic InitiativesTotal
Segments		OMGTotal
Management fees$197,437 $52,157 $24,184 $0 $273,778 $0 $273,778 
Other fees3,058 110 704 0 3,872 0 3,872 
Compensation and benefits(70,925)(19,596)(12,413)0 (102,934)(36,426)(139,360)
General, administrative and other expenses(15,313)(5,633)(2,935)0 (23,881)(21,305)(45,186)
Fee related earnings114,257 27,038 9,540 0 150,835 (57,731)93,104 
Performance income—realized9,016 116,154 26,600 0 151,770 0 151,770 
Performance related compensation—realized(7,899)(92,924)(17,170)0 (117,993)0 (117,993)
Realized net performance income1,117 23,230 9,430 0 33,777 0 33,777 
Investment income (loss)—realized(843)11,470 1,290 0 11,917 (5,698)6,219 
Interest and other investment income—realized4,575 812 796 0 6,183 168 6,351 
Interest expense(1,715)(1,643)(971)0 (4,329)(977)(5,306)
Realized net investment income (loss)2,017 10,639 1,115 0 13,771 (6,507)7,264 
Realized income$117,391 $60,907 $20,085 $0 $198,383 $(64,238)$134,145 
39
 Credit Group Private Equity Group Real
Estate Group		 Total
Segments		 OMG Total
Management fees (Credit Group includes ARCC Part I Fees of $24,036)$120,178
 $51,313
 $17,137
 $188,628
 $—
 $188,628
Other fees5,668
 449
 27
 6,144
 —
 6,144
Compensation and benefits(46,551) (19,256) (11,398) (77,205) (27,577) (104,782)
General, administrative and other expenses(6,851) (4,655) (2,125) (13,631) (18,380) (32,011)
Fee related earnings72,444

27,851

3,641
 103,936
 (45,957) 57,979
Performance fees—realized3,296
 173,304
 2,389
 178,989
 —
 178,989
Performance fees—unrealized33,033
 (142,822) 20,366
 (89,423) —
 (89,423)
Performance fee compensation—realized(1,466) (138,657) (856) (140,979) —
 (140,979)
Performance fee compensation—unrealized(19,820) 114,395
 (12,233) 82,342
 —
 82,342
Net performance fees15,043

6,220

9,666
 30,929
 —
 30,929
Investment income—realized6,206
 14,268
 1,997
 22,471
 18
 22,489
Investment income (loss)—unrealized(1,123) (8,421) (767) (10,311) 4,357
 (5,954)
Interest and other investment income (expense)(540) 1,129
 716
 1,305
 26
 1,331
Interest expense(3,277) (1,229) (396) (4,902) (441) (5,343)
Net investment income1,266

5,747

1,550
 8,563
 3,960
 12,523
Performance related earnings16,309

11,967

11,216
 39,492
 3,960
 43,452
Economic net income$88,753

$39,818

$14,857
 $143,428
 $(41,997) $101,431
Distributable earnings$73,120
 $75,809
 $4,736
 $153,665
 $(53,214) $100,451
The following table presents the financial results for the Company’s operating segments, as well as the OMG, for the three months ended September 30, 2016:
 Credit Group Private Equity Group Real
Estate Group		 Total
Segments		 OMG Total
Management fees (Credit Group includes ARCC Part I Fees of $33,260)$115,794
 $35,183
 $17,819
 $168,796
 $—
 $168,796
Other fees280
 309
 162
 751
 —
 751
Compensation and benefits(45,222) (16,697) (9,459) (71,378) (25,960) (97,338)
General, administrative and other expenses(7,274) (3,925) (2,289) (13,488) (13,386) (26,874)
Fee related earnings63,578

14,870

6,233

84,681

(39,346)
45,335
Performance fees—realized22,422
 108,245
 2,170
 132,837
 —
 132,837
Performance fees—unrealized11,152
 16,569
 4,647
 32,368
 —
 32,368
Performance fee compensation—realized(7,241) (86,537) —
 (93,778) —
 (93,778)
Performance fee compensation—unrealized(11,686) (13,387) (4,322) (29,395) —
 (29,395)
Net performance fees14,647

24,890

2,495

42,032

—

42,032
Investment income (loss)—realized588
 11,267
 (151) 11,704
 (20,005) (8,301)
Investment income—unrealized5,460
 7,066
 6,211
 18,737
 15,979
 34,716
Interest and other investment income5,940
 417
 714
 7,071
 15
 7,086
Interest expense(1,831) (1,399) (242) (3,472) (664) (4,136)
Net investment income (loss)10,157

17,351

6,532

34,040

(4,675)
29,365
Performance related earnings24,804

42,241

9,027

76,072

(4,675)
71,397
Economic net income$88,382

$57,111

$15,260

$160,753

$(44,021)
$116,732
Distributable earnings$81,542
 $45,481
 $6,408
 $133,431
 $(66,696) $66,735



40
Ares Management L.P.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 financial results for the Company’s operating segments, as well as the OMG, for the nine months ended September 30, 2017:
 Credit Group Private Equity Group Real
Estate Group		 Total
Segments		 OMG Total
Management fees (Credit Group includes ARCC Part I Fees of $76,436)$354,179
 $147,559
 $49,231
 $550,969
 $—
 $550,969
Other fees15,834
 1,127
 37
 16,998
 —
 16,998
Compensation and benefits(142,647) (50,862) (30,848) (224,357) (84,881) (309,238)
General, administrative and other expenses(22,766) (13,198) (7,947) (43,911) (56,729) (100,640)
Fee related earnings204,600
 84,626
 10,473
 299,699
 (141,610) 158,089
Performance fees—realized19,957
 238,084
 3,883
 261,924
 —
 261,924
Performance fees—unrealized41,062
 118,162
 64,243
 223,467
 —
 223,467
Performance fee compensation—realized(8,649) (189,571) (1,033) (199,253) —
 (199,253)
Performance fee compensation—unrealized(27,357) (95,131) (39,303) (161,791) —
 (161,791)
Net performance fees25,013
 71,544
 27,790
 124,347
 —
 124,347
Investment income—realized9,049
 17,564
 4,153
 30,766
 3,217
 33,983
Investment income (loss)—unrealized16
 25,479
 (77) 25,418
 222
 25,640
Interest and other investment income2,399
 3,264
 2,069
 7,732
 1,125
 8,857
Interest expense(8,800) (4,139) (1,257) (14,196) (1,380) (15,576)
Net investment income2,664
 42,168
 4,888
 49,720
 3,184
 52,904
Performance related earnings27,677
 113,712
 32,678
 174,067
 3,184
 177,251
Economic net income$232,277
 $198,338
 $43,151
 $473,766
 $(138,426) $335,340
Distributable earnings$204,402
 $145,696
 $12,596
 $362,694
 $(151,642) $211,052
The following table presents the financial results for the Company’s operating segments, as well as the OMG, for the nine months ended September 30, 2016:
 Credit Group Private Equity Group Real
Estate Group		 Total
Segments		 OMG Total
Management fees (Credit Group includes ARCC Part I Fees of $90,884)$332,182
 $111,100
 $50,794
 $494,076
 $—
 $494,076
Other fees939
 983
 855
 2,777
 —
 2,777
Compensation and benefits(135,068) (46,556) (31,327) (212,951) (77,225) (290,176)
General, administrative and other expenses(19,383) (10,489) (8,241) (38,113) (44,616) (82,729)
Fee related earnings178,670
 55,038
 12,081
 245,789
 (121,841) 123,948
Performance fees—realized44,624
 171,024
 5,142
 220,790
 —
 220,790
Performance fees—unrealized(1,544) 109,848
 10,030
 118,334
 —
 118,334
Performance fee compensation—realized(9,978) (136,761) (53) (146,792) —
 (146,792)
Performance fee compensation—unrealized(9,853) (88,766) (8,328) (106,947) —
 (106,947)
Net performance fees23,249
 55,345
 6,791
 85,385
 —
 85,385
Investment income (loss)—realized390
 14,641
 412
 15,443
 (20,093) (4,650)
Investment income (loss)—unrealized9,256
 (1,030) 7,943
 16,169
 4,460
 20,629
Interest and other investment income (expense)21,617
 8,532
 1,642
 31,791
 (53) 31,738
Interest expense(6,729) (4,201) (788) (11,718) (2,101) (13,819)
Net investment income (loss)24,534
 17,942
 9,209
 51,685
 (17,787) 33,898
Performance related earnings47,783
 73,287
 16,000
 137,070
 (17,787) 119,283
Economic net income$226,453
 $128,325
 $28,081
 $382,859
 $(139,628) $243,231
Distributable earnings$221,357
 $104,162
 $16,867
 $342,386
 $(157,550) $184,836


41
Table of Contents
Ares Management, L.P.
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 other income (expense):
realized net investment income:
 For the Three Months Ended 
 September 30,		 For the Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Segment Revenues       
Management fees (includes ARCC Part I Fees of $24,036, $76,436 and $33,260, $90,884 for the three and nine months ended September 30, 2017 and 2016, respectively)$188,628
 $168,796
 $550,969
 $494,076
Other fees6,144
 751
 16,998
 2,777
Performance fees—realized178,989
 132,837
 261,924
 220,790
Performance fees—unrealized(89,423) 32,368
 223,467
 118,334
Total segment revenues$284,338
 $334,752
 $1,053,358
 $835,977
Segment Expenses       
Compensation and benefits$77,205
 $71,378
 $224,357
 $212,951
General, administrative and other expenses13,631
 13,488
 43,911
 38,113
Performance fee compensation—realized140,979
 93,778
 199,253
 146,792
Performance fee compensation—unrealized(82,342) 29,395
 161,791
 106,947
Total segment expenses$149,473
 $208,039
 $629,312
 $504,803
Other Income (Expense)       
Investment income—realized$22,471
 $11,704
 $30,766
 $15,443
Investment income (loss)—unrealized(10,311) 18,737
 25,418
 16,169
Interest and other investment income1,305
 7,071
 7,732
 31,791
Interest expense(4,902) (3,472) (14,196) (11,718)
Total other income$8,563
 $34,040
 $49,720
 $51,685
Three months ended March 31,
20212020
Segment revenues
Management fees$327,463 $273,778 
Other fees6,804 3,872 
Performance income—realized76,981 151,770 
Total segment revenues$411,248 $429,420 
Segment expenses
Compensation and benefits$121,731 $102,934 
General, administrative and other expenses21,007 23,881 
Performance related compensation—realized61,096 117,993 
Total segment expenses$203,834 $244,808 
Segment realized net investment income (expense)
Investment income (loss)—realized$(7,392)$11,917 
Interest and other investment income —realized6,174 6,183 
Interest expense(6,605)(4,329)
Total segment realized net investment income (expense)$(7,823)$13,771 


The following table reconciles the Company's consolidated revenues to segment revenue to Ares consolidated revenues:revenue:
Three months ended March 31,
20212020
Total consolidated revenue$658,388 $13,409 
Performance (income) loss—unrealized(224,954)387,657 
Management fees of Consolidated Funds eliminated in consolidation11,706 10,502 
Incentive fees of Consolidated Funds eliminated in consolidation1,525 (45)
Administrative, transaction and other fees of Consolidated Funds eliminated in consolidation4,145 3,317 
Administrative fees(1)
(9,808)(9,661)
Performance income (loss) reclass(2)
55 (1,717)
Principal investment (income) loss, net of eliminations(25,100)26,723 
Net income of non-controlling interests in consolidated subsidiaries(4,709)(765)
Total consolidation adjustments and reconciling items(247,140)416,011 
Total segment revenue$411,248 $429,420 
 For the Three Months Ended 
 September 30,		 For the Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Total segment revenue$284,338
 $334,752
 $1,053,358
 $835,977
Revenue of Consolidated Funds eliminated in consolidation(6,822) (5,986) (18,738) (13,439)
Administrative fees(1)7,352
 6,618
 26,090
 19,984
Performance fees reclass(2)(1,187) 76
 (1,428) (1,512)
Revenue of non-controlling interests in consolidated
subsidiaries(3)
(10) —
 (64) —
Total consolidated adjustments and reconciling items(667) 708
 5,860
 5,033
Total consolidated revenue$283,671
 $335,460
 $1,059,218

$841,010

(1)Represents administrative fees that are presented in administrative 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 fees for AREA Sponsor Holdings LLC, an investment pool. Changes in value of this investment are reflected within other income (expense) in the Company’s Condensed Consolidated Statements of Operations.
(3)Adjustments for administrative fees reimbursed and other revenue items attributable to certain of our joint venture partners.

(1)Represents administrative fees 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.

42
40
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)






The following table reconciles segmentthe Company's consolidated expenses to Ares consolidatedsegment expenses:
Three months ended March 31,
20212020
Total consolidated expenses$525,109 $81,959 
Performance related compensation-unrealized(160,337)285,892 
Expenses of Consolidated Funds added in consolidation(17,436)(17,899)
Expenses of Consolidated Funds eliminated in consolidation13,265 10,456 
Administrative fees(1)
(9,808)(9,661)
OMG expenses(63,063)(57,731)
Acquisition and merger-related expense(8,590)(3,115)
Equity compensation expense(55,649)(32,557)
Deferred placement fees(297)(5,415)
Depreciation and amortization expense(14,100)(5,542)
Expense of non-controlling interests in consolidated subsidiaries(5,260)(1,579)
Total consolidation adjustments and reconciling items(321,275)162,849 
Total segment expenses$203,834 $244,808 
 For the Three Months Ended 
 September 30,		 For the Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Total segment expenses$149,473
 $208,039
 $629,312
 $504,803
Expenses of Consolidated Funds added in consolidation25,862
 16,068
 45,196
 27,334
Expenses of Consolidated Funds eliminated in consolidation(6,823) (5,980) (17,724) (16,320)
Administrative fees(1)7,352
 6,618
 26,090
 19,984
OMG expenses45,957
 39,346
 141,610
 121,841
Acquisition and merger-related expenses2,818
 79
 278,878
 432
Equity compensation expense18,091
 8,476
 52,097
 27,185
Placement fees and underwriting costs4,495
 2,202
 14,317
 4,886
Amortization of intangibles3,651
 6,378
 14,200
 20,762
Depreciation expense3,468
 2,148
 9,458
 5,940
Expenses of non-controlling interests in consolidated subsidiaries(2)(217) —
 357
 —
Total consolidation adjustments and reconciling items104,654
 75,335
 564,479
 212,044
Total consolidated expenses$254,127
 $283,374
 $1,193,791

$716,847

(1)
(1)Represents administrative fees 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)Adjustments to eliminate costs being borne by certain of our joint venture partners.
The following table reconciles segment other income (expense) to Ares consolidated other income:reporting.


41
 For the Three Months Ended 
 September 30,		 For the Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Total other income$8,563
 $34,040
 $49,720
 $51,685
Other income from Consolidated Funds added in consolidation, net55,227
 30,181
 90,522
 14,545
Other income (expense) from Consolidated Funds eliminated in consolidation, net(9,973) (5,549) (16,847) 6,125
Other income of non-controlling interests in consolidated subsidiaries9
 —
 14
 —
OMG other expense3,960
 (4,675) 3,184
 (17,787)
Performance fee reclass(1)1,187
 (76) 1,428
 1,512
Changes in fair value of contingent consideration(60) 17,690
 20,156
 17,486
Other non-cash expense—
 1,728
 —
 1,728
Offering costs(33) —
 (688) —
Total consolidation adjustments and reconciling items50,317
 39,299
 97,769
 23,609
Total consolidated other income$58,880
 $73,339
 $147,489

$75,294
(1)Related to performance fees for AREA Sponsor Holdings LLC. Changes in value of this investment are reflected within other (income) expense in the Company’s Condensed Consolidated Statements of Operations.




43
Ares Management L.P.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 other income to segment realized net investment income:
Three months ended March 31,
20212020
Total consolidated other income (expense)$56,785 $(227,863)
Investment (income) loss—unrealized(22,168)105,594 
Interest and other investment (income) loss—unrealized3,950 (4,961)
Other (income) loss from Consolidated Funds added in consolidation, net(67,316)198,245 
Other expense from Consolidated Funds eliminated in consolidation, net(4,112)(3,819)
OMG other expense333 1,141 
Performance (income) loss reclass(1)
(55)1,717 
Principal investment income (loss)25,095 (75,988)
Other (income) expense, net(473)22 
Other loss of non-controlling interests in consolidated subsidiaries138 19,683 
Total consolidation adjustments and reconciling items(64,608)241,634 
Total segment realized net investment income (expense)$(7,823)$13,771 

(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.


The following table presents the reconciliation of income before taxes as reported in the Condensed Consolidated Statements of Operations to segment results of ENI, FRE, PRERI and DE:FRE:
Three months ended March 31,
20212020
Income (loss) before taxes$190,064 $(296,413)
Adjustments:
Depreciation and amortization expense14,100 5,542 
Equity compensation expense55,649 32,557 
Acquisition and merger-related expense8,590 3,137 
Deferred placement fees297 5,415 
OMG expense, net63,396 58,872 
Other income, net(473)0 
Net expense of non-controlling interests in consolidated subsidiaries689 20,497 
(Income) loss before taxes of non-controlling interests in Consolidated Funds, net of eliminations(49,886)166,378 
Total performance (income) loss—unrealized(224,954)387,657 
Total performance related compensation—unrealized160,337 (285,892)
Total investment (income) loss—unrealized(18,218)100,633 
Realized income199,591 198,383 
Total performance income—realized(76,981)(151,770)
Total performance related compensation—realized61,096 117,993 
Total investment income—realized7,823 (13,771)
Fee related earnings$191,529 $150,835 

 For the Three Months Ended 
 September 30,		 For the Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Economic net income       
Income before taxes$88,424
 $125,425
 $12,916
 $199,457
Adjustments:       
Amortization of intangibles3,651
 6,378
 14,200
 20,762
Depreciation expense3,468
 2,148
 9,458
 5,940
Equity compensation expenses18,091
 8,476
 52,097
 27,185
Acquisition and merger-related expenses2,878
 (17,611) 258,722
 (17,054)
Placement fees and underwriting costs4,495
 2,202
 14,317
 4,886
OMG expenses, net41,997
 44,021
 138,426
 139,628
Offering costs33
 —
 688
 —
Other non-cash expense—
 (1,728) —
 (1,728)
(Income) loss before taxes of non-controlling interests in consolidated subsidiaries(216) —
 407
 —
(Income) loss before taxes of non-controlling interests in Consolidated Funds, net of eliminations(19,393) (8,558) (27,465) 3,783
Total consolidation adjustments and reconciling items55,004
 35,328

460,850

183,402
Economic net income143,428
 160,753

473,766

382,859
Total performance fees income - realized(178,989) (132,837) (261,924) (220,790)
Total performance fees income - unrealized89,423
 (32,368) (223,467) (118,334)
Total performance fee compensation - realized140,979
 93,778
 199,253
 146,792
Total performance fee compensation - unrealized(82,342) 29,395
 161,791
 106,947
Total investment income(8,563) (34,040) (49,720) (51,685)
Fee related earnings103,936
 84,681

299,699

245,789
Performance fees—realized178,989
 132,837
 261,924
 220,790
Performance fee compensation—realized(140,979) (93,778) (199,253) (146,792)
Investment and other income realized, net21,160
 14,777
 27,067
 33,605
Additional adjustments:       
Dividend equivalent(1)(3,540) (1,649) (7,741) (3,039)
One-time acquisition costs(1)(12) (12) (35) (294)
Income tax expense(1)(343) (292) (950) (773)
Non-cash items397
 36
 533
 883
Placement fees and underwriting costs(1)(4,495) (2,209) (14,317) (4,894)
Depreciation and amortization(1)(1,448) (960) (4,233) (2,889)
Distributable earnings$153,665
 $133,431

$362,694

$342,386
Performance related earnings       
Economic net income$143,428
 $160,753

$473,766

$382,859
Less: fee related earnings(103,936) (84,681)
(299,699)
(245,789)
Performance related earnings$39,492

$76,072

$174,067

$137,070
42
(1)
Certain costs are reduced by the amounts attributable to OMG, which is excluded from segment results.

44
Table of Contents
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)






15. 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 their carrying value, which approximates fair value and representsrepresent 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 and the Consolidated Funds' interests in consolidated and non-consolidated VIEs, as presented in the Condensed Consolidated Statements of Financial Condition, and theirits respective maximum exposure to loss relating to non-consolidated VIEs are as follows:

As of March 31,As of December 31,
As of September 30, As of December 31,
2017 201620212020
Maximum exposure to loss attributable to the Company's investment in non-consolidated VIEs(1)$364,860
 $268,950
$199,819 $224,203 
Maximum exposure to loss attributable to the Company's investment in consolidated VIEs(1)$162,295
 $153,746
387,934 391,963 
Assets of consolidated VIEs$5,760,754
 $3,822,010
Assets of consolidated VIEs11,724,262 11,580,003 
Liabilities of consolidated VIEs$5,152,179
 $3,360,329
Liabilities of consolidated VIEs10,851,579 10,716,438 

(1)As of March 31, 2021 and December 31, 2020, 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 $106.6 million and $107.7 million, respectively.

Three months ended March 31,
20212020
Net income (loss) attributable to non-controlling interests related to consolidated VIEs$27,816 $(166,406)

43
 For the Three Months Ended 
 September 30,		 For the Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Net income (loss) attributable to non-controlling interests related to consolidated VIEs$18,195
 $7,861
 $25,403
 $(3,064)


45
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)






CONSOLIDATING SCHEDULESConsolidating Schedules
The following supplemental financial information illustrates the consolidating effects of the Consolidated Funds on the Company's financial condition, as of September 30, 2017 and December 31, 2016 and results from operations for the three and nine months ended September 30, 2017 and 2016.  cash flows:
 As of March 31, 2021
 Consolidated
Company 
Entities 		Consolidated
Funds 		Eliminations Consolidated 
Assets    
Cash and cash equivalents$609,872 $— $— $609,872 
Investments (includes $1,369,684 of accrued carried interest)2,323,728 — (391,750)1,931,978 
Due from affiliates358,106 — (22,656)335,450 
Other assets781,464 — (1,523)779,941 
Right-of-use operating lease assets157,908 — — 157,908 
Assets of Consolidated Funds
Cash and cash equivalents— 557,271 — 557,271 
U.S. Treasury securities, at fair value— 1,000,040 — 1,000,040 
Investments, at fair value— 10,944,061 4,112 10,948,173 
Due from affiliates— 25,990 (9,750)16,240 
Receivable for securities sold— 166,960 — 166,960 
Other assets— 32,096 — 32,096 
Total assets$4,231,078 $12,726,418 $(421,567)$16,535,929 
Liabilities    
Accounts payable, accrued expenses and other liabilities$129,327 $— $(9,749)$119,578 
Accrued compensation89,791 — — 89,791 
Due to affiliates77,817 — — 77,817 
Performance related compensation payable968,582 — — 968,582 
Debt obligations811,279 — — 811,279 
Operating lease liabilities186,594 — — 186,594 
Liabilities of Consolidated Funds
Accounts payable, accrued expenses and other liabilities— 112,014 (13,541)98,473 
Due to affiliates— 20,690 (20,068)622 
Payable for securities purchased— 781,845 — 781,845 
CLO loan obligations, at fair value— 9,892,853 (53,214)9,839,639 
Fund borrowings— 110,409 — 110,409 
Total liabilities2,263,390 10,917,811 (96,572)13,084,629 
Commitments and contingencies0000
Redeemable interest in Consolidated Funds— 930,924 — 930,924 
Redeemable interest in Ares Operating Group entities99,808 — — 99,808 
Non-controlling interest in Consolidated Funds— 877,683 (324,995)552,688 
Non-controlling interest in Ares Operating Group entities706,381 — — 706,381 
Stockholders' Equity
Series A Preferred Stock, $0.01 par value, 1,000,000,000 shares authorized (12,400,000 shares issued and outstanding)298,761 — — 298,761 
Class A common stock, $0.01 par value, 1,500,000,000 shares authorized (149,840,978 shares issued and outstanding)1,498 — — 1,498 
Class B common stock, $0.01 par value, 1,000 shares authorized (1,000 shares issued and outstanding)0 — — 0 
Class C common stock, $0.01 par value, 499,999,000 shares authorized (112,163,894 shares issued and outstanding)1,122 — — 1,122 
Additional paid-in-capital1,033,735 — — 1,033,735 
Retained earnings(173,555)— — (173,555)
Accumulated other comprehensive loss, net of tax(62)— — (62)
       Total stockholders' equity1,161,499 — — 1,161,499 
       Total equity1,867,880 877,683 (324,995)2,420,568 
Total liabilities, redeemable interest, non-controlling interests and equity$4,231,078 $12,726,418 $(421,567)$16,535,929 
44
 As of September 30, 2017
 Consolidated
Company 
Entities 		 Consolidated
Funds 		 Eliminations  Consolidated 
Assets 
  
  
  
Cash and cash equivalents$186,437
 $—
 $—
 $186,437
Investments (includes fair value investments of $581,614)746,990
 —
 (162,295) 584,695
Performance fees receivable1,001,581
 —
 (4,003) 997,578
Due from affiliates166,214
 —
 (4,782) 161,432
Deferred tax asset, net36,661
 —
 —
 36,661
Other assets103,885
 —
 —
 103,885
Intangible assets, net44,115
 —
 —
 44,115
Goodwill143,880
 —
 —
 143,880
Assets of Consolidated Funds 
  
  
 

Cash and cash equivalents—
 799,609
 —
 799,609
Investments, at fair value—
 4,915,029
 —
 4,915,029
Due from affiliates—
 8,047
 —
 8,047
Dividends and interest receivable—
 10,061
 —
 10,061
Receivable for securities sold—
 25,926
 —
 25,926
Other assets—
 2,082
 —
 2,082
Total assets$2,429,763
 $5,760,754
 $(171,080) $8,019,437
Liabilities 
  
  
  
Accounts payable, accrued expenses and other liabilities$94,351
 $—
 $—
 $94,351
Accrued compensation133,799
 —
 —
 133,799
Due to affiliates17,207
 —
 —
 17,207
Performance fee compensation payable780,201
 —
 —
 780,201
Debt obligations486,007
 —
 —
 486,007
Liabilities of Consolidated Funds 
  
  
 

Accounts payable, accrued expenses and other liabilities—
 50,992
 —
 50,992
Due to affiliates—
 8,786
 (8,786) —
Payable for securities purchased—
 481,055
 —
 481,055
CLO loan obligations, at fair value—
 4,490,085
 (13,442) 4,476,643
Fund borrowings—
 121,261
 —
 121,261
Total liabilities1,511,565
 5,152,179
 (22,228) 6,641,516
Commitments and contingencies

 

 

 

Preferred equity (12,400,000 units issued and outstanding)298,761
 —
 —
 298,761
Non-controlling interest in Consolidated Funds—
 608,575
 (148,852) 459,723
Non-controlling interest in Ares Operating Group entities348,513
 —
 —
 348,513
Controlling interest in Ares Management, L.P.: 
  
  
 

Partners' capital (82,211,302 units issued and outstanding)275,410
 —
 —
 275,410
Accumulated other comprehensive loss, net of tax(4,486) —
 —
 (4,486)
Total controlling interest in Ares Management, L.P.270,924
 —
 —
 270,924
Total equity918,198

608,575

(148,852)
1,377,921
Total liabilities and equity$2,429,763

$5,760,754

$(171,080)
$8,019,437

46
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)







 As of December 31, 2020
 Consolidated
Company 
Entities 		Consolidated
Funds 		EliminationsConsolidated 
Assets    
Cash and cash equivalents$539,812 $— $— $539,812 
Investments (includes $1,145,853 of accrued carried interest)2,064,517 — (381,758)1,682,759 
Due from affiliates426,021 — (20,134)405,887 
Other assets812,630 — (211)812,419 
Right-of-use operating lease assets154,742 — — 154,742 
Assets of Consolidated Funds
Cash and cash equivalents— 522,377 — 522,377 
Investments, at fair value— 10,873,522 3,575 10,877,097 
Due from affiliates— 27,377 (10,205)17,172 
Receivable for securities sold— 121,225 —121,225 
Other assets— 35,502 —35,502 
Total assets$3,997,722 $11,580,003 $(408,733)$15,168,992 
Liabilities    
Accounts payable, accrued expenses and other liabilities$125,494 $— $(10,205)$115,289 
Accrued compensation103,010 — — 103,010 
Due to affiliates100,186 — — 100,186 
Performance related compensation payable813,378 — — 813,378 
Debt obligations642,998 — — 642,998 
Operating lease liabilities180,236 — — 180,236 
Liabilities of Consolidated Funds
Accounts payable, accrued expenses and other liabilities— 46,824 — 46,824 
Due to affiliates— 16,770 (16,770)0 
Payable for securities purchased— 514,946 — 514,946 
CLO loan obligations— 10,015,989 (57,913)9,958,076 
Fund borrowings— 121,909 — 121,909 
Total liabilities1,965,302 10,716,438 (84,888)12,596,852 
Commitments and contingencies0000
Redeemable interest in Ares Operating Group entities100,366 — — 100,366 
Non-controlling interest in Consolidated Funds— 863,565 (323,845)539,720 
Non-controlling interest in Ares Operating Group entities738,369 — — 738,369 
Stockholders' Equity
Series A Preferred Stock, $0.01 par value, 1,000,000,000 shares authorized (12,400,000 shares issued and outstanding)298,761 — — 298,761 
Class A common stock, $0.01 par value, 1,500,000,000 shares authorized (147,182,562 shares issued and outstanding)1,472 — — 1,472 
Class B common stock, $0.01 par value, 1,000 shares authorized (1,000 shares issued and outstanding)— — — 0 
Class C common stock, $0.01 par value, 499,999,000 shares authorized (112,447,618 share issued and outstanding)1,124 — — 1,124 
Additional paid-in-capital1,043,669 — — 1,043,669 
Retained earnings(151,824)— — (151,824)
   Accumulated other comprehensive income, net of tax483 — — 483 
       Total stockholders' equity1,193,685 — — 1,193,685 
       Total equity1,932,054 863,565 (323,845)2,471,774 
       Total liabilities, redeemable interest, non-controlling interests and equity$3,997,722 $11,580,003 $(408,733)$15,168,992 


45
 As of December 31, 2016
 Consolidated
Company 
Entities 		 Consolidated
Funds 		 Eliminations Consolidated 
Assets   
  
  
Cash and cash equivalents$342,861
 $—
 $—
 $342,861
Investments (includes fair value investments of $448,336)622,215
 —
 (153,744) 468,471
Performance fees receivable767,429
 —
 (8,330) 759,099
Due from affiliates169,252
 —
 (6,316) 162,936
Deferred tax asset, net6,731
 —
 —
 6,731
Other assets65,565
 —
 —
 65,565
Intangible assets, net58,315
 —
 —
 58,315
Goodwill143,724
 —
 —
 143,724
Assets of Consolidated Funds   
  
 

Cash and cash equivalents—
 455,280
 —
 455,280
Investments, at fair value—
 3,330,203
 —
 3,330,203
Due from affiliates—
 3,592
 —
 3,592
Dividends and interest receivable—
 8,479
 —
 8,479
Receivable for securities sold—
 21,955
 —
 21,955
Other assets—
 2,501
 —
 2,501
Total assets$2,176,092

$3,822,010

$(168,390)
$5,829,712
Liabilities   
  
  
Accounts payable, accrued expenses and other liabilities$83,336
 $—
 $—
 $83,336
Accrued compensation131,736
 —
 —
 131,736
Due to affiliates17,959
 —
 (395) 17,564
Performance fee compensation payable598,050
 —
 —
 598,050
Debt obligations305,784
 —
 —
 305,784
Liabilities of Consolidated Funds   
  
 

Accounts payable, accrued expenses and other liabilities—
 21,056
 —
 21,056
Due to affiliates—
 10,599
 (10,599) —
Payable for securities purchased—
 208,742
 —
 208,742
CLO loan obligations, at fair value—
 3,064,862
 (33,750) 3,031,112
Fund borrowings—
 55,070
 —
 55,070
Total liabilities1,136,865

3,360,329

(44,744)
4,452,450
Commitments and contingencies

 

 

 

Preferred equity (12,400,000 units issued and outstanding)298,761
 —
 —
 298,761
Non-controlling interest in Consolidated Funds—
 461,681
 (123,646) 338,035
Non-controlling interest in Ares Operating Group entities447,615
 —
 —
 447,615
Controlling interest in Ares Management, L.P.: 
  
  
  
Partners' capital (80,814,732 units issued and outstanding)301,790
 —
 —
 301,790
Accumulated other comprehensive loss, net of tax(8,939) —
 —
 (8,939)
Total controlling interest in Ares Management, L.P.292,851
 —
 —
 292,851
Total equity1,039,227

461,681

(123,646)
1,377,262
Total liabilities and equity$2,176,092

$3,822,010

$(168,390) $5,829,712


47
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)







 Three months ended March 31, 2021
 Consolidated
Company 
Entities 		Consolidated
Funds 		Eliminations Consolidated
Revenues    
Management fees$331,979 $— $(11,706)$320,273 
Carried interest allocation297,535 — — 297,535 
Incentive fees4,345 — (1,525)2,820 
Principal investment income25,095 — 5 25,100 
Administrative, transaction and other fees16,805 — (4,145)12,660 
Total revenues675,759 — (17,371)658,388 
Expenses    
Compensation and benefits231,850 — — 231,850 
Performance related compensation221,432 — — 221,432 
General, administrative and other expense67,656 — — 67,656 
Expenses of the Consolidated Funds— 17,436 (13,265)4,171 
Total expenses520,938 17,436 (13,265)525,109 
Other income (expense)    
Net realized and unrealized gains (losses) on investments(6,118)— 11,551 5,433 
Interest and dividend income1,863 — (903)960 
Interest expense(6,695)— — (6,695)
Other expense, net(3,693)— (456)(4,149)
Net realized and unrealized gains on investments of the Consolidated Funds— 26,468 (10,046)16,422 
Interest and other income of the Consolidated Funds— 115,383 456 115,839 
Interest expense of the Consolidated Funds— (74,535)3,510 (71,025)
Total other income (expense)(14,643)67,316 4,112 56,785 
Income before taxes140,178 49,880 6 190,064 
Income tax expense25,726 28 — 25,754 
Net income114,452 49,852 6 164,310 
Less: Net income attributable to non-controlling interests in Consolidated Funds— 49,852 6 49,858 
Net income attributable to Ares Operating Group entities114,452 — — 114,452 
Less: Net income attributable to redeemable interest in Ares Operating Group entities32 — — 32 
Less: Net income attributable to non-controlling interests in Ares Operating Group entities56,042 — — 56,042 
Net income attributable to Ares Management Corporation58,378 — — 58,378 
Less: Series A Preferred Stock dividends paid5,425 — — 5,425 
Net income attributable to Ares Management Corporation Class A common stockholders$52,953 $— $— $52,953 

46
 For the Three Months Ended September 30, 2017
 
Consolidated
Company 
Entities 
 Consolidated
Funds 		 Eliminations  Consolidated 
Revenues 
  
  
  
Management fees (includes ARCC Part I Fees of $24,036)$188,628
 $—
 $(5,451) $183,177
Performance fees88,379
 —
 (1,371) 87,008
Administrative and other fees13,486
 —
 —
 13,486
Total revenues290,493

—

(6,822)
283,671
Expenses 
  
  
  
Compensation and benefits129,347
 —
 —
 129,347
Performance fee compensation58,637
 —
 —
 58,637
General, administrative and other expense47,104
 —
 —
 47,104
Expenses of the Consolidated Funds—
 25,862
 (6,823) 19,039
Total expenses235,088

25,862

(6,823)
254,127
Other income (expense) 
  
  
  
Investment income and net interest expense (includes interest expense of $5,343)(1,606) —
 (225) (1,831)
Other expense, net(2,492) —
 —
 (2,492)
Net realized and unrealized gain on investments17,724
 —
 (10,515) 7,209
Investment income and net interest income of the Consolidated Funds (includes interest expense of $28,127)—
 7,169
 12,885
 20,054
Net realized and unrealized gain on investments of the Consolidated Funds—
 48,058
 (12,118) 35,940
Total other income13,626

55,227

(9,973)
58,880
Income before taxes69,031

29,365

(9,972)
88,424
Income tax expense3,354
 1,198
 —
 4,552
Net income65,677

28,167

(9,972)
83,872
Less: Net income attributable to non-controlling interests in Consolidated Funds—
 28,167
 (9,972) 18,195
Less: Net income attributable to non-controlling interests in Ares Operating Group entities37,839
 —
 —
 37,839
Net income attributable to Ares Management, L.P.27,838

—

—

27,838
Less: Preferred equity distributions paid5,425
 —
 —
 5,425
Net income attributable to Ares Management, L.P. common unitholders$22,413

$—

$—

$22,413

48
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)






 Three months ended March 31, 2020
 Consolidated
Company 
Entities 		Consolidated
Funds 		EliminationsConsolidated 
Revenues    
Management fees$274,351 $— $(10,502)$263,849 
Carried interest allocation(230,876)— — (230,876)
Incentive fees(3,294)— 45 (3,249)
Principal investment loss(75,988)— 49,265 (26,723)
Administrative, transaction and other fees13,725 — (3,317)10,408 
Total revenues(22,082)— 35,491 13,409 
Expenses
Compensation and benefits180,084 — — 180,084 
Performance related compensation(167,899)— — (167,899)
General, administrative and other expense62,331 — — 62,331 
Expenses of the Consolidated Funds— 17,899 (10,456)7,443 
Total expenses74,516 17,899 (10,456)81,959 
Other income (expense)
Net realized and unrealized losses on investments(35,695)— 27,661 (8,034)
Interest and dividend income2,602 — (812)1,790 
Interest expense(5,306)— — (5,306)
Other income, net4,962 — 502 5,464 
Net realized and unrealized losses on investments of the Consolidated Funds— (230,173)(24,588)(254,761)
Interest and other income of the Consolidated Funds— 113,225 — 113,225 
Interest expense of the Consolidated Funds— (81,297)1,056 (80,241)
Total other expense(33,437)(198,245)3,819 (227,863)
Loss before taxes(130,035)(216,144)49,766 (296,413)
Income tax expense (benefit)(20,644)28 — (20,616)
Net loss(109,391)(216,172)49,766 (275,797)
Less: Net loss attributable to non-controlling interests in Consolidated Funds— (216,172)49,766 (166,406)
Net loss attributable to Ares Operating Group entities(109,391)— — (109,391)
Less: Net loss attributable to non-controlling interests in in Ares Operating Group entities(78,355)— — (78,355)
Net loss attributable to Ares Management Corporation(31,036)— — (31,036)
Less: Series A Preferred Stock dividends paid5,425 — — 5,425 
Net loss attributable to Ares Management Corporation Class A common stockholders$(36,461)$— $— $(36,461)

47
 For the Three Months Ended September 30, 2016
 Consolidated
Company 
Entities 		 Consolidated
Funds 		 Eliminations  Consolidated 
Revenues 
  
  
  
Management fees (includes ARCC Part I Fees of $33,260)$168,796
 $—
 $(5,187) $163,609
Performance fees165,281
 —
 (799) 164,482
Administrative and other fees7,369
 —
 —
 7,369
Total revenues341,446

—

(5,986)
335,460
Expenses 
  
  
  
Compensation and benefits111,916
 —
 —
 111,916
Performance fee compensation123,173
 —
 —
 123,173
General, administrative and other expense38,197
 —
 —
 38,197
Expenses of the Consolidated Funds—
 16,068
 (5,980) 10,088
Total expenses273,286

16,068

(5,980)
283,374
Other income (expense) 
  
  
  
Investment income and net interest expense (includes interest expense of $4,136)(675) —
 (1,006) (1,681)
Other income, net23,042
 —
 —
 23,042
Net realized and unrealized gain on investments26,340
 —
 (6,982) 19,358
Investment income and net interest income of the Consolidated Funds (includes interest expense of $26,413)—
 6,525
 2,212
 8,737
Net realized and unrealized gain on investments of the Consolidated Funds—
 23,656
 227
 23,883
Total other income48,707
 30,181
 (5,549) 73,339
Income before taxes116,867

14,113

(5,555)
125,425
Income tax expense6,944
 697
 —
 7,641
Net income109,923
 13,416
 (5,555) 117,784
Less: Net income attributable to non-controlling interests in Consolidated Funds—
 13,416
 (5,555) 7,861
Less: Net income attributable to redeemable interests in Ares Operating Group entities107
 —
 —
 107
Less: Net income attributable to non-controlling interests in Ares Operating Group entities66,511
 —
 —
 66,511
Net income attributable to Ares Management, L.P.43,305

—

—

43,305
Less: Preferred equity distributions paid6,751
 —
 —
 6,751
Net income attributable to Ares Management, L.P. common unitholders$36,554

$—

$—

$36,554

49
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)






 Three months ended March 31, 2021
 Consolidated
Company 
Entities 		Consolidated
Funds		EliminationsConsolidated
Cash flows from operating activities:  
Net income$114,452 $49,852 $6 $164,310 
Adjustments to reconcile net income to net cash provided by (used in) operating activities34,292 — 9,992 44,284 
Adjustments to reconcile net income to net cash used in operating activities allocable to redeemable and non-controlling interests in Consolidated Funds— (1,208,767)587 (1,208,180)
Cash flows due to changes in operating assets and liabilities(11,336)— 4,292 (7,044)
Cash flows due to changes in operating assets and liabilities allocable to redeemable and non-controlling interest in Consolidated Funds— 314,126 (48,614)265,512 
Net cash provided by (used in) operating activities137,408 (844,789)(33,737)(741,118)
Cash flows from investing activities: 
Purchase of furniture, equipment and leasehold improvements, net of disposals(3,284)— — (3,284)
Net cash used in investing activities(3,284)— — (3,284)
Cash flows from financing activities: 
Proceeds from Credit Facility168,000 — — 168,000 
Dividends and distributions (141,768)— — (141,768)
Series A Preferred Stock dividends(5,425)— — (5,425)
Taxes paid related to net share settlement of equity awards(84,590)— — (84,590)
Other financing activities341 — — 341 
Allocable to redeemable and non-controlling interests in Consolidated Funds:
Contributions from redeemable and non-controlling interests in Consolidated Funds— 955,083 (13,148)941,935 
Distributions to non-controlling interests in Consolidated Funds— (50,822)11,993 (38,829)
Borrowings under loan obligations by Consolidated Funds— 7,000 — 7,000 
Repayments under loan obligations by Consolidated Funds— (29,453)— (29,453)
Net cash provided by (used in) financing activities(63,442)881,808 (1,155)817,211 
Effect of exchange rate changes(622)(2,127)0 (2,749)
Net change in cash and cash equivalents70,060 34,892 (34,892)70,060 
Cash and cash equivalents, beginning of period539,812 522,377 (522,377)539,812 
Cash and cash equivalents, end of period$609,872 $557,269 $(557,269)$609,872 


48
 For the Nine Months Ended September 30, 2017
 
Consolidated
Company 
Entities 
 Consolidated
Funds 		 Eliminations  Consolidated 
Revenues 
  
  
  
Management fees (includes ARCC Part I Fees of $76,436)$550,969
 $—
 $(14,979) $535,990
Performance fees483,963
 —
 (3,759) 480,204
Administrative and other fees43,024
 —
 —
 43,024
Total revenues1,077,956

—

(18,738)
1,059,218
Expenses 
  
  
  
Compensation and benefits384,905
 —
 —
 384,905
Performance fee compensation361,044
 —
 —
 361,044
General, administrative and other expense145,193
 —
 —
 145,193
Transaction support expense275,177
 —
 —
 275,177
Expenses of the Consolidated Funds—
 45,196
 (17,724) 27,472
Total expenses1,166,319

45,196

(17,724)
1,193,791
Other income (expense) 
  
  
  
Investment income and net interest expense (includes interest expense of $15,576)(4,064) —
 (2,154) (6,218)
Other income, net16,826
 —
 —
 16,826
Net realized and unrealized gain on investments61,052
 —
 (21,109) 39,943
Investment income and net interest income of the Consolidated Funds (includes interest expense of $86,324)—
 11,072
 30,603
 41,675
Net realized and unrealized gain on investments of the Consolidated Funds—
 79,450
 (24,187) 55,263
Total other income73,814

90,522

(16,847)
147,489
Income (loss) before taxes(14,549)
45,326

(17,861)
12,916
Income tax expense (benefit)(30,521) 2,062
 —
 (28,459)
Net income15,972

43,264

(17,861)
41,375
Less: Net income attributable to non-controlling interests in Consolidated Funds—
 43,264
 (17,861) 25,403
Less: Net loss attributable to non-controlling interests in Ares Operating Group entities(20,610) —
 —
 (20,610)
Net income attributable to Ares Management, L.P.36,582

—

—

36,582
Less: Preferred equity distributions paid16,275
 —
 —
 16,275
Net income attributable to Ares Management, L.P. common unitholders$20,307

$—

$—

$20,307



50
Ares Management L.P.Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share Data and As Otherwise Noted)






 Three months ended March 31, 2020
 Consolidated
Company 
Entities 		Consolidated
Funds		EliminationsConsolidated
Cash flows from operating activities:  
Net loss$(109,391)$(216,172)$49,766 $(275,797)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities190,761 — (65,691)125,070 
Adjustments to reconcile net loss to net cash provided by (used in) operating activities allocable to non-controlling interests in Consolidated Funds— (478,695)25,680 (453,015)
Cash flows due to changes in operating assets and liabilities45,995 — 6,000 51,995 
Cash flows due to changes in operating assets and liabilities allocable to non-controlling interest in Consolidated Funds— 99,272 89,238 188,510 
Net cash provided by (used in) operating activities127,365 (595,595)104,993 (363,237)
Cash flows from investing activities: 
Purchase of furniture, equipment and leasehold improvements, net of disposals(3,062)— — (3,062)
Cash paid for asset acquisition(35,844)— — (35,844)
Net cash used in investing activities(38,906)— — (38,906)
Cash flows from financing activities: 
Proceeds from issuance of Class A common stock383,334 — — 383,334 
Proceeds from Credit Facility790,000 — — 790,000 
Repayments of Credit Facility(60,000)— — (60,000)
Dividends and distributions (106,838)— — (106,838)
Series A Preferred Stock dividends(5,425)— — (5,425)
Stock option exercises19,551 — — 19,551 
Taxes paid related to net share settlement of equity awards(73,500)— — (73,500)
Other financing activities(2,125)— — (2,125)
Allocable to non-controlling interests in Consolidated Funds: 
Contributions from non-controlling interests in Consolidated Funds— 148,270 (15,005)133,265 
Distributions to non-controlling interests in Consolidated Funds— (15,426)1,934 (13,492)
Borrowings under loan obligations by Consolidated Funds— 454,391 0 454,391 
Repayments under loan obligations by Consolidated Funds— (73,609)0 (73,609)
Net cash provided by financing activities944,997 513,626 (13,071)1,445,552 
Effect of exchange rate changes(4,167)(9,953)0 (14,120)
Net change in cash and cash equivalents1,029,289 (91,922)91,922 1,029,289 
Cash and cash equivalents, beginning of period138,384 606,321 (606,321)138,384 
Cash and cash equivalents, end of period$1,167,673 $514,399 $(514,399)$1,167,673 

49
 For the Nine Months Ended September 30, 2016
 Consolidated
Company 
Entities 		 Consolidated
Funds 		 Eliminations  Consolidated 
Revenues 
  
  
  
Management fees (includes ARCC Part I Fees of $90,884)$494,076
 $—
 $(13,513) $480,563
Performance fees337,612
 —
 74
 337,686
Administrative and other fees22,761
 —
 —
 22,761
Total revenues854,449
 —
 (13,439) 841,010
Expenses 
  
  
  
Compensation and benefits335,249
 —
 —
 335,249
Performance fee compensation253,739
 —
 —
 253,739
General, administrative and other expense116,845
 —
 —
 116,845
Expenses of the Consolidated Funds—
 27,334
 (16,320) 11,014
Total expenses705,833
 27,334
 (16,320) 716,847
Other income (expense) 
  
  
  
Investment income and net interest income (expense) (includes interest expense of $13,819)3,177
 —
 (3,224) (47)
Other income, net33,956
 —
 —
 33,956
Net realized and unrealized gain on investments17,491
 —
 3,858
 21,349
Investment income and net interest income of the Consolidated Funds (includes interest expense of $67,469)—
 20,133
 5,626
 25,759
Net realized and unrealized loss on investments of the Consolidated Funds—
 (5,588) (135) (5,723)
Total other income54,624
 14,545
 6,125
 75,294
Income (loss) before taxes203,240
 (12,789) 9,006
 199,457
Income tax expense (benefit)8,587
 (719) —
 7,868
Net income (loss)194,653
 (12,070) 9,006
 191,589
Less: Net loss attributable to non-controlling interests in Consolidated Funds—
 (12,070) 9,006
 (3,064)
Less: Net income attributable to redeemable interests in Ares Operating Group entities456
 —
 —
 456
Less: Net income attributable to non-controlling interests in Ares Operating Group entities116,404
 —
 —
 116,404
Net income attributable to Ares Management, L.P.77,793
 —
 —
 77,793
Less: Preferred equity distributions paid6,751
 —
 —
 6,751
Net income attributable to Ares Management, L.P. common unitholders$71,042

$—

$—

$71,042

Ares Management Corporation
Notes to the Unaudited Condensed Consolidated Financial Statements

(Dollars in Thousands, Except Share Data and As Otherwise Noted)


16. SUBSEQUENT EVENTS
The Company evaluated all events or transactions that occurred after September 30, 2017March 31, 2021 through the date the condensed consolidated financial statements were issued. During this period, the Company had the following material subsequent events that require disclosure:
On April 5, 2021, the Company entered into a Share Purchase Agreement (the “Purchase Agreement”) with Sumitomo Mitsui Banking Corporation (“SMBC”). Pursuant to the Purchase Agreement, the Company agreed to issue and sell to SMBC approximately $250.0 million of the Company’s common stock (consisting of 3,489,911 shares of non-voting common stock and 1,234,200 shares of Class A common stock) at a price per share equal to the public offering price of Class A common stock being offered pursuant to the Offering (as defined below), less underwriting discounts and commissions (the “Private Placement”). The Private Placement closed on April 8, 2021 and resulted in gross proceeds to the Company of approximately $250.0 million before deducting offering expenses.

On April 6, 2021, the Company entered into an underwriting agreement pursuant to which the Company agreed to issue and sell 10,925,000 shares of the Class A common stock (including 1,425,000 shares of Class A common stock sold pursuant to the exercise of the underwriters' option to purchase up to 1,425,000 additional shares of Class A common stock) (collectively, the “Offering”). The Offering closed on April 8, 2021 and resulted in gross proceeds to the Company of approximately $578.2 million before deducting offering expenses.

In November 2017,April 2021, the Company's board of directors of the Company's general partner declared a quarterly distributiondividend of $0.41$0.47 per share of Class A common unitstock payable on June 30, 2021 to common unitholdersstockholders of record at the close of business on November 17, 2017, with a payment date of December 1, 2017.June 16, 2021.


In November 2017,April 2021, the Company's board of directors of the Company's general partner declared a quarterly distributiondividend of $0.4375 per preferred equity unitshare of Series A Preferred Stock payable on June 30, 2021 to preferred equity unitholdersstockholders of record at the close of business on DecemberJune 15, 2017, with a payment date2021.
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Item 2.  Management’s Discussion Andand AnalysisOf of Financial Condition Andand Results Ofof Operations
Ares Management L.P.Corporation is a Delaware limited partnership formed on November 15, 2013.corporation. Unless the context otherwise requires, references to “Ares,” “we,” “us,” “our,” “the Partnership” and “the Company”the “Company” are intended to mean the business and operations of Ares Management L.P.Corporation and its consolidated subsidiaries. The following discussion analyzes the financial condition and results of operations of the Partnership.Company. “Consolidated Funds” refers collectively to certain Ares‑affiliatedAres funds, related co‑ investmentco-investment entities, CLOs and certain CLOsspecial purpose acquisition companies that are required under generally accepted accounting principles in the United States (“GAAP”) to be consolidated in our condensed consolidated financial statements included in this Quarterly Report on Form 10‑Q.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‑Q10-Q and the audited consolidated financial statements and the related notes included in the 20162020 Annual Report on Form 10-K of Ares Management L.P.Corporation and the related notes.
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.


Our Business
We are a leading global alternative asset manager that operates through three distinct but complementary investment groups, which are our reportable segments. Our reportable segments are Credit Group, Private Equity Group and Real Estate Group. For a detailed description of our reportable segments, see Note 14, "Segment Reporting," to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. During the nine months ended September 30, 2017, we reclassified certain expenses from OMG to our operating segments. Historical results have been modified to conform to the current period presentation.
The focus of our business model is to provide our investment management capabilities through various funds and products that meet the needs of a wide range of institutional and retail investors. Our revenues consist primarily of management fees and performance fees, as well as investment income and administrative expense reimbursements. Management fees are generally based on a defined percentage of average fair value of assets, total commitments, invested capital, net asset value, net investment income or par value of the investment portfolios we manage. Performance fees are based on certain specific hurdle rates as defined in the funds' applicable investment management or partnership agreements and represent either an incentive fee or carried interest. Other income (expense) typically represents the investment income, realized gains (losses) and unrealized appreciation (depreciation) resulting from the investments of the Company and the Consolidated Funds, as well as interest expense. We provide administrative services to certain of our affiliated funds that are presented within administrative and other fees for GAAP reporting, but are presented net of respective expenses for segment reporting purposes. We also receive transaction fees from certain affiliated funds for activities related to fund transactions, such as loan originations. In accordance with GAAP, we are required to consolidate those funds in which we hold a significant economic interest and substantive control rights. However, for segment reporting purposes, we present revenues and expenses on a combined segment basis, which shows the results of our reportable segments without giving effect to the consolidation of the funds. Accordingly, our segment revenues consist of management fees, other income, realized and unrealized performance fees, and net investment income. Our segment expenses consist of compensation and benefits, net of administrative fees, general, administrative and other expenses, net of administrative fees, as well as realized and unrealized performance fee compensation.
Trends Affecting Our Business
We believe that our disciplined investment philosophy across our three distinct but complementary investment groups contributes to the stability of our firm’s performance throughout market cycles. Additionally,As of March 31, 2021, approximately 75%67% of our assets under managementAUM were in funds with a remaining contractual life of three years or more, and approximately 49%73% of our AUM were in funds with a contractual life ofan initial duration greater than seven years or more. Asat time of September 30, 2017,closing and 89% of our management fees were derived from permanent capital vehicles, CLOs and closed end funds. Our funds have a stable base of committed capital enabling us to invest in assets with a long termlong-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, particularlyenvironments.

Performance across global capital markets during the quarter was dominated by progress in the United Statesvaccine rollout and Western Europe.
Creditaccommodative monetary and fiscal support. Despite rate volatility and concerns for elevated inflation, U.S. leveraged credit markets continuedresponded favorably to advance throughimproving economic growth trends and the third quarterrollout of 2017additional economic stimulus in the face of various headwinds as healthy corporate fundamentals, fiscal policy optimism and benign macroeconomic volatility supported investor sentiment. Despite elevated concerns around shifting monetary policy, ongoing geopolitical tensions and the impact of Hurricanes Harvey and Irma, capital marketsU.S.


were resilient and creditU.S. high yield bond spreads tightened throughoutinto quarter-end as rising commodity prices, a wave of rating upgrades and expectations for strong corporate earnings provided a supportive tailwind to the quarter. As a result,asset class. Specifically, the high yield market experienced solid returns of 2.04% as measured by the BofA Merrill Lynch U.S.ICE BAML High Yield Master II Index, ("H0A0") fora high yield bond index, returned 0.9% in the thirdfirst quarter of 2017, with commodity related sectors delivering outsized returns2021. Meanwhile, U.S. leveraged loans outperformed bonds, as demand for floating rate instruments increased amid rebounding oil prices. Leveraged loans continued to benefit from robustrising rates and strong CLO formation, the overwhelming driver of loan demand during the quarter and as a result,origination. Specifically, the Credit Suisse Leveraged Loan Index ("CSLLI"(“CSLLI”), a leveraged loan index, returned 1.06%2.0% in the quarter.

European high yield and leveraged loan markets rallied alongside its U.S. counterparts, amid encouraging news surrounding the rollout of vaccines and an improving macroeconomic outlook. Slower than expected vaccine distribution due to production issues slightly weighed on performance in March; however, sentiment was bolstered heading into quarter-end by the European Central Bank’s commitment to increase the pace of its Pandemic Emergency Purchasing Program. The ICEBAML European Currency High Yield Index returned 1.5% in the first quarter of 2021, while the Credit Suisse Western European Leveraged Loan Index returned 1.7%.

Global equity markets also continued to recover from the lows of the COVID-19 pandemic. The S&P 500 Index and the MSCI All Country World ex USA Index had positive returns of 6.2% and 3.5%, respectively, for the third quarter of 2017. Against a backdrop of improving corporate earningsquarter. Private equity market activity remained robust and increasing hopes for tax reform, equities (measured by the S&P 500 Index) reached record highs in September 2017 and returned 4.48% forhas accelerated through the quarter, marking the eighth consecutive quarter of gains for the index.
Additionally, European markets showed notable stability during the third quarter of 2017 as improving growth prospects and employment data in the region seemed to offset geopolitical and monetary policy concerns.
For our businesses, these markets and economies have created opportunities, particularly for the Credit Group’s direct lendingCOVID-19-resilient businesses. Deal activity and liquid alternative credit strategies, which utilize flexible investment mandatesvaluations continued to manage portfolios throughrise and were higher in certain sectors, such as technology, amid an increasingly competitive market cycles. As market conditions shift and default risk and interest rate risk come under greater focus, having the abilitydue to move up and down the capital structure enables the Credit Group to reduce risk and enhance returns. Similarly, given our broad capabilities in leveraged loans, such flexibility enables our Credit Group to reduce sensitivities to changing interest rates by increasing allocations to floating rate leveraged loans. On a market value basis, approximately 76% of the debt assets within our Credit Group are floating rate instruments, which we believe helps mitigate volatility associated with changes in the treasury curve.
Notwithstanding the potential opportunities represented by market volatility, future earnings, cash flows and distributions are affected by a rangevariety of factors, including realizationspent-up demand following the slowdown in 2020. In light of our funds’ investments, which are subjectthe highly competitive environment, we believe companies prefer to significant fluctuations from periodpartner with sponsors who can help add value and navigate the challenging growth landscape.

With the European and U.S. economies continuing to period.
See "Item 1A. Risk Factors" in our Annual Report on Form 10-Krecover over the quarter, real estate values have increased following declines caused by the onset of the global pandemic. The FTSE EPRA/NAREIT Developed Europe and the FTSE NAREIT All Equity REITs indices returned a negative 0.9% and 7.5%, respectively, for the year ended December 31, 2016quarter. Rents and Item 1A. herein,occupancies for a discussion
51
certain property types and geographies are still below where they were for the risks to which our businesses are subject.first quarter of 2020, though the outlook is improved with the acceleration of vaccinations and progress towards the broader reopening of economies.

ARCC and American Capital, Ltd. Merger Agreement

Recent Transactions

On January 3, 2017, ARCC completed its acquisitionMarch 30, 2021, a subsidiary of American Capital, Ltd. ("ACAS") pursuant toAres entered into a definitive merger agreement entered intoto acquire 100% of Landmark Partners, LLC (collectively with its subsidiaries, “Landmark”), a leading investment manager focused on the secondary markets. Landmark manages private equity, real estate and infrastructure secondaries funds totaling approximately $18.7 billion in May 2016 (the "ARCC-ACAS Transaction"). To support the ARCC-ACAS Transaction, we, through our subsidiary Ares Capital Management LLC, which serves as the investment adviser to ARCC, provided $275.2 million of cash consideration to ACAS shareholders upon the closing of the ARCC-ACAS Transaction in accordance with the terms and conditions of the merger agreement. In addition, we agreed to waive up to $10 million per quarter of ARCC's Part I Fees for ten calendar quarters, which began in the second quarter of 2017. We received a favorable private letter ruling from the IRS in the second quarter of 2017 which supports the full deductibility of the $275.2 million support payment in the 2017 tax year.
Consolidation and Deconsolidation of Ares Funds
Pursuant to GAAP, we consolidate the Consolidated Funds into our financial results as presented in this Quarterly Report on Form 10‑Q. These funds represented approximately 6.0% of our AUM as of September 30, 2017, 2.7%December 31, 2020.
In April 2021, Ares sold approximately $250.0 million of our management feescommon stock, consisting of non-voting common stock and 0.8%Class A common stock, to Sumitomo Mitsui Banking Corporation in a private offering and approximately $578.2 million of our performance fees forClass A common stock in connection with a public offering.

On April 1, 2021, Ares and certain of its subsidiaries entered into a series of transactions that simplified the nine months ended September 30, 2017. Asorganizational structure, including merging Ares Offshore and Ares Investments with and into Ares Holdings, with Ares Holdings surviving. Accordingly, the separate existence of September 30, 2017, we consolidated nine CLOseach of Ares Offshore and 11 private funds,Ares Investments ceased. Prior to these series of transactions, Ares Offshore and as of September 30, 2016, we consolidated six CLOs and nine private funds. FourAres Investments were part of the CLOs asAres Operating Group. Following these series of September 30, 2017 were consolidated through risk retention vehicles.
The consolidation of these funds significantly impacted interest and other income of Consolidated Funds, interest and other expenses of Consolidated Funds, net investment gains (losses) of Consolidated Funds and non-controlling interests in Consolidated Funds, among others, fortransactions, Ares Holdings became the three and nine months ended September 30, 2017 and 2016. Further, the consolidation of these funds may impact our management fees and performance fees reported under GAAP to the extent these fees are eliminated upon consolidation.  For the actual impact that consolidation had on our results, see the Consolidating Schedules within Note 15, “Consolidation”, to our condensed consolidated financial statements included herein.

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 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 direct net effect on the net income attributable to us. The net economic ownership interests of our Consolidated Funds, to which we have no economic rights, are reflected as non-controlling interestssole entity in the Consolidated Funds in our condensed consolidated financial statements.Ares Operating Group.


We generally deconsolidate funds we advise and CLOs when we are no longer deemed to have a controlling interest in the entity. During the nine months ended September 30, 2017, there was one entity liquidated/dissolved, and no non-VIEs experienced a significant change in ownership or control that resulted in deconsolidation during the period.
The performance of our Consolidated Funds is not necessarily consistent with, or representative of, the combined performance trends of all of our funds.
Managing Business Performance
Non‑GAAP Financial Measures
We use the following non-GAAP measures to assess and track our performance:
Economic Net Income (ENI)
Fee Related Earnings (FRE)
Performance Related Earnings (PRE)
Distributable Earnings (DE)

The specific components and calculations of these non‑GAAP measures are discussed in greater detail in Note 14, "Segment Reporting," to our condensed consolidated financial statements included in this Quarterly Report on Form 10‑Q. These non‑GAAP financial measures supplement and should be considered in addition to and not in lieu of the results of operations, presented and discussed further under “Results of Operations—Consolidated Results of Operations", which are prepared in accordance with GAAP. For a reconciliation of these measures to the most comparable measure in accordance with GAAP, see Note 14, “Segment Reporting,” to our condensed consolidated financial statements included in this Quarterly Report on Form 10‑Q.
Operating Metrics
We monitormeasure our business performance using certain operating metrics that are common to the alternative asset management industry, which are discussed below.
Assets Under Management
Assets under managementAUM refers to the assets we manage. We view AUMmanage 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. For our funds other than CLOs, our AUM equals the sum
52
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 all the assets of a fund less the fair value of all liabilities of the fund.
For funds that are CLOs, our AUM is equal to subordinated notes (equity) plus all drawn and undrawn debt tranches.

The tables below provide the period-to-periodpresent rollforwards of our total AUM by segment for the three months ended September 30, 2017 and 2016 (in millions)segment:
($ in millions)Credit
Group		Private Equity GroupReal Estate
Group		Strategic InitiativesTotal AUM
Balance at 12/31/2020$145,472 $27,439 $14,808 $9,261 $196,980 
Net new par/equity commitments(1)
4,519 (21)730 700 5,928 
Net new debt commitments2,543 — 1,880 — 4,423 
Capital reductions(545)(2)(232)— (779)
Distributions(740)(634)(171)(131)(1,676)
Redemptions(536)— — — (536)
Change in fund value403 2,237 114 64 2,818 
Balance at 3/31/2021$151,116 $29,019 $17,129 $9,894 $207,158 
Average AUM(2)
$148,296 $28,230 $15,970 $9,578 $202,074 
Credit
Group		Private Equity GroupReal Estate
Group		Strategic InitiativesTotal AUM
Balance at 12/31/2019$110,543 $25,166 $13,207 $— $148,916 
Acquisitions2,693 — — — 2,693 
Net new par/equity commitments2,036 364 1,560 — 3,960 
Net new debt commitments2,219 — 226 — 2,445 
Capital reductions(47)(25)— — (72)
Distributions(632)(1,838)(643)— (3,113)
Redemptions(464)— — — (464)
Change in fund value(3,836)(1,652)(238)— (5,726)
Balance at 3/31/2020$112,512 $22,015 $14,112 $— $148,639 
Average AUM(2)
$111,528 $23,591 $13,660 $— $148,779 
(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.
(2) Represents the quarterly average of beginning and ending balances.

The components of our AUM are presented below as of ($ in billions):
 Credit Group Private Equity Group Real Estate Group Total AUM
Balance at 6/30/2017$67,447
 $25,770
 $10,792
 $104,009
Net new par/equity commitments2,624
 —
 246
 2,870
Net new debt commitments2,603
 —
 —
 2,603
Distributions(3,312) (1,373) (642) (5,327)
Change in fund value1,115
 178
 197
 1,490
Balance at 9/30/2017$70,477
 $24,575
 $10,593
 $105,645
Average AUM(1)$68,963
 $25,173
 $10,693
 $104,829
 Credit Group Private Equity Group Real Estate Group Total AUM
Balance at 6/30/2016$60,325
 $24,814
 $10,124
 $95,263
Net new par/equity commitments1,755
 10
 273
 2,038
Net new debt commitments2,161
 —
 125
 2,286
Distributions(3,005) (841) (257) (4,103)
Change in fund value808
 893
 132
 1,833
Balance at 9/30/2016$62,044
 $24,876
 $10,397
 $97,317
Average AUM(1)$61,185
 $24,846
 $10,262
 $96,293
ares-20210331_g2.jpgares-20210331_g3.jpg
AUM: $207.2AUM: $148.6

FPAUMAUM not yet paying fees
Non-fee paying(1)
General partner and affiliates


(1) Represents the quarterly averageIncludes $9.1 billion and $8.0 billion of beginningAUM of funds from which we indirectly earn management fees as of March 31, 2021 and ending balances.2020, respectively.
The tables below provide the period-to-period rollforwards of our total AUM by segment for the nine months ended September 30, 2017 and 2016 (in millions):
 Credit Group Private Equity Group Real Estate Group Total AUM
Balance at 12/31/2016$60,466
 $25,041
 $9,752
 $95,259
Acquisitions3,605
 —
 —
 3,605
Net new par/equity commitments6,981
 323
 767
 8,071
Net new debt commitments5,338
 —
 509
 5,847
Distributions(8,967) (2,676) (1,017) (12,660)
Change in fund value3,054
 1,887
 582
 5,523
Balance at 9/30/2017$70,477
 $24,575
 $10,593
 $105,645
Average AUM(1)$65,906
 $25,011
 $10,270
 $101,187
 Credit Group Private Equity Group Real Estate Group Total AUM
Balance at 12/31/2015$60,386
 $22,978
 $10,268
 $93,632
Net new par/equity commitments4,880
 2,164
 787
 7,831
Net new debt commitments3,703
 —
 225
 3,928
Distributions(8,610) (1,740) (1,125) (11,475)
Change in fund value1,685
 1,474
 242
 3,401
Balance at 9/30/2016$62,044
 $24,876
 $10,397
 $97,317
Average AUM(1)$60,254
 $24,432
 $10,243
 $94,929
(1) Represents the quarterly average of beginning and ending balances.
Please refer to “— Results of Operations by Segment” for a more detailed presentation of AUM by segment for each of the periods presented.

The graphs below present our Incentive Generating AUM and Incentive Eligible AUM by segment as of September 30, 2016 and 2017 (in millions):
aresmanageme_chart-05713a01.jpgaresmanageme_chart-07119a01.jpgpresented
53
CreditPrivate EquityReal Estate

AsTable of September 30, 2017 and 2016, our available capital, which we refer to as dry powder, was $25.8 billion and $24.5 billion, respectively, primarily attributable to our funds in the Credit Group and the Private Equity Group.Contents
Fee Paying Assets Under Management
The following components generally comprise our FPAUM:
The amount of limited partner, third party capital commitments and debt commitments eligibleFPAUM refers to payAUM from which we directly earn management fees for certain closed-endand is equal to the sum of all the individual fee bases of our funds within the reinvestment period in the Credit Group, funds in the Private Equity Group and certain private funds in the Real Estate Group;
The amount of limited partner invested capital for the aforementioned closed-end funds beyond the reinvestment period as well as the structured assets funds in the Credit Group, certain managed accounts within their reinvestment period, the mezzanine fund in the Credit Group, European commingled funds in the Credit Group and co-invest vehicles in the Real Estate Group;
The gross amount of aggregate collateral balance, for CLOs, at par, adjusted for defaulted or discounted collateral; and
The portfolio value, gross asset value or NAV, adjusted in certain instances for cash or certain accrued expenses, for the remaining funds in the Credit Group, ARCC, certain managed accounts in the Credit Group and certain debt funds in the Real Estate Group.that directly contribute to our management fees.
The tables below provide the period‑to‑periodpresent rollforwards of our total FPAUM by segment for the three months ended September 30, 2017 and 2016 (in millions):segment:
($ in millions)Credit
Group		Private Equity GroupReal Estate GroupStrategic InitiativesTotal
FPAUM Balance at 12/31/2020$88,017 $21,172 $10,252 $6,596 $126,037 
Commitments(1)
1,585 79 496 (231)1,929 
Subscriptions/deployment/increase in leverage4,539 592 337 538 6,006 
Capital reductions(837)— (32)(1)(870)
Distributions(1,322)(576)(141)(256)(2,295)
Redemptions(646)— — — (646)
Change in fund value279 (1)(92)(20)166 
Change in fee basis— (2,739)— — (2,739)
FPAUM Balance at 3/31/2021$91,615 $18,527 $10,820 $6,626 $127,588 
Average FPAUM(2)
$89,817 $19,850 $10,537 $6,611 $126,815 
Credit
Group		Private Equity GroupReal Estate GroupStrategic InitiativesTotal
FPAUM Balance at 12/31/2019$71,880 $17,040 $7,963 $— $96,883 
Acquisitions2,596 — — — 2,596 
Commitments1,240 — 1,368 — 2,608 
Subscriptions/deployment/increase in leverage4,563 352 480 — 5,395 
Capital reductions(101)— (11)— (112)
Distributions(1,031)(367)(226)— (1,624)
Redemptions(481)— — — (481)
Change in fund value(2,906)(5)(48)— (2,959)
Change in fee basis— — (311)— (311)
FPAUM Balance at 3/31/2020$75,760 $17,020 $9,215 $— $101,995 
Average FPAUM(2)
$73,821 $17,031 $8,590 $— $99,442 
(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.
(2) Represents the quarterly average of beginning and ending balances.
 Credit Group Private Equity Group Real Estate Group Total
FPAUM Balance at 6/30/2017$46,509
 $17,292
 $6,654
 $70,455
Commitments2,434
 —
 245
 2,679
Subscriptions/deployment/increase in leverage1,229
 86
 249
 1,564
Redemptions/distributions/decrease in leverage(2,354) (502) (216) (3,072)
Change in fund value816
 (67) 60
 809
Change in fee basis(12) (25) —
 (37)
FPAUM Balance at 9/30/2017$48,622
 $16,784
 $6,992
 $72,398
Average FPAUM(1)$47,567
 $17,039
 $6,824
 $71,430

 Credit Group Private Equity Group Real Estate Group Total
FPAUM Balance at 6/30/2016$40,586
 $11,853
 $6,644
 $59,083
Commitments1,069
 10
 251
 1,330
Subscriptions/deployment/increase in leverage1,040
 41
 60
 1,141
Redemptions/distributions/decrease in leverage(1,462) (275) (212) (1,949)
Change in fund value629
 —
 (13) 616
Change in fee basis—
 (264) —
 (264)
FPAUM Balance at 9/30/2016$41,862
 $11,365
 $6,730
 $59,957
Average FPAUM(1)$41,225
 $11,610
 $6,688
 $59,523
(1) Represents the quarterly average of beginning and ending balances.
The tables below provide the period‑to‑period rollforwards of our total FPAUM by segment for the nine months ended September 30, 2017 and 2016 (in millions):
 Credit Group Private Equity Group Real Estate Group Total
FPAUM Balance at 12/31/2016$42,709
 $11,314
 $6,540
 $60,563
Acquisitions2,789
 —
 —
 2,789
Commitments4,219
 7,922
 635
 12,776
Subscriptions/deployment/increase in leverage3,511
 923
 459
 4,893
Redemptions/distributions/decrease in leverage(6,856) (1,420) (487) (8,763)
Change in fund value2,037
 (403) 130
 1,764
Change in fee basis213
 (1,552) (285) (1,624)
FPAUM Balance at 9/30/2017$48,622
 $16,784
 $6,992
 $72,398
Average FPAUM(1)$45,884
 $15,644
 $6,636
 $68,164
 Credit Group Private Equity Group Real Estate Group Total
FPAUM Balance at 12/31/2015$39,925
 $12,462
 $6,757
 $59,144
Commitments2,340
 10
 424
 2,774
Subscriptions/deployment/increase in leverage2,870
 63
 326
 3,259
Redemptions/distributions/decrease in leverage(4,443) (436) (600) (5,479)
Change in fund value1,230
 (168) (54) 1,008
Change in fee basis(60) (566) (123) (749)
FPAUM Balance at 9/30/2016$41,862
 $11,365
 $6,730
 $59,957
Average FPAUM(1)$40,495
 $11,923
 $6,702
 $59,120
(1) Represents the quarterly average of beginning and ending balances.
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.


54
The charts below present FPAUM by its fee basis as of September 30, 2016 and 2017 (in millions)($ in billions):
aresmanageme_chart-08641a01.jpgaresmanageme_chart-09644a01.jpg
ares-20210331_g4.jpgares-20210331_g5.jpg
FPAUM: $59,957$127.6FPAUM: $72,398$102.0

The components of our AUM, including the portion that is FPAUM, are presented below as of September 30, 2016 and 2017 (in millions):
aresmanageme_chart-10729a01.jpgaresmanageme_chart-11732a01.jpg

AUM: $97,317
Invested capital/other(1)
AUM: $105,645
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 $5.7$24.8 billion and $8.0$20.5 billion from funds that primarily invest in illiquid strategies as of AUMMarch 31, 2021 and 2020, respectively. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies.

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 indirectlyare entitled to receive performance income, excluding capital committed by us and our professionals (from which we do not earn performance income). 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 performance income on a realized or unrealized basis. It represents the basis on which we are entitled to receive performance income. The basis is typically the NAV or total assets of the fund, excluding amounts on which we do not earn performance income, such as capital committed by us and our professionals. ARCC is only included in IGAUM when ARCC Part II Fees are being generated.
The charts below present our IEAUM and IGAUM by segment ($ in billions):
ares-20210331_g6.jpg
CreditPrivate EquityReal EstateStrategic Initiatives
55
The charts below present our available capital and AUM not yet paying fees by segment ($ in billions):
ares-20210331_g7.jpgares-20210331_g8.jpg
CreditPrivate EquityReal EstateStrategic Initiatives

As of March 31, 2021, AUM not yet paying fees of $40.2 billion could generate approximately $423.1 million in potential incremental annual management fees, of which $395.7 million relates to $37.6 billion of AUM that is available for future deployment. As of March 31, 2020, AUM not yet paying fees of $23.1 billion could generate approximately $222.3 million in potential incremental annual management fees, of which $199.8 million relates to $21.0 billion of AUM that is available for future deployment.

Management Fees Fund Duration

We view the duration of funds we manage as a metric to measure the stability of September 30, 2017our future management fees. For the three months ended March 31, 2021 and 2016, respectively.2020, 77% and 78%, respectively, of our segment management fees were attributable to funds with three or more years in duration. The charts below present the composition of our segment management fees by the initial fund duration:

ares-20210331_g9.jpgares-20210331_g10.jpg
Permanent Capital10 or more years7 to 9 years3 to 6 yearsFewer than 3 years
Differentiated Managed Accounts(1)
Managed Accounts

(1) Differentiated managed accounts have been managed by the Company for longer than three years, are investing in illiquid strategies or are co-investments structured to pay management fees.

56
Fund Performance Metrics
Fund performance information for our investment funds that are 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 include thoseare commingled funds that contributed at least 1% of our total management fees for the nine months ended September 30, 2017 or composed ofrepresented at least 1% of the Company’s total FPAUM as of September 30, 2017, and for which we have sole discretion for investment decisions within the fund.past two consecutive quarterly periods. In addition to management fees, each of our significant funds may generate performance feesincome 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 the CompanyAres 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.

We do not present fund performance metrics for significant funds with less than two years of investment performance from the date of the fund's first investment, except for those significant funds that pay management fees on invested capital, in which case investment performance will be presented on the earlier of (i) the one-year anniversary of the fund's first investment or (ii) such time that the fund has invested at least 50% of its capital.

To further facilitate an understanding of the impact a significant fund may have on our results, we present our drawdown funds as either funds harvesting investments or funds deploying capital to indicate the fund's stage in its life cycle. A fund harvesting investments indicates a fund is generally not seeking to deploy capital into new investment opportunities, while a fund deploying capital is generally seeking new investment opportunities.

Consolidation and Deconsolidation of Ares Funds
In February 2021, our first sponsored SPAC, Ares Acquisition Corporation (“AAC”), consummated its initial public offering that generated gross proceeds of $1.0 billion. Prior to the completion of a business combination, the sponsor, a wholly owned subsidiary, owns the majority of the Class B ordinary shares outstanding of AAC. We consolidate AAC under the voting interest model and reflect the results of the SPAC as a Consolidated Fund.

Consolidated Funds represented approximately 7% of our AUM as of March 31, 2021, 4% of our management fees and less than 1% of our carried interest and incentive fees for the three months ended March 31, 2021. As of March 31, 2021, we consolidated 21 CLOs, nine private funds and one SPAC, and as of March 31, 2020, we consolidated 21 CLOs and seven private funds.
The activity of the Consolidated Funds is reflected within the 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 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. 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 condensed consolidated financial statements. Redeemable interest in Consolidated Funds represent the shares issued by 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 three months ended March 31, 2021, we did not deconsolidate any entities and during the three months ended March 31, 2020, we deconsolidated one entity as a result of liquidation/dissolution.
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 15. Consolidation” to our condensed consolidated financial statements included herein.

57
Results of Operations
Consolidated Results of Operations
The following table and discussion sets forth information regarding our consolidated results of operations for the three and nine months ended September 30, 2017 and 2016. 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.funds and entities. The consolidation of these funds and entities had no effect on net income attributable to us for the periods presented.
 Three Months Ended 
 September 30,		 Favorable (Unfavorable) Nine Months Ended 
 September 30,		 Favorable (Unfavorable)
 2017 2016 $ Change % Change 2017 2016 $ Change % Change
 (Dollars in thousands)
Revenues               
Management fees (includes ARCC Part I Fees of $24,036, $76,436 and $33,260, $90,884 for the three and nine months ended September 30, 2017 and 2016, respectively)$183,177
 $163,609
 $19,568
 12 % $535,990
 $480,563
 $55,427
 12 %
Performance fees87,008
 164,482
 (77,474) (47)% 480,204
 337,686
 142,518
 42 %
Administrative and other fees13,486
 7,369
 6,117
 83 % 43,024
 22,761
 20,263
 89 %
Total revenues283,671
 335,460
 (51,789) (15)% 1,059,218
 841,010
 218,208
 26 %
Expenses 
  
            
Compensation and benefits129,347
 111,916
 (17,431) (16)% 384,905
 335,249
 (49,656) (15)%
Performance fee compensation58,637
 123,173
 64,536
 52 % 361,044
 253,739
 (107,305) (42)%
General, administrative and other expenses47,104
 38,197
 (8,907) (23)% 145,193
 116,845
 (28,348) (24)%
Transaction support expense—
 —
 —
 NM
 275,177
 —
 (275,177) NM
Expenses of the Consolidated Funds19,039
 10,088
 (8,951) NM
 27,472
 11,014
 (16,458) (149)%
Total expenses254,127

283,374
 29,247
 10 % 1,193,791
 716,847
 (476,944) (67)%
Other income (expense) 
  
            
Investment income and net interest expense (includes interest expense of $5,343, $15,576 and $4,136, $13,819 for the three and nine months ended September 30, 2017 and 2016, respectively)(1,831) (1,681) (150) (9)% (6,218) (47) (6,171) NM
Other income (expense), net(2,492) 23,042
 (25,534) NM
 16,826
 33,956
 (17,130) (50)%
Net realized and unrealized gain on investments7,209
 19,358
 (12,149) (63)% 39,943
 21,349
 18,594
 87 %
Investment income and net interest income of the Consolidated Funds (includes interest expense of $28,127, $86,324 and $26,413, $67,469 for the three and nine months ended September 30, 2017 and 2016, respectively)20,054
 8,737
 11,317
 130 % 41,675
 25,759
 15,916
 62 %
Net realized and unrealized gain (loss) on investments of the Consolidated Funds35,940
 23,883
 12,057
 50 % 55,263
 (5,723) 60,986
 NM
Total other income58,880

73,339
 (14,459) (20)% 147,489
 75,294
 72,195
 96 %
Income before taxes88,424

125,425
 (37,001) (30)% 12,916
 199,457
 (186,541) (94)%
Income tax expense (benefit)4,552
 7,641
 3,089
 40 % (28,459) 7,868
 36,327
 NM
Net income83,872

117,784
 (33,912) (29)% 41,375
 191,589
 (150,214) (78)%
Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds18,195
 7,861
 10,334
 131 % 25,403
 (3,064) 28,467
 NM
Less: Net income attributable to redeemable interests in Ares Operating Group entities—
 107
 (107) NM
 —
 456
 (456) NM
Less: Net income (loss) attributable to non-controlling interests in Ares Operating Group entities37,839
 66,511
 (28,672) (43)% (20,610) 116,404
 (137,014) NM
Net income attributable to Ares Management, L.P.27,838

43,305
 (15,467) (36)% 36,582
 77,793
 (41,211) (53)%
Less: Preferred equity distributions paid5,425
 6,751
 1,326
 20 % 16,275
 6,751
 (9,524) (141)%
Net income attributable to Ares Management, L.P. common unitholders$22,413

$36,554
 (14,141) (39)% $20,307
 $71,042
 (50,735) (71)%
NM - Not Meaningful

As such, we separate the analysis of the Consolidated Funds and evaluate that activity in total. The following section discusses the period-over-period fluctuations oftable and discussion sets forth information regarding our consolidated results of operationsoperations:

Three months ended March 31,Favorable (Unfavorable)
($ in thousands)20212020$ Change% Change
Revenues
Management fees$320,273 $263,849 $56,424 21 %
Carried interest allocation297,535 (230,876)528,411 NM
Incentive fees2,820 (3,249)6,069 NM
Principal investment income (loss)25,100 (26,723)51,823 NM
Administrative, transaction and other fees12,660 10,408 2,252 22
Total revenues658,388 13,409 644,979 NM
Expenses
Compensation and benefits231,850 180,084 (51,766)(29)
Performance related compensation221,432 (167,899)(389,331)NM
General, administrative and other expenses67,656 62,331 (5,325)(9)
Expenses of Consolidated Funds4,171 7,443 3,272 44
Total expenses525,109 81,959 (443,150)NM
Other income (expense)
Net realized and unrealized gains (losses) on investments5,433 (8,034)13,467 NM
Interest and dividend income960 1,790 (830)(46)
Interest expense(6,695)(5,306)(1,389)(26)
Other income (expense), net(4,149)5,464 (9,613)NM
Net realized and unrealized gains (losses) on investments of Consolidated Funds16,422 (254,761)271,183 NM
Interest and other income of Consolidated Funds115,839 113,225 2,614 2
Interest expense of Consolidated Funds(71,025)(80,241)9,216 11
Total other income (expense)56,785 (227,863)284,648 NM
Income (loss) before taxes190,064 (296,413)486,477 NM
Income tax expense (benefit)25,754 (20,616)(46,370)NM
Net income (loss)164,310 (275,797)440,107 NM
Less: Net income (loss) attributable to non-controlling interests in Consolidated Funds49,858 (166,406)216,264 NM
Net income (loss) attributable to Ares Operating Group entities114,452 (109,391)223,843 NM
Less: Net income attributable to redeemable interest in Ares Operating Group entities32 — 32 NM
Less: Net income (loss) attributable to non-controlling interests in Ares Operating Group entities56,042 (78,355)134,397 NM
Net income (loss) attributable to Ares Management Corporation58,378 (31,036)89,414 NM
Less: Series A Preferred Stock dividends paid5,425 5,425 — —
Net income (loss) attributable to Ares Management Corporation Class A common stockholders$52,953 $(36,461)89,414 NM

NM - Not Meaningful

58
Three Months Ended March 31, 2021Compared to Three Months Ended March 31, 2020
Consolidated Results of Operations of the Company
Management Fees. Management fees increased by $56.4 million, or 21%, for the three and nine months ended September 30, 2017March 31, 2021 compared to 2016. Additional details behindthe three months ended March 31, 2020. The increase was primarily due to the Credit Group, driven by higher FPAUM fromcapital deployments in direct lending funds. Management fees also increased by $17.5 million in connection with the acquisition of SSG (“SSG Acquisition”) that occurred in the third quarter of 2020 and by $1.7 million in connection with the acquisition of F&G Reinsurance Ltd (“F&G Re”) that occurred in the fourth quarter of 2020. For detail regarding the fluctuations attributable to a particular segment are included in "—of management fees within each of our segments see “—Results of Operations by Segment" for each of the segments.Segment.”
Three and Nine Months Ended September 30, 2017Compared to Three and Nine Months Ended September 30, 2016
Revenues
Management Fees.  Total management feesCarried Interest Allocation. Carried interest allocation increased by $19.6$528.4 million or 12%, to $183.2$297.5 million for the three months ended September 30, 2017March 31, 2021 compared to the three months ended September 30, 2016 andMarch 31, 2020. The activity was principally composed of the following:
($ in millions)Three months ended March 31, 2021Primary DriversThree months ended March 31, 2020Primary Drivers
Credit funds$85.6 Four direct lending funds and one alternative credit fund with $11.7 billion of IGAUM generating returns in excess of their hurdle rates, primarily consisting of: $15.5 million from Ares Private Credit Solutions, L.P. ("PCS"), $27.9 million from Ares Capital Europe IV, L.P. ("ACE IV") and $12.0 million from Ares Pathfinder Fund, L.P. (“Pathfinder”). The carried interest allocation generated by these funds was driven by net investment income on an increasing invested capital base. In addition, Ares Capital Europe III, L.P. ("ACE III") generated carried interest allocation of $9.5 million primarily driven by net investment income during the period.$(27.5)Four direct lending funds with $10.2 billion of IGAUM generating lower returns due to market volatility driven by the COVID-19 pandemic, primarily from ACE III and Ares Private Credit Solutions, L.P. ("PCS") that led to the reversal of unrealized carried interest allocation of $7.8 million and $18.2 million during the period, respectively. Ares Capital Europe IV, L.P. ("ACE IV") generated $4.6 million of carried interest allocation during the period.
Private equity funds188.8 Ares Corporate Opportunities Fund IV, L.P. ("ACOF IV") generated carried interest allocation of $105.8 million primarily due to market appreciation of its investment in The AZEK Company (“AZEK”) following its initial public offering. In addition, market appreciation across several investments generated carried interest allocation of $43.3 million from Ares Special Opportunities Fund, L.P. (“ASOF”) and $18.4 million from our sixth flagship corporate private equity fund.(194.4)Market depreciation across several investments that led to the reversal of unrealized carried interest allocation of $49.0 million from Ares Corporate Opportunities Fund III, L.P. (“ACOF III”), $23.7 million from ACOF IV, $75.1 million from Ares Corporate Opportunities Fund V, L.P. (“ACOF V”) and $27.4 million from Ares Energy Opportunities Fund, L.P. ("AEOF"). The market depreciation was driven by the extreme market volatility from the COVID-19 pandemic and the energy market dislocation.
Real estate funds22.8 Market appreciation from properties within real estate equity funds, primarily driven by gains generated across several industrial and multi-family assets, generated carried interest allocation of $9.2 million from US Real Estate Fund IX, L.P. ("US IX") and $8.1 million from US Real Estate Fund VIII.(9.0)Market depreciation from multiple properties within real estate equity funds that led to the reversal of unrealized carried interest allocation primarily from US IX and Ares European Real Estate Fund IV, L.P. ("EF IV") in the amount of $6.8 million and $9.0 million for the period, respectively, offset by gains generated in multiple funds from the monetization of a pan-European logistics portfolio.
Strategic initiatives funds0.3 Market appreciation of investments in an Asian secured lending fund.— No activity.
Carried interest allocation$297.5 $(230.9)

59
Incentive Fees. Incentive fees increased by $55.4 million, or 12%, to $536.0 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The increases are primarily attributed to fees generated by our Private Equity Group funds, including the launch of Ares Corporate Opportunities Fund V, L.P. (“ACOF V”), and to an increase in management fees generated by Ares Energy Investors Fund V, L.P. ("EIF V"), which included one-time catch-up fees of $5.8 million in the nine months ended September 30, 2017. Within the Credit Group, base management fees generated by ARCC increased proportionally with fee paying assets attributable to ARCC's acquisition of ACAS, but were partially offset by a reduction in ARCC Part I Fees in accordance with the $10 million fee waiver under the ARCC-ACAS Transaction agreement, which became effective in the second quarter of 2017. Management fees generated by our Real Estate Group remained relatively consistent for the comparative periods.
Performance Fees.  Performance fees decreased by $77.5$6.1 million to $87.0$2.8 million for the three months ended September 30, 2017March 31, 2021 compared to the three months ended September 30, 2016. Performance feesMarch 31, 2020: The activity was principally composed of the following:
($ in millions)Three months ended March 31, 2021Primary DriversThree months ended March 31, 2020Primary Drivers
Credit funds$2.2 Two direct lending funds with incentive fees that crystallized during the period.$(3.2)One-time reversal of incentive fees following management's decision to extend the measurement period after the fees were crystallized.
Real estate funds0.7 Incentive fees generated from ACRE.— No activity
Incentive fees$2.8 $(3.2)


Principal Investment Income (Loss). Principal investment income (loss) increased by $142.5$51.8 million to $480.2 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The Private Equity Group hadfrom a decrease in consolidated performance feesloss of $94.3 million for the three month comparative periods, partially offset by increases of $14.7 million and $2.1 million in consolidated performance fees from the Real Estate Group and Credit Group, respectively, for the same period. For the nine months ended September 30, 2017, consolidated performance fees attributable to the Private Equity Group, Real Estate Group and Credit Group increased by $71.5 million, $53.0 million and $18.0 million, respectively, compared to the nine months ended September 30, 2016. For more detail regarding the fluctuations of performance fees within each of the segments, see "—Results of Operations by Segment" for each of the segments.
Administrative and Other Fees.  Administrative fees and other fees increased by $6.1 million, or 83%, to $13.5$26.7 million for the three months ended September 30, 2017March 31, 2020 to income of $25.1 million for the three months ended March 31, 2021. The activity for the three months ended March 31, 2021 was primarily driven by market appreciation of ACOF IV’s investment in AZEK and of various investments in ACOF III and our sixth flagship corporate private equity fund. The global equity and credit markets experienced significant downturns in the first quarter of 2020 due to the outbreak of the COVID-19 pandemic and to the energy market dislocation, leading to a broad decrease in valuations in the prior year period.

    Administrative, Transaction and Other Fees. Administrative, transaction and other fees increased by $2.3 million, or 22%, for the three months ended March 31, 2021 compared to the three months ended September 30, 2016March 31, 2020. The increase during the current year period was primarily driven by higher transaction fees for certain funds in our Credit Group that increased with originations.

Compensation and Benefits. Compensation and benefits increased by $20.3$51.8 million, or 89%29%, for the ninethree months ended September 30, 2017March 31, 2021 compared to the ninethree months ended September 30, 2016.March 31, 2020. The increase was primarily driven by headcount and merit increases, in the current year periods were primarily dueby higher incentive compensation attributable to an increase in fees associated with certain funds within the Credit Group,improved operating performance and margin expansion from which we earned transaction fees of $5.1 millionscaling our business,, and $13.9 millionby equity compensation increases for the three and nine months ended September 30, 2017, respectively. We begancomparative period. Average headcount increased by 17% to recognize transaction-based fees from certain direct lending funds in1,460 professionals for the fourthfirst quarter of 2016. These fees will change with the level of deployed capital and the number of new funds earning this type of fee, however not all funds will be eligible or earn this type of fee. In addition, administrative fees included $6.5 million and $23.6 million of compensation and benefits expense reimbursements2021 from 1,251 professionals for the three and nine months ended September 30, 2017, respectively, of which $0.9 million and $6.4 million, respectively, are related to temporary employees that are assisting with the integration of ACAS into ARCC. Comparatively, administrative fee reimbursements offsettingsame period in 2020.
Equity compensation and benefits were $6.1 million and $17.9 million for the three and nine months ended September 30, 2016.
Expenses
Compensation and Benefits.  Compensation and benefits expensesexpense increased by $17.4 million, or 16%, to $129.3$23.1 million for the three months ended September 30, 2017March 31, 2021 compared to the three months ended September 30, 2016March 31, 2020 primarily due to additional performance-based restricted units granted to certain executive officers in the first quarter of 2021 and to the approval of awards to these executive officers, as well as to certain other senior leaders, that will be granted during the first quarter of 2022, 2023 and 2024. These awards increased expense by $49.7$18.7 million or 15%, forduring the ninethree months ended September 30, 2017 compared toMarch 31, 2021. Additional expense was incurred from an increase in recurring, discretionary merit-based awards and units awarded as part of the nineannual bonus program by $6.6 million and $2.1 million, respectively. The three months ended September 30, 2016. March 31, 2020 included $3.7 million of accelerated expense from the vesting of restricted units granted to our Chief Executive Officer as a result of achieving one of the applicable performance conditions.

For detail regarding the three and nine months ended September 30, 2017,fluctuations of compensation and benefits expenses increased due to an increase in headcount, including an additional $2.8 million and $13.5 million, respectively, attributable to employees hired in connection with ARCC's acquisitionwithin each of ACAS,our segments see “—Results of which $0.3 million and $6.4 million, respectively,Operations by Segment."

Performance Related Compensation. Performance related to temporary employees assisting with the integration. In addition, equity compensation increased $9.6 million and $24.9 million for the three and nine months ended September 30, 2017 compared to the respective prior year periods due to additional restricted stock units granted in the current year.
Performance Fee Compensation.  Performance fee compensation decreased by $64.5$389.3 million to $58.6$221.4 million for the three months ended September 30, 2017March 31, 2021 compared to the three months ended September 30, 2016 and by $107.3 million to $361.0 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The changeMarch 31, 2020. Changes in performance feerelated compensation expenseare directly correlatesassociated with the changechanges in our performancecarried interest allocation and incentive fees before giving effect to the performance fees earned from our Consolidated Funds that are eliminated upon consolidation.described above.

General, Administrative and Other Expenses. General, administrative and other expenses increased by $8.9$5.3 million, or 23%9%, for the three months ended March 31, 2021 compared to $47.1the three months ended March 31, 2020. The increase was primarily driven by a net increase of $9.6 million in amortization expense incurred in 2021 when compared to 2020 related to the intangible assets recorded in connection with the SSG Acquisition during the second half of 2020 and by higher professional service fees of $5.5 million during the current year, largely as a result of due diligence and legal expenses related to certain strategic initiatives. Certain expenses have also increased during the current period, including occupancy costs to support our growing headcount and information services and information technology to support the expansion of our business. Collectively, these expenses increased by $2.2 million for the three months ended September 30, 2017March 31, 2021 when compared to the same period in 2020.
60
The three months ended March 31, 2021 continued to be impacted by the COVID-19 pandemic that began at the end of the first quarter of 2020 and resulted in a decrease in certain operating expenses. During the first quarter of 2021, our operating expenses were impacted by limitations in certain business activities, most notably travel, entertainment and marketing sponsorships, and by certain office services and fringe benefits from the modified remote working environment. Collectively, these expenses decreased by $8.8 million for the three months ended March 31, 2021, when compared to the same period in 2020. While there have been positive developments that have resulted in a reduction in travel and gathering restrictions, the timing of recovery is uncertain. We anticipate that future periods will continue to be impacted similarly until we return to pre-pandemic working conditions. Those operating expenses that were impacted by the pandemic are expected to increase throughout the year, particularly with marketing sponsorships and events that have been postponed to future periods in 2021.
During the first quarter of 2020, we recorded $3.3 million in expenses associated with settling an SEC compliance matter that is not expected to recur.
Net Realized and Unrealized Gains (Losses) on Investments. Net realized and unrealized gains (losses) on investments increased by $13.5 million from a $8.0 million loss for the three months ended March 31, 2020 to a $5.4 million gain for the three months ended March 31, 2021. The activity for the three months ended March 31, 2021 was primarily attributable to unrealized gains on certain strategic initiative related investments and on our U.S. CLO investments. The activity in the prior year period was primarily attributable to losses from CLO investments due to market volatility driven by the COVID-19 pandemic.
Interest Expense. Interest expense increased by $1.4 million, or 26%, for the three months ended March 31, 2021 compared to the three months ended September 30, 2016 and by $28.3 million, or 24%, to $145.2 million forMarch 31, 2020. The issuance of the nine months ended September 30, 2017 compared to2030 Senior Notes late in the nine months ended September 30, 2016. Payments to professional service providers increased by $2.3 million and $6.3 million for the three and nine months ended September 30, 2017, respectively, compared to the prior year periods due to several information technology initiatives to support various system implementations and process improvement initiatives as well as new fund structuring costs. In addition, placement fees increased $2.3 million and $9.4 million for the three and nine months ended September 30, 2017, respectively, compared to the prior year respective periods, primarily due to two funds within our Credit Group during the current nine month period. In the current year, diligence related costs increased by $2.7 million and $3.2 million for the three and nine month comparative periods, associated with potential acquisitions and capital transactions. Also impacting the nine months ended September 30, 2017 was a $2.5 million one-time non-income tax paid during the firstsecond quarter of 2017.
Transaction Support Expense. Transaction support2020 increased interest expense represents a one-time payment of $275.2 million that we made, through our subsidiary Ares Capital Management LLC, to ACAS shareholders during the first quarter of 2017 upon the closing of ARCC’s acquisition of ACAS. In connection with this acquisition, our AUM increased by $3.6 billion and FPAUM increased by $2.8 billion at closing. No similar expenses were incurred in the other periods presented.
Expenses of the Consolidated Funds. Expenses of the Consolidated Funds increased by $9.0 million to $19.0$3.4 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and by $16.5 million to $27.5 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The increases were primarily due to organizational and offering costs incurred to launch four new funds that we began consolidating in the current quarter and two funds we began consolidating in late 2016.
Other Income (Expense)
When evaluating the changes in other income (expense), we separately analyze the other income generated by the Company from the investment returns generated by our Consolidated Funds.
Investment Income and Net Interest Expense. Investment income and net interest expense of the Company increased by $0.2 million to $1.8 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016. Investment income and net interest expense of the Company increased $6.2 million to $6.2 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Interest expense increased $1.2 million and $1.8 million for the three and nine months ended September 30, 2017, respectively, compared to the prior year periods as a result of term loans that were entered into in connection with new CLO investments within our syndicated loan strategy. The increases in interest expense for the three and nine months ended September 30, 2017 were partially offset by increases in interest income of $0.9 million and $1.8 million, respectively, from the new CLO investments that we did not hold in the prior year periods. The increase in net expense for the nine months ended September 30, 2017 compared to the prior year period was primarily the result of a partial sale and recapitalization of one of ACOF III's portfolio companies, which resulted in a $8.3 million dividend distribution during 2016 that did not recur during the current year.
Other Income (Expense), Net. Other income (expense) of the Company decreased by $25.5 million from other income of $23.0 million for the three months ended September 30, 2016 to other expense of $2.5 million for the three months ended September 30, 2017. The decrease was primarily due to the revaluation of our Energy Investors Funds ("EIF") contingent consideration liability during the third quarter of 2016, resulting in a net gain of $17.7 million due to lower than expected commitment period management fee revenue. Additionally, transaction gains decreased by $6.0 million from a gain of $3.6 million for the three months ended September 30, 2016 to a loss of $2.4 million for the three months ended September 30, 2017 due to the revaluation of certain assets and liabilities denominated in foreign currencies.
Other income of the Company decreased by $17.1 million to $16.8 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, primarily resulting from a decrease of $17.4 million in transaction gains from the revaluation of certain assets and liabilities denominated in foreign currencies.
Net Realized and Unrealized Gain on Investments. Net gain on investments of the Company decreased by $12.1 million to $7.2 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016. The decrease is a result of: (i) a $6.3 million decrease of net returns from our investment in ACOF III as the prior year period included gains on a sale of one of its portfolio companies that did not recur in the current quarter, (ii) a $3.2 million decrease of net returns on our investments within our syndicated loans strategy and (iii) a $3.2 million decrease of net returns on our investment in AREA Sponsor Holdings LLC as the appreciation of property values in the prior period was greater than the appreciation of property values in the current period, though the values of the portfolio continued positive improvement.

Net gain on investments of the Company increased by $18.6 million to $39.9 million for the nine months ended September 30, 2017 compared to the prior year period. The increase was primarily attributable to ACOF III, which had increases in net returns of $23.9 million for the nine month respective period due to market appreciation in one of its portfolio companies that completed its initial public offering.March 31, 2021. The increase was partially offset by a decrease of $5.0 million in net returns on our investment in EIF V, resulting from a reallocation of capital due to its final equity closing.
Investment Income and Net Interest Incomelower average outstanding balance of the Consolidated Funds. InvestmentCredit Facility in the current year period compared to the prior year period.
Other Income (Expense), Net. Other income and(expense), net interest incomeis principally composed of transaction gains (losses) associated with currency fluctuations for our businesses domiciled outside of the Consolidated FundsU.S. and is based on the fluctuations in currency exchange rates primarily among the U.S. dollar, the British pound and the Euro.
Income Tax Expense (Benefit) Income tax expense (benefit) increased by $11.3$46.4 million or 130%, to $20.1from income tax benefit of $20.6 million for the three months ended September 30, 2017 comparedMarch 31, 2020 to income tax expense of $25.8 million for the three months ended September 30, 2016March 31, 2021.The change in the comparative period is primarily a result of an increases in income before taxes and by $15.9 million, or 62%, to $41.7 millionweighted average daily ownership. The weighted average daily ownership for AMC common stockholders increased from 50.4% for the ninethree months ended September 30, 2017 comparedMarch 31, 2020 to 57.1% for the ninethree months ended September 30, 2016.March 31, 2021. The increases were primarily driven by increases in interest and dividend incomethe issuance of the underlying investments of the Consolidated Funds within our Credit Group and Private Equity Group.
Net Realized and Unrealized Gain (Loss) on Investments of the Consolidated Funds. Net gain on investments of the Consolidated Funds increased by $12.1 million to $35.9 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016. The increase was primarily driven by appreciation on certain investments within an E.U. direct lending fund and a U.S. direct lending fund, offset by lower valuations of underlying investments in an Asian corporate privative equity fund and in our CLOs.
Net gain (loss) on investments of the Consolidated Funds increased from a net investment loss of $5.7 million for the nine months ended September 30, 2016 to a net investment gain of $55.3 million for the nine months ended September 30, 2017. The increase was driven by unrealized appreciation on certain investments in an Asian corporate private equity fund and appreciation in an E.U. direct lending fund driven by the strengthening Euro. These gains were offset by lower valuations of underlying investments in a commercial finance fund.
Income Tax Expense (Benefit).  Not all Company and Consolidated Fund entities are subject to taxes. As a result, income taxes may not move in tandem with income before taxes. Specifically, the Company’s investment income and performance fees are generally not subject to income tax.
For the three months ended September 30, 2017 we had an income tax expense of $4.6 million compared to $7.6 million for the three months ended September 30, 2016. For the nine months ended September 30, 2017, our income tax benefit was $28.5 million, compared to an income tax expense of $7.9 million for the nine months ended September 30, 2016. The tax benefit for the nine months ended September 30, 2017 was largely driven by the pre-tax losses recognized by AHI, a corporate taxpayer, resulting from the $275.2 million transaction support payment madeClass A common stock in connection with ARCC's acquisitionstock option exercises, vesting of ACAS.restricted stock awards and the issuance of stock in connection with the SSG Acquisition that occurred after March 31, 2020.
Redeemable and Non-Controlling and Redeemable Interests. Net income (loss) attributable to non-controllingredeemable and redeemablenon-controlling interests in Ares Operating GroupAOG entities represents results attributable to the owners of AOG Units that are not held by Ares Management, L.P. andAMC. In connection with the SSG Acquisition, the former owners of SSG retained an ownership interest in certain AOG entities 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. The former ownersunitholders, 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 to Crestline Denali Class B membership interests based on the activity of Indicus Advisors, LLP, a company we acquired in 2011, exercisedthose financial interests. For the put option on their redeemable interest duringthree months ended March 31, 2021 and 2020, net loss of $0.5 million and $19.6 million, respectively, was also allocated to the third quarter of 2016, at which timeCrestline Denali Class B membership interests related to the redeemable interest in Ares Operating Group entities ceased to exist.losses from those CLO securities held.
Net income (loss) attributable to non-controlling and redeemable interests in Ares Operating GroupAOG entities decreased $28.8 million to $37.8increased by $134.4 million for the three months ended September 30, 2017March 31, 2021 compared to the three months ended September 30, 2016. NetMarch 31, 2020. The change in the comparative period is a result of the respective changes in income (loss) attributable to non-controllingbefore taxes and redeemable interests in Ares Operating Group entities decreased from a netweighted average daily ownership. While income of $116.9 million forbefore taxes increased, the nine months ended September 30, 2016 to a net loss of $20.6 million for the nine months ended September 30, 2017. The weighted average daily ownership for the non-controlling and redeemable AOG unitholders was 61.31% and 61.46%decreased from 49.6% for the three and nine months ended September 30, 2017, respectively, comparedMarch 31, 2020 to 61.83% and 62.02%42.9% for the three and nine months ended September 30, 2016, respectively.March 31, 2021.

61

Consolidated Results of Operations of the Consolidated Funds

The following table presents the results of operations of the Consolidated Funds:

 Three months ended March 31,Favorable (Unfavorable)
($ in thousands)20212020$ Change% Change
Expenses of the Consolidated Funds$(4,171)$(7,443)$3,272 44 %
Net realized and unrealized gains (losses) on investments of Consolidated Funds16,422 (254,761)271,183 NM
Interest and other income of Consolidated Funds115,839 113,225 2,614 2
Interest expense of Consolidated Funds(71,025)(80,241)9,216 11
Income (loss) before taxes57,065 (229,220)286,285 NM
Income tax expense of Consolidated Funds(28)(28)— —
Net income (loss)57,037 (229,248)286,285 NM
Less: Revenues attributable to Ares Management Corporation eliminated upon consolidation17,371 (35,491)52,862 NM
Less: Other expense, net attributable to Ares Management Corporation eliminated upon consolidation(10,192)(27,351)17,159 63
Net income (loss) attributable to non-controlling interests in Consolidated Funds$49,858 $(166,406)216,264 NM

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. For the three months ended March 31, 2021, expenses were primarily driven by professional fees incurred from the restructure of the European CLOs legal entities. For the three months ended March 31, 2020, expenses were primarily driven by the issuance of one European CLOs. Net realized and unrealized gains fluctuated for the comparative period, primarily due to a significant change in the value of loans held by the CLOs. The CSLLI returned 2.0% for the first quarter of 2021 when compared to a negative 13.2% for the first quarter of 2020. The decrease in interest expense was attributable to the lower interest rates from newly issued and refinanced CLOs since the first quarter of 2020.

Revenues and other income (expense) attributable to AMC represents management fees, incentive fees, principal investment income and administrative, transaction and other fees that are eliminated from the respective components of AMC's results upon consolidation. The decrease for the comparative period for other income (expense), principal investment income and incentive fees was primarily due to the price fluctuations associated with the COVID-19 pandemic previously mentioned.

Segment Analysis
For segment reporting purposes, revenues and expenses are presented on a basis that excludesbefore giving effect to the results of our Consolidated Funds.Funds and the results attributable to non-controlling interests of joint ventures that we consolidate. As a result, segment revenues from management fees, performance feesincome and investment income are different than those presented on a consolidated basis in accordance with GAAP because revenuesGAAP. Revenues recognized from Consolidated Funds are eliminated in consolidation.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.Funds and the non-controlling interests of joint ventures.
Discussed below are our results of operations for each of our three reportable segments. In additionNon-GAAP Financial Measures
We use the following non-GAAP measures to the three segments, we separately discuss the OMG. This information is used by our management to makemaking operating decisions, assess performance and allocate resources.resources:
ENI•Fee Related Earnings (“FRE”)
•Realized Income (“RI”)
These non-GAAP financial measures supplement and Other Measures
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.The following table sets forth FRE PRE, ENI and DERI by reportable segment for the three and nine months ended September 30, 2017 and 2016. FRE, PRE, ENI and DE are non‑GAAP financial measures our management uses when making resource deployment decisions and in assessing performance of our segments (see the Glossary for definitions of each of these non-GAAP financial measures and how they are being used by management).OMG:
62
Three Months Ended Favorable (Unfavorable) Nine Months Ended Favorable (Unfavorable) Three months ended March 31,Favorable (Unfavorable)
September 30, September 30, 
2017 2016 $ Change % Change 2017 2016 $ Change % Change
(Dollars in thousands)
Fee related earnings:                     
($ in thousands)($ in thousands)20212020$ Change% Change
Fee Related Earnings:Fee Related Earnings:
Credit Group$72,444
 $63,578
 $8,866
 14 % $204,600
 $178,670
 $25,930
 15 %Credit Group$147,672 $114,257 $33,415 29 %
Private Equity Group27,851
 14,870
 12,981
 87 % 84,626
 55,038
 29,588
 54 %Private Equity Group23,886 27,038 (3,152)(12)
Real Estate Group3,641
 6,233
 (2,592) (42)% 10,473
 12,081
 (1,608) (13)%Real Estate Group11,044 9,540 1,504 16 
Strategic InitiativesStrategic Initiatives8,927 — 8,927 NM
Operations Management Group(45,957) (39,346) (6,611) (17)% (141,610) (121,841) (19,769) (16)%Operations Management Group(63,063)(57,731)(5,332)(9)
Fee related earnings$57,979
 $45,335
 12,644
 28 % $158,089
 $123,948
 34,141
 28 %
Performance related earnings:               
Fee Related EarningsFee Related Earnings$128,466 $93,104 35,362 38 
Realized Income:Realized Income:
Credit Group$16,309
 $24,804
 (8,495) (34)% $27,677
 $47,783
 (20,106) (42)%Credit Group$150,749 $117,391 $33,358 28 %
Private Equity Group11,967
 42,241
 (30,274) (72)% 113,712
 73,287
 40,425
 55 %Private Equity Group29,689 60,907 (31,218)(51)
Real Estate Group11,216
 9,027
 2,189
 24 % 32,678
 16,000
 16,678
 104 %Real Estate Group12,495 20,085 (7,590)(38)
Strategic InitiativesStrategic Initiatives6,658 — 6,658 NM
Operations Management Group3,960
 (4,675) 8,635
 NM
 3,184
 (17,787) 20,971
 NM
Operations Management Group(62,798)(64,238)1,440 2 
Performance related earnings$43,452
 $71,397
 (27,945) (39)% $177,251
 $119,283
 57,968
 49 %
Economic net income:               
Credit Group$88,753
 $88,382
 371
 < 1%
 $232,277
 $226,453
 5,824
 3 %
Private Equity Group39,818
 57,111
 (17,293) (30)% 198,338
 128,325
 70,013
 55 %
Real Estate Group14,857
 15,260
 (403) (3)% 43,151
 28,081
 15,070
 54 %
Operations Management Group(41,997) (44,021) 2,024
 5 % (138,426) (139,628) 1,202
 1 %
Economic net income$101,431
 $116,732
 (15,301) (13)% $335,340
 $243,231
 92,109
 38 %
Distributable earnings:               
Credit Group$73,120
 $81,542
 (8,422) (10)% $204,402
 $221,357
 (16,955) (8)%
Private Equity Group75,809
 45,481
 30,328
 67 % 145,696
 104,162
 41,534
 40 %
Real Estate Group4,736
 6,408
 (1,672) (26)% 12,596
 16,867
 (4,271) (25)%
Operations Management Group(53,214) (66,696) 13,482
 20 % (151,642) (157,550) 5,908
 4 %
Distributable earnings$100,451
 $66,735
 33,716
 51 % $211,052
 $184,836
 26,216
 14 %
Realized IncomeRealized Income$136,793 $134,145 2,648 2 

NM - Not Meaningful



Reconciliation of Certain Non-GAAP Measures to Consolidated GAAP Financial Measures
Income before provision for income taxes is the GAAP financial measure most comparable to ENI, FRE, PRERI and DE.FRE. The following table presents the reconciliation of income before taxes as reported in the Condensed Consolidated Statements of Operations to ENI,RI and FRE PREof the reportable segments and DE (in thousands):
OMG:
 For the Three Months Ended 
 September 30,		 For the Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Economic net income       
Income before taxes$88,424
 $125,425
 $12,916
 $199,457
Adjustments:       
Amortization of intangibles3,651
 6,378
 14,200
 20,762
Depreciation expense3,468
 2,148
 9,458
 5,940
Equity compensation expenses18,091
 8,476
 52,097
 27,185
Acquisition and merger-related expenses2,878
 (17,611) 258,722
 (17,054)
Placement fees and underwriting costs4,495
 2,202
 14,317
 4,886
Offering costs33
 —
 688
 —
Other non-cash expense—
 (1,728) —
 (1,728)
(Income) loss before taxes of non-controlling interests in consolidated subsidiaries(216) —
 407
 —
(Income) loss before taxes of non-controlling interests in Consolidated Funds, net of eliminations(19,393) (8,558) (27,465) 3,783
Economic net income101,431
 116,732
 335,340
 243,231
Unconsolidated performance fees income - realized(178,989) (132,837) (261,924) (220,790)
Unconsolidated performance fees income - unrealized89,423
 (32,368) (223,467) (118,334)
Unconsolidated performance fee compensation - realized140,979
 93,778
 199,253
 146,792
Unconsolidated performance fee compensation - unrealized(82,342) 29,395
 161,791
 106,947
Unconsolidated net investment income(12,523) (29,365) (52,904) (33,898)
Fee related earnings57,979
 45,335
 158,089
 123,948
Unconsolidated performance fees—realized178,989
 132,837
 261,924
 220,790
Unconsolidated performance fee compensation—realized(140,979) (93,778) (199,253) (146,792)
Unconsolidated investment and other income realized, net20,855
 (5,877) 29,922
 11,381
Adjustments:       
One-time acquisition costs(2,818) (145) (3,701) (489)
Dividend equivalent(4,223) (2,045) (9,428) (3,799)
Equity income397
 36
 533
 883
Income tax expense(1,753) (5,278) (2,571) (10,260)
Placement fees and underwriting costs(4,495) (2,202) (14,317) (4,886)
Non-cash depreciation and amortization(3,468) (2,148) (9,458) (5,940)
Offering costs(33) —
 (688) —
Distributable earnings$100,451
 $66,735
 $211,052
 $184,836
Performance related earnings       
Economic net income$101,431
 $116,732
 $335,340
 $243,231
Less: fee related earnings(57,979) (45,335) (158,089) (123,948)
Performance related earnings$43,452
 $71,397
 $177,251
 $119,283
Three months ended March 31,
($ in thousands)20212020
Income (loss) before taxes$190,064 $(296,413)
Adjustments:
Depreciation and amortization expense14,100 5,542 
Equity compensation expense55,649 32,557 
Acquisition and merger-related expense8,590 3,137 
Deferred placement fees297 5,415 
Other income, net(473)— 
Net expense of non-controlling interests in consolidated subsidiaries689 20,497 
(Income) loss before taxes of non-controlling interests in Consolidated Funds, net of eliminations(49,886)166,378 
Unconsolidated performance (income) loss—unrealized(224,954)387,657 
Unconsolidated performance related compensation—unrealized160,337 (285,892)
Unconsolidated net investment (income) loss—unrealized(17,620)95,267 
Realized Income136,793 134,145 
Unconsolidated performance income—realized(76,981)(151,770)
Unconsolidated performance related compensation—realized61,096 117,993 
Unconsolidated investment (income) loss—realized7,558 (7,264)
Fee Related Earnings$128,466 $93,104 



The following table reconciles unconsolidated performance fee incomeFor 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 14. Segment Reporting”, to our unaudited condensed consolidated GAAP performance fee income (in thousands):financial statements included in this Quarterly Report on Form 10-Q. Discussed below are our results of operations for our reportable segments and OMG.
63
 For the Three Months Ended 
 September 30,		 For the Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Unconsolidated performance fee income - realized$178,989
 $132,837
 $261,924
 $220,790
Performance fee income - realized earned from Consolidated Funds—
 —
 (8,086) —
Performance fee - realized reclass(1)(981) (2,170) (2,181) (5,053)
Performance fee income - realized178,008

130,667

251,657

215,737
Unconsolidated performance fee income - unrealized(89,423) 32,368
 223,467
 118,334
Performance fee income - unrealized earned from Consolidated Funds(1,371) (799) 4,327
 74
Performance fee - unrealized reclass(1)(206) 2,246
 753
 3,541
Performance fee income - unrealized(91,000)
33,815

228,547

121,949
Total GAAP performance fee income$87,008

$164,482

$480,204

$337,686
(1) Related to performance fees for AREA Sponsor Holdings LLC. Changes in valueTable of this investment are reflected within other (income) expense in the Company’s Condensed Consolidated Statements of Operations.Contents

The following table reconciles unconsolidated other income to our consolidated GAAP other income (in thousands):
 For the Three Months Ended 
 September 30,		 For the Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Unconsolidated net investment income$12,523
 $29,365
 $52,904
 $33,898
Net investment income from Consolidated Funds45,254
 24,632
 73,675
 20,670
Performance fee - reclass(1)1,187
 (76) 1,428
 1,512
Change in value of contingent consideration(60) 17,690
 20,156
 17,486
Other non-cash expense—
 1,728
 —
 1,728
Offering costs(33) —
 (688) —
Income before taxes of non-controlling interests in consolidated subsidiaries(2)9
 —
 14
 —
Total GAAP other income$58,880

$73,339

$147,489

$75,294
(1) Related to performance fees for AREA Sponsor Holdings LLC. Changes in value of this investment are reflected within other (income) expense in the Company’s Condensed Consolidated Statements of Operations.
(2) Adjustments to eliminate costs being borne by certain of our joint venture partners.

Results of Operations by Segment

Credit Group
The following table sets forth certain statement of operations data and certain other data of our Credit Group segment for the periods presented.
 Three Months Ended Favorable (Unfavorable) Nine Months Ended Favorable (Unfavorable)
 September 30,  September 30, 
 2017 2016 $ Change % Change 2017 2016 $ Change % Change
 (Dollars in thousands)
Management fees (includes ARCC Part I Fees of $24,036, $76,436 and $33,260, $90,884 for the three and nine months ended September 30, 2017 and 2016, respectively)$120,178
 $115,794
 $4,384
 4 % $354,179
 $332,182
 $21,997
 7 %
Other fees5,668
 280
 5,388
 NM
 15,834
 939
 14,895
 NM
Compensation and benefits(46,551) (45,222) (1,329) (3)% (142,647) (135,068) (7,579) (6)%
General, administrative and other expenses(6,851) (7,274) 423
 6 % (22,766) (19,383) (3,383) (17)%
Fee Related Earnings72,444
 63,578
 8,866
 14 % 204,600
 178,670
 25,930
 15 %
Performance fees-realized3,296
 22,422
 (19,126) (85)% 19,957
 44,624
 (24,667) (55)%
Performance fees-unrealized33,033
 11,152
 21,881
 196 % 41,062
 (1,544) 42,606
 NM
Performance fee compensation-realized(1,466) (7,241) 5,775
 80 % (8,649) (9,978) 1,329
 13 %
Performance fee compensation-unrealized(19,820) (11,686) (8,134) (70)% (27,357) (9,853) (17,504) (178)%
Net performance fees15,043
 14,647
 396
 3 % 25,013
 23,249
 1,764
 8 %
Investment income-realized6,206
 588
 5,618
 NM
 9,049
 390
 8,659
 NM
Investment income (loss)-unrealized(1,123) 5,460
 (6,583) NM
 16
 9,256
 (9,240) (100)%
Interest and other investment income (loss)(540) 5,940
 (6,480) NM
 2,399
 21,617
 (19,218) (89)%
Interest expense(3,277) (1,831) (1,446) (79)% (8,800) (6,729) (2,071) (31)%
Net investment income1,266
 10,157
 (8,891) (88)% 2,664
 24,534
 (21,870) (89)%
Performance related earnings16,309
 24,804
 (8,495) (34)% 27,677
 47,783
 (20,106) (42)%
Economic net income$88,753
 $88,382
 371
 < 1%
 $232,277
 $226,453
 5,824
 3 %
Distributable earnings$73,120
 $81,542
 (8,422) (10)% $204,402
 $221,357
 (16,955) (8)%
NM - Not meaningful

Accrued performance fees for the Credit Group are composed of the following:
 As of September 30, As of December 31,
 2017 2016
 (Dollars in thousands)
CLOs$1,407
 $8,182
CSF29,103
 26,416
ACE II22,691
 16,427
ACE III34,649
 11,541
Other credit funds66,589
 42,386
Total Credit Group$154,439
 $104,952

Net performance fee revenues for the Credit Group are composed of the following:
 Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
 Realized Unrealized Net Realized Unrealized Net
 (Dollars in thousands)
CLOs$1,602
 $(2,409) $(807) $10,269
 $(7,100) $3,169
CSF—
 10,104
 10,104
 —
 21,226
 21,226
ACE II—
 2,745
 2,745
 12,124
 (13,669) (1,545)
ACE III—
 9,621
 9,621
 —
 3,067
 3,067
Other credit funds1,694
 12,972
 14,666
 29
 7,628
 7,657
Total Credit Group$3,296
 $33,033
 $36,329
 $22,422
 $11,152
 $33,574
 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
 Realized Unrealized Net Realized Unrealized Net
 (Dollars in thousands)
CLOs$6,485
 $(6,896) $(411) $27,920
 $(16,967) $10,953
CSF—
 2,686
 2,686
 —
 5,436
 5,436
ACE II3,201
 5,303
 8,504
 12,124
 (9,275) 2,849
ACE III—
 21,163
 21,163
 —
 9,469
 9,469
Other credit funds10,271
 18,806
 29,077
 4,580
 9,793
 14,373
Total Credit Group$19,957
 $41,062
 $61,019
 $44,624
 $(1,544) $43,080

The following tables present the components of the change in performance fees - unrealized for the Credit Group:
 Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
 Performance Fees - Realized Increases Decreases Performance Fees - Unrealized Performance Fees - Realized Increases Decreases Performance Fees - Unrealized
 (Dollars in thousands)
CLOs$(1,602) $—
 $(807) $(2,409) $(10,269) $3,241
 $(72) $(7,100)
CSF—
 10,104
 —
 10,104
 —
 21,226
 —
 21,226
ACE II—
 2,745
 —
 2,745
 (12,124) —
 (1,545) (13,669)
ACE III—
 9,621
 —
 9,621
 —
 3,067
 —
 3,067
Other credit funds(1,694) 15,701
 (1,035) 12,972
 (29) 8,241
 (584) 7,628
Total Credit Group$(3,296)
$38,171

$(1,842)
$33,033
 $(22,422)
$35,775

$(2,201)
$11,152
 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
 Performance Fees - Realized Increases Decreases Performance Fees - Unrealized Performance Fees - Realized Increases Decreases Performance Fees - Unrealized
 (Dollars in thousands)
CLOs$(6,485) $316
 $(727) $(6,896) $(27,920) $11,218
 $(265) $(16,967)
CSF—
 2,686
 —
 2,686
 —
 5,436
 —
 5,436
ACE II(3,201) 8,504
 —
 5,303
 (12,124) 3,115
 (266) (9,275)
ACE III—
 21,163
 —
 21,163
 —
 9,469
 —
 9,469
Other credit funds(10,271) 29,177
 (100) 18,806
 (4,580) 16,313
 (1,940) 9,793
Total Credit Group$(19,957) $61,846
 $(827) $41,062
 $(44,624) $45,551
 $(2,471) $(1,544)


Credit Group—Three and Nine Months Ended September 30, 2017March 31, 2021Compared to Three and Nine Months Ended September 30, 2016March 31, 2020
Fee Related Earnings:
Fee related earningsThe following table presents the components of the Credit Group's FRE:

 Three months ended March 31,Favorable (Unfavorable)
($ in thousands)20212020$ Change% Change
Management fees$232,877 $197,437 $35,440 18 %
Other fees5,969 3,058 2,911 95 
Compensation and benefits(80,365)(70,925)(9,440)(13)
General, administrative and other expenses(10,809)(15,313)4,504 29 
Fee Related Earnings$147,672 $114,257 33,415 29 

Management Fees. The chart below presents Credit Group management fees and effective management fee rates:
ares-20210331_g11.jpg
Management fees on existing direct lending funds increased by $8.9 million, or 14%, to $72.4primarily from deployment of capital, with ACE IV, PCS and Ares Senior Direct Lending Fund L.P. (“SDL”) collectively generating additional fees of $10.9 million for the three months ended September 30, 2017March 31, 2021 compared to the three months ended September 30, 2016March 31, 2020. Management fees from ARCC increased $2.5 million from prior year primarily due to an increase in the average size of ARCC's portfolio. The remaining increase in management fees on funds in existence in both periods was primarily driven by deployment of capital in other direct lending funds and by $25.9SMAs. Management fees from CLOs also increased from the prior year primarily due to the net addition of four CLOs and to $1.2 million or 15%, to $204.6 millionof incremental fees associated with managing the seven collateral management contracts acquired from Crestline Denali for the nine months ended September 30, 2017 comparedfull quarter in 2021. In addition, Part I Fees increased primarily due to the nine months ended September 30, 2016. Fee related earnings were impactedan increase in pre-incentive fee net investment income generated by fluctuationsARCC and CADC.

64
Management Fees. TotalThe decrease in effective management fees increased by $4.4 million, or 4%, to $120.2 millionfee rates for the three months ended September 30, 2017March 31, 2021 compared to the three months ended September 30, 2016March 31, 2020 was primarily driven by the increase in fee paying AUM of U.S. CLOs that have fee rates below 0.50% and by $22.0 million, or 7%, to $354.2 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. In the current year periods, Ares Capital Europe III, L.P. (“ACE III”) generated additional management fees of $2.5 million and $7.1 million for the three and nine months ended September 30, 2017, respectively, as additional capital was deployed for investments. We also earned $2.0 million and $3.2 million of management fees for the three and nine months ended September 30, 2017, respectively, from 10 new U.S. direct lendingdeployment in certain alternative credit funds that began generating management fees subsequent to September 30, 2016. Additionally, ARCC's acquisition of ACAShave fee rates below 1.00%. The decrease was also driven by the decrease in the first quarter of 2017 increased FPAUM by approximately $2.8 billion at acquisition, which drove increases of $10.2 million and $23.9 million in management fees generated by ARCC in the current three and nine month periods, respectively. Conversely, ARCC Part I Fees decreased $9.2 million and $14.4 million for the three and nine month respective periods, due primarilyFees' contribution to the $10 million ARCC Part I Fee waiver in each of the second and third quarters of 2017.
The effective management fee rate decreaseddue to the proportional increase in fees from 1.10%other credit funds.

Compensation and 1.07% for the threeBenefits. Compensation and nine months ended September 30, 2016, respectively, to 0.97% and 1.01% for the three and nine months ended September 30, 2017, respectively. ARCC Part I Fees contributed 0.19% towards the total effective management fee rate of the Credit Groupbenefits increased by $9.4 million, or 13%, for the three months ended September 30, 2017, compared to 0.32% for the three months ended September 30, 2016. For the nine months ended September 30, 2017, ARCC Part I Fees contributed 0.22% towards the total effective management fee rate of the Credit Group, compared to 0.29% for the nine months ended September 30, 2016. In the second and third quarters of 2017, we waived in each quarter $10 million of ARCC Part I Fees, which reduced the effective management fee rate attributable to ARCC Part I Fees in the current year periods.
Other Fees. Other fees increased by $5.4 million for the three months ended September 30, 2017March 31, 2021 compared to the three months ended September 30, 2016March 31, 2020. The increase was primarily driven by higher incentive compensation attributable to improved operating performance and margin expansion from scaling our business, by headcount growth and by $14.9 millionmerit increases. Average headcount increased by 5% to 416 investment and investment support professionals for the nine months ended September 30, 2017 comparedfirst quarter of 2021 from 396 professionals for the same period in 2020 as we added additional investment professionals to the nine months ended September 30, 2016. The increases resulted from a transaction fee based on the amount of loans funded from certainsupport our growing U.S. and European direct lending funds that we began recognizing in the fourth quarter of 2016.platforms.
Compensation and Benefits.  Compensation and benefits expenses increased by $1.3 million, or 3%, to $46.6 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016. Compensation and benefits expenses increased by $7.6 million, or 6%, to $142.6 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Excluding the impact of the ARCC-ACAS Transaction, compensation and benefits expenses increased $5.2 million and $10.5 million for the three and nine months ended September 30, 2017, respectively, primarily due to additional headcount and increase of incentive compensation with segment performance, compared to the prior year periods. Compensation costs related to employees hired in connection with the ARCC-ACAS Transaction were $1.7 million and $5.6 million for the three and nine months ended September 30, 2017, respectively. These increases were offset by $5.6 million and $8.5 million decreases in ARCC Part I compensation for the three and nine month respective periods, due to the decrease in ARCC Part I Fee revenue. Compensation and benefits expenses represented 38.7% and 40.3% of management fees for the three and nine months ended September 30, 2017, respectively, compared to 39.1% and 40.7% for the three and nine months ended September 30, 2016, respectively.
General, Administrative and Other Expenses. General, administrative and other expenses decreased by $0.4$4.5 million, or 6%29%, for the three months ended March 31, 2021 compared to $6.9the three months ended March 31, 2020. The three months ended March 31, 2021 continued to be impacted by the COVID-19 pandemic that began at the end of the first quarter of 2020 and resulted in a decrease in certain operating expenses. During the first quarter of 2021, our operating expenses were impacted by limitations in certain business activities, most notably travel, entertainment and marketing sponsorships, and by certain office services and fringe benefits from the modified remote working environment. Collectively, these expenses decreased by $4.2 million for the three months ended September 30, 2017,March 31, 2021, when compared to the three months ended September 30, 2016. There were no significant fluctuationssame period in 2020.
Realized Income:

The following table presents the components of general, administrative and other expenses incurred by ourthe Credit Group for the three month comparative period.Group's RI:
General, administrative and other expenses increased by $3.4 million, or 17%, to $22.8 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The increase in the current year period was primarily due to occupancy and business support costs associated with increased staffing levels.
Three months ended March 31,Favorable (Unfavorable)
($ in thousands)20212020$ Change% Change
Fee Related Earnings$147,672 $114,257 $33,415 29 %
Performance income—realized3,816 9,016 (5,200)(58)
Performance related compensation—realized(2,893)(7,899)5,006 63
Realized net performance income923 1,117 (194)(17)
Investment loss—realized— (843)843 100
Interest and other investment income—realized3,669 4,575 (906)(20)
Interest expense(1,515)(1,715)200 12
Realized net investment income2,154 2,017 137 7
Realized Income$150,749 $117,391 33,358 28


Performance Related Earnings:
Performance related earnings decreased by $8.5 million to $16.3 millionNM - Not Meaningful
Realized net performance income for the three months ended September 30, 2017 comparedMarch 31, 2021 was primarily attributable to the three months ended September 30, 2016 and by $20.1 million to $27.7 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Performance related earnings were impacted by fluctuations of the following components:
Net Performance Fees. Netincentive fees on two direct lending funds. Realized net performance fees include realized and unrealized performance fees, net of realized and unrealized performance fee compensation. The impact of reversals of previously recognized performance fee revenue and the corresponding performance fee compensation expense is reflected as a reduction in unrealized performance fees and unrealized performance fee compensation.  
Net performance fees increased by $0.4 million to $15.0 millionincome for the three months ended September 30, 2017 comparedMarch 31, 2020 was primarily attributable to the three months ended September 30, 2016. Net performance fees increased by $1.8 million to $25.0 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The increases in current year periods were driven by increases in performance fees earned from certain funds within ourtax distributions on direct lending strategies, which generated returns in excess of their hurdle rates on an increased capital base. These increases werefunds, partially offset by decreased performancea one-time reversal of certain incentive fees primarily from our syndicated loans strategy which benefited from a broad-based credit market rallythat were recognized in prior year.2019.
Net Investment Income.  NetRealized net investment income decreased by $8.9 million to $1.3 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016March 31, 2021 and by $21.9 million to $2.7 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The decreases in the current year periods were2020 was primarily attributable to the revaluation of certain assets and liabilities denominated in foreign currencies, which resulted in transaction losses of $3.0 million and $5.1 million for the three and nine months ended September 30, 2017, respectively, compared to transaction gains of $3.4 million and $14.3 million for the three and nine months ended September 30, 2016, respectively. Interest expense also increased $1.4 million and $2.1 million for the three and nine months ended September 30, 2017, respectively, compared to the prior year periods as a result of term loans that were entered into in connection with newinterest income generated from our CLO investments.
Economic Net Income:
Economic Realized net investment income is composed of fee related earnings and performance related earnings. Economic net income increased by $0.4 million to $88.8 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and by $5.8 million, or 3%, to $232.3 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The increases wereMarch 31, 2020 also included a result of the fluctuations described above.
Distributable Earnings:
DE decreased by $8.4 million, or 10%, to $73.1 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and by $17.0 million, or 8%, to $204.4 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. DE was lower due to decreases of $5.0 million in net realizedterm loan investment and otherthat generated interest income, for the nine months ended September 30, 2017 and of $13.4 million and $23.3 million in net realized performance fees for the three and nine months ended September 30, 2017, respectively. Increases in non-core expenses, primarily driven by placement fees related to new fund launches and by dividend equivalent payments made on unvested restricted stock, of $5.3 million and $14.5 million for the three and nine months ended September 30, 2017, respectively, compared to the prior year periods also contributed to the decrease of DE. These decreases were partially offset by increasesa realized loss of $1.0 million from the write down of an investment in FREa U.S. CLO.
65
Credit Group— Carried Interest and $25.9 millionIncentive Fees

The following table presents the accrued carried interest and incentive fees receivable, also referred to as accrued performance income, and related performance compensation for the three and nine months ended September 30, 2017 compared toCredit Group:
As of March 31, 2021As of December 31, 2020
($ in thousands)Accrued Performance IncomeAccrued Performance CompensationAccrued Net Performance IncomeAccrued Performance IncomeAccrued Performance CompensationAccrued Net Performance Income
Accrued Carried Interest
ACE III$87,446 $52,468 $34,978 $77,959 $46,776 $31,183 
ACE IV121,369 75,249 46,120 93,462 57,946 35,516 
PCS117,424 69,401 48,023 101,656 60,084 41,572 
Other credit funds131,396 84,452 46,944 100,238 61,898 38,340 
Total accrued carried interest457,635 281,570 176,065 373,315 226,704 146,611 
Incentive fees24,083 15,059 9,024 31,653 18,601 13,052 
Total Credit Group$481,718 $296,629 $185,089 $404,968 $245,305 $159,663 


The following table presents the prior year periods.change in accrued carried interest during the period for the Credit Group:

 As of December 31, 2020Activity during the periodAs of March 31, 2021
($ in thousands)Fee TypeAccrued Carried InterestChange in UnrealizedRealizedForeign Exchange and Other AdjustmentsAccrued Carried Interest
ACE IIIEuropean$77,959 $9,487 $— $— $87,446 
ACE IVEuropean93,462 27,907 — — 121,369 
PCSEuropean101,656 15,528 — 240 117,424 
Other credit fundsEuropean99,980 32,720 (137)(1,422)131,141 
Other credit fundsAmerican258 (3)— — 255 
Total Credit Group$373,315 $85,639 $(137)$(1,182)$457,635 

66
Credit Group—Assets Under Management
The tables below provide the period‑to‑periodpresent rollforwards of AUM for the Credit Group for the three months ended September 30, 2017 and 2016 (in millions):Group:
($ in millions)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 commitments115 101 393 1,230 1,067 1,613 4,519 
Net new debt commitments722 — — — 1,821 — 2,543 
Capital reductions(59)— — — (451)(35)(545)
Distributions(39)— (3)(97)(339)(262)(740)
Redemptions(89)(82)(78)(235)(41)(11)(536)
Change in fund value(175)45 67 148 778 (460)403 
Balance at 3/31/2021$28,442 $2,927 $3,332 $13,943 $59,351 $43,121 $151,116 
Average AUM(1)
$28,205 $2,895 $3,143 $13,420 $57,934 $42,699 $148,296 
Syndicated LoansHigh
Yield		Multi-Asset CreditAlternative CreditU.S. Direct LendingEuropean Direct LendingTotal Credit Group
Balance at 12/31/2019$22,320 $3,492 $2,611 $7,571 $48,431 $26,118 $110,543 
Acquisitions2,693 — — — — — $2,693 
Net new par/equity commitments103 22 6 929 880 96 2,036 
Net new debt commitments255 — — — 1,407 557 2,219 
Capital reductions(6)— — — (28)(13)(47)
Distributions(15)— (2)(94)(349)(172)(632)
Redemptions(124)(267)(37)(18)(18)— (464)
Change in fund value(558)(411)(353)(905)(1,086)(523)(3,836)
Balance at 3/31/2020$24,668 $2,836 $2,225 $7,483 $49,237 $26,063 $112,512 
Average AUM(1)
$23,494 $3,164 $2,418 $7,527 $48,834 $26,091 $111,528 
(1) Represents the quarterly average of beginning and ending balances.
 Syndicated Loans High Yield Credit Opportunities Structured Credit U.S. Direct Lending E.U. Direct Lending Total Credit Group
Balance at 6/30/2017$16,589
 $4,502
 $3,351
 $4,511
 $27,727
 $10,767
 $67,447
Net new par/ equity commitments165
 359
 12
 55
 1,383
 650
 2,624
Net new debt commitments1,668
 —
 —
 —
 935
 —
 2,603
Distributions(1,382) (349) (73) (54) (1,257) (197) (3,312)
Change in fund value125
 108
 69
 81
 228
 504
 1,115
Balance at 9/30/2017$17,165
 $4,620
 $3,359
 $4,593
 $29,016
 $11,724
 $70,477
Average AUM(1)$16,877
 $4,561
 $3,355
 $4,552
 $28,372
 $11,246
 $68,963
 Syndicated Loans High Yield Credit Opportunities Structured Credit U.S. Direct Lending E.U. Direct Lending Total Credit Group
Balance at 6/30/2016$16,928
 $4,331
 $3,329
 $3,953
 $21,938
 $9,846
 $60,325
Net new par/ equity commitments295
 569
 (5) 5
 741
 150
 1,755
Net new debt commitments752
 —
 —
 —
 1,409
 —
 2,161
Distributions(1,094) (43) (18) (4) (1,607) (239) (3,005)
Change in fund value93
 176
 104
 177
 121
 137
 808
Balance at 9/30/2016$16,974
 $5,033
 $3,410
 $4,131
 $22,602
 $9,894
 $62,044
Average AUM(1)$16,951
 $4,682
 $3,370
 $4,042
 $22,270
 $9,870
 $61,185
(1) Represents the quarterly average of beginning and ending balances.
The tables below provide the period‑to‑period rollforwardscomponents of our AUM for the Credit Group for the nine months ended September 30, 2017 and 2016 (in millions)are presented below ($ in billions):
 Syndicated Loans High Yield Credit Opportunities Structured Credit U.S. Direct Lending(1) E.U. Direct Lending Total Credit Group
Balance at 12/31/2016$17,260
 $4,978
 $3,304
 $4,254
 $21,110
 $9,560
 $60,466
Acquisitions—
 —
 —
 —
 3,605
 —
 3,605
Net new par/ equity commitments685
 470
 (16) 224
 4,754
 864
 6,981
Net new debt commitments2,958
 —
 —
 —
 1,809
 571
 5,338
Distributions(4,098) (1,115) (102) (167) (2,816) (669) (8,967)
Change in fund value360
 287
 173
 282
 554
 1,398
 3,054
Balance at 9/30/2017$17,165
 $4,620
 $3,359
 $4,593
 $29,016
 $11,724
 $70,477
Average AUM(2)$16,944
 $4,698
 $3,345
 $4,405
 $26,037
 $10,477
 $65,906
 Syndicated Loans High Yield Credit Opportunities Structured Credit U.S. Direct Lending(1) E.U. Direct Lending Total Credit Group
Balance at 12/31/2015$17,618
 $3,303
 $3,714
 $3,102
 $23,594
 $9,055
 $60,386
Net new par/ equity commitments540
 1,530
 248
 805
 739
 1,018
 4,880
Net new debt commitments1,262
 —
 —
 —
 2,109
 332
 3,703
Distributions(2,677) (186) (718) (53) (4,263) (713) (8,610)
Change in fund value231
 386
 166
 277
 423
 202
 1,685
Balance at 9/30/2016$16,974
 $5,033
 $3,410
 $4,131
 $22,602
 $9,894
 $62,044
Average AUM(2)$17,137
 $4,027
 $3,380
 $3,616
 $22,596
 $9,498
 $60,254
ares-20210331_g12.jpgares-20210331_g13.jpg
AUM: $151.1AUM: $112.5

FPAUMAUM not yet paying fees
Non-fee paying(1)
General partner and affiliates


(1) Distributions of $2.8Includes $9.1 billion and $4.3$8.0 billion for the nine months ended September 30, 2017of AUM of funds from which we indirectly earn management fees as of March 31, 2021 and 2016, respectively, include $1.6 billion and $3.0 billion reduction in leverage, respectively, related to the paydown associated with the Senior Secured Loan Program (the "SSLP").2020, respectively.
(2) Represents the quarterly average


67


Credit Group—Fee Paying AUM

The tables below provide the period‑to‑periodpresent rollforwards of fee paying AUM for the Credit Group for the three months ended September 30, 2017 and 2016 (in millions):Group:
($ in millions)Syndicated LoansHigh
Yield		Multi-Asset CreditAlternative CreditU.S. Direct LendingEuropean Direct LendingTotal Credit Group
FPAUM Balance at 12/31/2020$27,171 $2,861 $2,457 $6,331 $32,337 $16,860 $88,017 
Commitments138 101 415 481 450 — 1,585 
Subscriptions/deployment/increase in leverage— — — 618 902 3,019 4,539 
Capital reductions(59)— (18)— (725)(35)(837)
Distributions(10)— (7)(102)(1,054)(149)(1,322)
Redemptions(88)(82)(78)(235)(32)(131)(646)
Change in fund value(352)45 64 (49)423 148 279 
FPAUM Balance at 3/31/2021$26,800 $2,925 $2,833 $7,044 $32,301 $19,712 $91,615 
Average FPAUM(1)
$26,986 $2,893 $2,645 $6,688 $32,319 $18,286 $89,817 
Syndicated LoansHigh
Yield		Multi-Asset CreditAlternative CreditU.S. Direct LendingEuropean Direct LendingTotal Credit Group
FPAUM Balance at 12/31/2019$21,458 $3,495 $2,144 $4,340 $27,876 $12,567 $71,880 
Acquisitions2,596 — — — — — 2,596 
Commitments802 22 6 335 75 — 1,240 
Subscriptions/deployment/increase in leverage— — 9 212 2,490 1,852 4,563 
Capital reductions(25)— (59)— (2)(15)(101)
Distributions(15)— (11)(127)(816)(62)(1,031)
Redemptions(124)(267)(33)(18)(18)(21)(481)
Change in fund value(568)(411)(343)(571)(797)(216)(2,906)
FPAUM Balance at 3/31/2020$24,124 $2,839 $1,713 $4,171 $28,808 $14,105 $75,760 
Average FPAUM(1)
$22,791 $3,167 $1,929 $4,256 $28,342 $13,336 $73,821 
(1) Represents the quarterly average of beginning and ending balances.
 Syndicated Loans High Yield Credit Opportunities Structured Credit U.S. Direct Lending E.U. Direct Lending Total Credit Group
FPAUM Balance at 6/30/2017$15,062
 $4,503
 $2,797
 $3,414
 $15,045
 $5,688
 $46,509
Commitments2,022
 321
 —
 60
 31
 —
 2,434
Subscriptions/deployment/increase in leverage—
 38
 13
 131
 665
 382
 1,229
Redemptions/distributions/decrease in leverage(1,336) (349) (31) (244) (279) (115) (2,354)
Change in fund value129
 108
 64
 66
 192
 257
 816
Change in fee basis—
 —
 —
 —
 —
 (12) (12)
FPAUM Balance at 9/30/2017$15,877
 $4,621
 $2,843
 $3,427
 $15,654
 $6,200
 $48,622
Average FPAUM(1)$15,470
 $4,562
 $2,820
 $3,421
 $15,350
 $5,944
 $47,567
 Syndicated Loans High Yield Credit Opportunities Structured Credit U.S. Direct Lending E.U. Direct Lending Total Credit Group
FPAUM Balance at 6/30/2016$15,934
 $4,330
 $2,464
 $2,779
 $10,445
 $4,634
 $40,586
Commitments547
 482
 —
 —
 40
 —
 1,069
Subscriptions/deployment/increase in leverage1
 87
 111
 63
 527
 251
 1,040
Redemptions/distributions/decrease in leverage(1,030) (43) (22) (2) (184) (181) (1,462)
Change in fund value97
 175
 101
 163
 101
 (8) 629
FPAUM Balance at 9/30/2016$15,549
 $5,031
 $2,654
 $3,003
 $10,929
 $4,696
 $41,862
Average FPAUM(1)$15,742
 $4,681
 $2,559
 $2,891
 $10,687
 $4,665
 $41,225
(1) Represents the quarterly average of beginning and ending balances.
The tables below provide the period‑to‑period rollforwards of fee paying AUM for the Credit Group for the nine months ended September 30, 2017 and 2016 (in millions):
 Syndicated Loans High Yield Credit Opportunities Structured Credit U.S. Direct Lending E.U. Direct Lending Total Credit Group
FPAUM Balance at 12/31/2016$15,998
 $4,978
 $2,705
 $3,128
 $11,292
 $4,608
 $42,709
Acquisitions—
 —
 —
 —
 2,789
 —
 2,789
Commitments3,545
 418
 4
 140
 112
 —
 4,219
Subscriptions/deployment/increase in leverage—
 52
 55
 278
 1,830
 1,296
 3,511
Redemptions/distributions/decrease in leverage(3,966) (1,115) (80) (375) (890) (430) (6,856)
Change in fund value300
 288
 159
 256
 521
 513
 2,037
Change in fee basis—
 —
 —
 —
 —
 213
 213
FPAUM Balance at 9/30/2017$15,877
 $4,621
 $2,843
 $3,427
 $15,654
 $6,200
 $48,622
Average FPAUM(1)$15,625
 $4,699
 $2,782
 $3,286
 $14,066
 $5,426
 $45,884
 Syndicated Loans High Yield Credit Opportunities Structured Credit U.S. Direct Lending E.U. Direct Lending Total Credit Group
FPAUM Balance at 12/31/2015$17,180
 $3,303
 $2,607
 $2,559
 $10,187
 $4,089
 $39,925
Commitments789
 1,443
 61
 7
 40
 —
 2,340
Subscriptions/deployment/increase in leverage4
 87
 199
 256
 1,084
 1,240
 2,870
Redemptions/distributions/decrease in leverage(2,571) (185) (314) (66) (794) (513) (4,443)
Change in fund value147
 383
 161
 247
 412
 (120) 1,230
Change in fee basis—
 —
 (60) —
 —
 —
 (60)
FPAUM Balance at 9/30/2016$15,549
 $5,031
 $2,654
 $3,003
 $10,929
 $4,696
 $41,862
Average FPAUM(1)$16,293
 $4,026
 $2,535
 $2,724
 $10,477
 $4,440
 $40,495



The charts below present FPAUM for the Credit Group by its fee basis as of September 30, 2016 and 2017 (in millions)($ in billions):
aresmanageme_chart-09107a01.jpgaresmanageme_chart-10093a01.jpg
ares-20210331_g14.jpgares-20210331_g15.jpg
FPAUM: $41,862$91.6FPAUM: $48,622$75.8


The components of our AUM, including the portion that is FPAUM, for the Credit Group are presented below as of September 30, 2016 and 2017 (in millions):
aresmanageme_chart-11126a01.jpgaresmanageme_chart-12290a01.jpg

AUM: $62,044Invested capitalAUM: $70,477
Market value(1)
Collateral balances (at par)


(1)Includes $5.7$20.9 billion and $8.0$19.0 billion of AUM offrom funds for which we indirectly earn management feesthat primarily invest in illiquid strategies as of September 30, 2017March 31, 2021 and 2016,2020, respectively. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies.



68
Credit Group—Fund Performance Metrics as of September 30, 2017March 31, 2021
The Credit Group managed 142 funds as of September 30, 2017 across the liquid and illiquid credit strategies. ARCC contributed approximately 57%45% of the Credit Group’s total management fees for the ninethree months ended September 30, 2017.March 31, 2021. In addition, to ARCC, we have sixfive other significant funds, whichACE III, ACE IV, Ares Secured Income Master Fund L.P. (“ASIF”), PCS and SDL, collectively contributed approximately 8%19% of the Credit Group’s management fees for the ninethree months ended September 30, 2017. Our significant funds that are not drawdown funds are ARCC; one sub-advised fund; Ares ELIS XI, Ltd. ("ELIS XI"), a 2013 vintage separately managed account focused on syndicated loans in the United States; and two separately managed accounts over which we exercise sole investment discretion. Our significant drawdown funds are Ares Capital Europe II, L.P. (“ACE II”), a 2013 vintage commingled fund; and ACE III, a 2015 vintage commingled fund, both of which focus on direct lending to European middle market companies. We do not present fund performance metrics for significantMarch 31, 2021.


funds with less than two years of historical information, except for those significant funds which pay management fees on invested capital, in which case performance is shown at the earlier of (i) the one year anniversary of the fund's first investment and (ii) such time the fund is 50% or more invested.
The following table presents the performance data for our significant funds that are not drawdown funds in the Credit Group that are not drawdown funds:as of March 31, 2021:
   
Returns(%)(1)
 
($ in millions)Year of InceptionAUMYear-To-Date
Since Inception(2)
Primary
Investment Strategy
FundGrossNetGrossNet
ARCC(3)
2004$20,687 N/A5.2 N/A11.7 U.S. Direct Lending
ASIF(4)
20181,237 1.2 1.0 3.2 2.6 Alternative Credit
   As of September 30, 2017  
     Returns(%)(1)  
 Year of AUM Current Quarter Year-To-Date Since Inception(2) 
Primary
Investment Strategy
FundInception (in millions) Gross Net Gross Net Gross Net 
ARCC(3)2004 $14,479
 N/A 1.9 N/A 7.3 N/A 11.7 U.S. Direct Lending
Sub-advised Client A(4)2007 733
 3.0 2.9 7.5 7.3 8.1 7.7 High Yield
ELIS XI(4)2013 726
 1.4 1.3 3.8 3.4 3.6 3.1 Syndicated Loans
Separately Managed Account Client A(4)2015 1,138
 1.9 1.8 8.6 8.2 6.8 6.4 Structured Credit
Separately Managed Account Client B(4)2016 825
 1.7 1.6 6.3 6.0 7.4 7.0 High Yield

(1)
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.
(1)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.
(2)Since inception returns are annualized.
(3)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 financial statements filed with the SEC, which are not part of this report.
(4)Gross returns do not reflect the deduction of management fees or other expenses. Net returns are calculated by subtracting the applicable management fees and other expenses from the gross returns on a monthly basis. ASIF is a master/feeder structure and its AUM and returns include activity from its' investment in an affiliated Ares fund. Returns presented in the table are expressed in U.S. Dollars and are for the master fund, excluding the share class hedges. The quarter, year-to-date, and since inception returns (gross / net) for the pound sterling hedged Cayman feeder, the fund's sole feeder, are as follows: 1.8% / 1.7%, 1.8% / 1.7%, 1.9% / 1.3%, respectively.


(2)
Since inception returns are annualized.
(3)
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 financial statements filed with the SEC, which are not part of this report.
(4)
Gross returns do not reflect the deduction of management fees or any other expenses. Net returns are calculated by subtracting the applicable management fee from the gross returns on a monthly basis.
The following table presents the performance data of our significant drawdown funds:funds as of March 31, 2021:
($ 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$5,175 $2,822 $2,563 $751 $2,634 $3,385 1.4x1.3x11.5 8.2 European Direct Lending
Funds Deploying Capital
PCS20173,957 3,365 2,381 862 2,118 2,980 1.3x1.2x13.1 9.3 U.S. Direct Lending
ACE IV Unlevered(8)
201810,766 2,851 2,345 162 2,411 2,573 1.1x1.1x9.0 6.3 European Direct Lending
ACE IV Levered(8)
4,819 3,897 373 4,114 4,487 1.2x1.1x13.2 9.5 
SDL Unlevered20185,154 922 602 101 548 649 1.1x1.1x9.8 7.2 U.S. Direct Lending
SDL Levered2,045 1,336 320 1,210 1,530 1.2x1.1x19.0 13.7 
     As of September 30, 2017 (Dollars in millions)      
 Year of Inception AUM Original Capital Commitments Cumulative Invested Capital Realized Proceeds(1) Unrealized Value(2) Total Value MoIC IRR(%) 
Primary
Investment Strategy
Fund       Gross(3) Net(4) Gross(5) Net(6) 
ACE II(7)2013 $1,492
 $1,216
 $972
 $390
 $843
 $1,233
 1.3x 1.2x 10.3 7.5 E.U. Direct Lending
ACE III(8)2015 5,070
 2,822
 1,686
 74
 1,810
 1,884
 1.2x 1.1x 18.5 13.7 E.U. Direct Lending

(1)
Realized proceeds represent 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 performance fees. The gross MoIC is before giving effect to management fees, performance fees as applicable and other expenses.
(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 performance fees. The net MoIC is after giving effect to management fees, performance fees as applicable and other expenses.
(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 performance fees. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. Gross IRRs are calculated before giving effect to management fees, performance fees as applicable, and other expenses.
(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 performance fees. 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, performance fees as applicable, and other expenses. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.
(7)ACE II
(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. The gross MoIC would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facilities.
(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. The net MoIC 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.
69
(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 and gross and net MoIC presented in the chart are for the U.S. dollar denominated feeder fund as that is the larger of the two feeders. The gross and net IRR for the Euro denominated feeder fund are 12.7% and 9.6%, respectively. The gross and net MoIC for the Euro denominated feeder

fund are 1.4x12.8% and 1.3x,9.3%, respectively. The gross and net MoIC for the U.S. dollar denominated feeder fund are 1.5x and 1.4x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund's closing. All other values for ACE IIIII 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 variance between the gross and net MoICsIRR and the net IRRs for the U.S. dollar denominated and Euro denominated feeder funds is driven by the U.S. GAAP mark-to-market reporting of the foreign currency hedging programMoIC 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.fund, which has not been presented separately The feeder fund will be holdinggross and net IRR for ACE IV (G) Unlevered are 11.0% and 7.7%, respectively. The gross and net MoIC for ACE IV (G) Unlevered are 1.2x and 1.1x, respectively. The gross and net IRR for ACE IV (G) Levered are 15.2% and 10.8%, respectively. The gross and net MoIC for ACE IV (G) Levered are 1.2x and 1.2x, respectively. Original capital commitments are converted to U.S. dollars at the foreign currency hedges until maturity,prevailing exchange rate at the time of the fund's closing. All other values for ACE IV Unlevered and therefore is expected to ultimately recognize a gain while mitigating the currency risk associated with the initial principal investments.
(8)
ACE III is made up of two feeder funds, one denominated in U.S. dollars and one denominated in Euros. The gross and net MoIC presented in the chartACE IV Levered are for the Euro denominated feeder fund as that is the larger of the two feeders. The gross and net IRR for the U.S. dollar denominated feeder fund are 18.1% and 13.3%, respectively. The gross and net MoIC for the U.S. dollar denominated feeder fund 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 III are for the combined fund and are converted to U.S. dollars at the prevailing quarter-end exchange rate.


Private Equity Group
The following table sets forth certain statement of operations data and certain other data of our Private Equity Group segment for the periods presented.combined levered and unlevered parallel funds and are converted to U.S. dollars at the prevailing quarter-end exchange rate.


 Three Months Ended Favorable (Unfavorable) Nine Months Ended Favorable (Unfavorable)
 September 30,  September 30, 
 2017 2016 $ Change % Change 2017 2016 $ Change % Change
 (Dollars in thousands)
Management fees$51,313
 $35,183
 $16,130
 46 % $147,559
 $111,100
 $36,459
 33 %
Other fees449
 309
 140
 45 % 1,127
 983
 144
 15 %
Compensation and benefits(19,256) (16,697) (2,559) (15)% (50,862) (46,556) (4,306) (9)%
General, administrative and other expenses(4,655) (3,925) (730) (19)% (13,198) (10,489) (2,709) (26)%
Fee Related Earnings27,851
 14,870
 12,981
 87 % 84,626
 55,038
 29,588
 54 %
Performance fees-realized173,304
 108,245
 65,059
 60 % 238,084
 171,024
 67,060
 39 %
Performance fees-unrealized(142,822) 16,569
 (159,391) NM
 118,162
 109,848
 8,314
 8 %
Performance fee compensation-realized(138,657) (86,537) (52,120) (60)% (189,571) (136,761) (52,810) (39)%
Performance fee compensation-unrealized114,395
 (13,387) 127,782
 NM
 (95,131) (88,766) (6,365) (7)%
Net performance fees6,220
 24,890
 (18,670) (75)% 71,544
 55,345
 16,199
 29 %
Investment income-realized14,268
 11,267
 3,001
 27 % 17,564
 14,641
 2,923
 20 %
Investment income (loss)-unrealized(8,421) 7,066
 (15,487) NM
 25,479
 (1,030) 26,509
 NM
Interest and other investment income1,129
 417
 712
 171 % 3,264
 8,532
 (5,268) (62)%
Interest expense(1,229) (1,399) 170
 12 % (4,139) (4,201) 62
 1 %
Net investment income5,747
 17,351
 (11,604) (67)% 42,168
 17,942
 24,226
 135 %
Performance related earnings11,967
 42,241
 (30,274) (72)% 113,712
 73,287
 40,425
 55 %
Economic net income$39,818
 $57,111
 (17,293) (30)% $198,338
 $128,325
 70,013
 55 %
Distributable earnings$75,809
 $45,481
 30,328
 67 % $145,696
 $104,162
 41,534
 40 %
NM - Not meaningful

Accrued performance fees for the Private Equity Group are composed of the following:
 As of September 30, As of December 31,
 2017 2016
 (Dollars in thousands)
ACOF III$529,723
 $342,958
ACOF IV184,220
 234,207
EIF V15,469
 16,510
Other funds12,599
 30,174
Total Private Equity Group$742,011
 $623,849

Net performance fee revenues for the Private Equity Group are composed of the following:
 Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
 Realized Unrealized Net Realized Unrealized Net
 (Dollars in thousands)
ACOF III$15,588
 $3,239
 $18,827
 $39,993
 $(15,550) $24,443
ACOF IV157,716
 (146,013) 11,703
 41,807
 43,793
 85,600
EIF V—
 1,399
 1,399
 —
 —
 —
Other funds—
 (1,447) (1,447) 26,445
 (11,674) 14,771
Total Private Equity Group$173,304

$(142,822)
$30,482
 $108,245
 $16,569
 $124,814
 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
 Realized Unrealized Net Realized Unrealized Net
 (Dollars in thousands)
ACOF III$19,851
 $186,765
 $206,616
 $102,078
 $(8,205) $93,873
ACOF IV213,569
 (49,987) 163,582
 41,807
 127,738
 169,545
EIF V—
 (1,040) (1,040) —
 —
 —
Other funds4,664
 (17,576) (12,912) 27,139
 (9,685) 17,454
Total Private Equity Group$238,084
 $118,162
 $356,246
 $171,024
 $109,848
 $280,872
The following tables present the components of the change in performance fees - unrealized for the Private Equity Group:
 Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
 Performance Fees - Realized Increases Decreases Performance Fees - Unrealized Performance Fees - Realized Increases Decreases Performance Fees - Unrealized
 (Dollars in thousands)
ACOF III$(15,588) $18,827
 $—
 $3,239
 $(39,993) $24,443
 $—
 $(15,550)
ACOF IV(157,716) 11,703
 —
 (146,013) (41,807) 85,600
 —
 43,793
EIF V—
 1,399
 —
 1,399
 —
 —
 —
 —
Other funds—
 11
 (1,458) (1,447) (26,445) 14,771
 —
 (11,674)
Total Private Equity Group$(173,304) $31,940
 $(1,458) $(142,822) $(108,245) $124,814
 $—
 $16,569
 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
 Performance Fees - Realized Increases Decreases Performance Fees - Unrealized Performance Fees - Realized Increases Decreases Performance Fees - Unrealized
 (Dollars in thousands)
ACOF III$(19,851) $206,616
 $—
 $186,765
 $(102,078) $93,873
 $—
 $(8,205)
ACOF IV(213,569) 163,582
 —
 (49,987) (41,807) 169,545
 —
 127,738
EIF V—
 —
 (1,040) (1,040) —
 —
 —
 —
Other funds(4,664) 1,013
 (13,925) (17,576) (27,139) 20,334
 (2,880) (9,685)
Total Private Equity Group$(238,084) $371,211
 $(14,965) $118,162
 $(171,024) $283,752
 $(2,880) $109,848


Private Equity Group—Three and Nine Months Ended September 30, 2017March 31, 2021Compared to Three and Nine Months Ended September 30, 2016March 31, 2020
Fee Related Earnings:
Fee related earningsThe following table presents the components of the Private Equity Group's FRE:

Three months ended March 31,Favorable (Unfavorable)
($ in thousands)20212020$ Change% Change
Management fees$49,331 $52,157 $(2,826)(5)%
Other fees108 110 (2)(2)
Compensation and benefits(20,685)(19,596)(1,089)(6)
General, administrative and other expenses(4,868)(5,633)765 14 
Fee Related Earnings$23,886 $27,038 (3,152)(12)

Management Fees. The chart below presents Private Equity Group management fees and effective management fee rates:
ares-20210331_g16.jpg
70
Management fees decreased for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to the step down in fee rate and change in fee base for ACOF V as a result of our sixth flagship corporate private equity fund paying fees beginning in the fourth quarter of 2020. Fees from ACOF V decreased by $18.0 million compared to the prior year period, partially offset by $12.1 million of fees from our sixth flagship corporate private equity fund in the current year period. The decrease in management fees was also partially offset by an increase in fees of $5.5 million from ASOF that was driven by increased deployment.
The decrease in effective management fee rate for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily driven by the step down in fee rate to 0.75% for ACOF V, partially offset by increased deployment in ASOF that has a higher fee rate than the average effective management fee rate.
Compensation and Benefits. Compensation and benefits increased by $13.0$1.1 million, or 87%6%, for the three months ended March 31, 2021 compared to $27.9the three months ended March 31, 2020. The activity was primarily driven by headcount growth as we hired professionals to support the expansion of our global presence, such as our growing corporate private equity and special opportunities platforms. Average headcount increased by 8% to 143 investment and investment support professionals for the first quarter of 2021 from 133 professionals for the same period in 2020.

General, Administrative and Other Expenses. General, administrative and other expenses decreased by $0.8 million, or 14%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The three months ended March 31, 2021 continued to be impacted by the COVID-19 pandemic that began at the end of the first quarter of 2020 and resulted in a decrease in certain operating expenses. During the first quarter of 2021, our operating expenses were impacted by limitations in certain business activities, most notably travel, entertainment and marketing sponsorships, and by certain office services and fringe benefits from the modified remote working environment. Collectively, these expenses decreased by $1.6 million for the three months ended September 30, 2017March 31, 2021, when compared to the three months ended September 30, 2016same period in 2020.

Conversely, in connection with our fundraising efforts and by $29.6 million, or 54%, to $84.6 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Fee related earnings were impacted by fluctuationsaddition of the following components:
Management Fees.  Total managementinvestment professionals, placement fees increased by $16.1$1.0 million or 46%,primarily associated with new commitments to $51.3 millionASOF and our sixth flagship corporate private equity fund, and recruiting fees increased to support the expanding platform.
Realized Income:
The following table presents the components of the Private Equity Group's RI:
Three months ended March 31,Favorable (Unfavorable)
($ in thousands)20212020$ Change% Change
Fee Related Earnings$23,886 $27,038 $(3,152)(12)%
Performance income-—realized71,218 116,154 (44,936)(39)
Performance related compensation—realized(57,026)(92,924)35,898 39
Realized net performance income14,192 23,230 (9,038)(39)
Investment income (loss)—realized(7,170)11,470 (18,640)NM
Interest and other investment income—realized444 812 (368)(45)
Interest expense(1,663)(1,643)(20)(1)
Realized net investment income (loss)(8,389)10,639 (19,028)NM
Realized Income$29,689 $60,907 (31,218)(51)

    Realized net performance income for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and by $36.5 million, or 33%, to $147.6 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The increase was primarily attributable to ACOF V, which began generating fees in March 2017 totaling $27.3 million and $63.5 million for the three and nine months ended September 30, 2017, respectively. In addition, EIF V held its final close in the second quarter of 2017, generating additional management fees of $1.4 million and $9.3 million for the three and nine months ended September 30, 2017, respectively. Management fees generated by EIF V for the nine months ended September 30, 2017 included $5.8 million of one time catch-up fees. Partially offsetting these increases, management fees generated by Ares Corporate Opportunities Fund IV, L.P. (“ACOF IV”) decreased by $10.8 million and $25.7 million for the three and nine month respective periods due to a reduced fee rate and change in fee basis in connection with the launch of ACOF V. Additionally, management fees attributable to certain U.S. power and energy infrastructure funds decreased $1.5 million and $8.2 million for the three and nine months ended September 30, 2017, respectively, as a result of portfolio realizations which reduced the fee bases of the funds.
The effective management fee rate decreased from 1.23% and 1.26% for the three and nine months ended September 30, 2016, respectively, to 1.19% and 1.20%, excluding the effect of one-time catch-up fees, for the three and nine months ended September 30, 2017, respectively. The decreases in the effective management fee rate resulted from a reduced fee rate at ACOF IV and were partially offset by ACOF V management fees commencing in March 2017.
Compensation and Benefits.  Compensation and benefits expenses increased by $2.6 million, or 15%, to $19.3 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and by $4.3 million, or 9%, to $50.9 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The increases for the three and nine month comparative periods were primarily due to increases in salary and benefits expenses as a result of additional headcount needed to support ACOF V's capital deployment, as well as merit based increases. Compensation and benefits expenses represented 37.5% and 34.5% of management fees for the three and nine months ended September 30, 2017, respectively, compared to 47.5% and 41.9% for the three and nine months ended September 30, 2016, respectively.
General, Administrative and Other Expenses.  General, administrative and other expenses increased by $0.7 million, or 19%, to $4.7 million for the three months ended September 30, 2017 compared to the prior year period and by $2.7 million, or 26%, to $13.2 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The increases in the current year periods31, 2021 were primarily attributable to increasesrealizations from a partial sale of ACOF IV's position in professional services expenses, including recruiting fees related to staffing needs. The nine month periodAZEK. Realized net investment income was also impacted by other business support costs driven by increased headcount.realized losses recognized in connection with an Asian corporate private equity fund’s sale of its investment in a dairy farm company, partially offset by realizations from a partial sale of ACOF IV’s position in AZEK.
Performance Related Earnings:
Performance related earnings decreased by $30.3 million to $12.0 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and increased by $40.4 million to $113.7 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Performance related earnings were impacted by fluctuations of the following components:
Net Performance Fees. Net performance fees include realized and unrealized performance fees, net of realized and unrealized performance fee compensation. The impact of reversals of previously recognized performance fee revenue and the corresponding performance fee compensation expense is reflected as a reduction in unrealized performance fees and unrealized performance fee compensation.
Net performance fees decreased by $18.7 million to $6.2 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016. The decrease inRealized net performance fees for the three months ended September 30, 2017 was primarily driven by lower market appreciation in ACOF IV portfolio companies compared to the prior year period, when we experienced significant appreciation of certain oilincome and gas portfolio investments.

Net performance fees increased by $16.2 million to $71.5 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The increase inrealized net performance fees for the nine months ended September 30, 2017 was primarily driven by significant market appreciation in one of ACOF III's retail portfolio companies following its initial public offering.

Net Investment Income.  Net investment income decreased by $11.6 million to $5.7 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016. Net investment income for the three months ended September 30, 2017 represented unrealized appreciation of $5.8 million on our investment in an Asian corporate private equity fund,March 31, 2020 were primarily attributable to realizations from the fund's portfoliomonetization of ACOF IV's investment in a public consumer products company. Net investmentNational Veterinary Associates following the sale of the company during the period.
71
Private Equity Group—Carried Interest
The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the three months ended September 30, 2016 included appreciation on our investmentPrivate Equity Group:
 As of March 31, 2021As of December 31, 2020
($ in thousands)Accrued Performance IncomeAccrued Performance CompensationAccrued Net Performance IncomeAccrued Performance IncomeAccrued Performance CompensationAccrued Net Performance Income
ACOF III$63,609 $50,888 $12,721 $55,022 $44,018 $11,004 
ACOF IV386,377 309,102 77,275 345,748 276,598 69,150 
Sixth flagship corporate private equity fund21,057 16,845 4,212 2,624 2,099 525 
ASOF156,627 109,639 46,988 113,313 79,319 33,994 
EIF V59,277 44,310 14,967 54,086 40,429 13,657 
Other funds1,652 1,652 — 175 175 — 
Total Private Equity Group$688,599 $532,436 $156,163 $570,968 $442,638 $128,330 

The following table presents the change in an Asian corporate private equity fund of $5.6 million, primarily attributable to its portfolio investment in a public consumer products company, and net realized and unrealized gains on our investments in ACOF III and certain special situations funds of $3.9 million and $4.0 million, respectively, due to appreciation of underlying investments.
Net investmentaccrued performance income increased by $24.2 million to $42.2 millionduring the period for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The increase was primarily attributable to ACOF III, which had an increasePrivate Equity Group:
 As of December 31, 2020Activity during the periodAs of March 31, 2021
($ in thousands)Fee TypeAccrued Performance IncomeChange in UnrealizedRealizedAccrued Performance Income
ACOF IIIAmerican$55,022 $14,613 $(6,026)$63,609 
ACOF IVAmerican345,748 105,821 (65,192)386,377 
Sixth flagship corporate private equity fundAmerican2,624 18,433 — 21,057 
ASOFEuropean113,313 43,314 — 156,627 
EIF VEuropean54,086 5,191 — 59,277 
Other fundsAmerican175 1,477 — 1,652 
Total Private Equity Group$570,968 $188,849 $(71,218)$688,599 

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Economic Net Income:
Economic net income is composed of fee related earnings and performance related earnings. Economic net income decreased by $17.3 million to $39.8 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and increased by $70.0 million to $198.3 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The changes were a result of the fluctuations described above.
Distributable Earnings:
DE increased by $30.3 million, or 67%, to $75.8 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and by $41.5 million, or 40%, to $145.7 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. DE was positively impacted by increases in FRE of $13.0 million and $29.6 million for the three and nine month respective periods, and increases in net realized performance fees of $12.9 million and $14.3 million for the three and nine months ended September 30, 2017, respectively. The increase in DE was partially offset by a decrease in net realized investment and other income of $3.3 million for the nine months ended September 30, 2017 compared to the prior year period.


Private Equity Group—Assets Under Management
The tables below provide the period‑to‑periodpresent rollforwards of AUM for the Private Equity Group for the three months ended September 30, 2017 and 2016 (in millions):Group:
($ in millions)Corporate Private EquityInfrastructure & PowerSpecial OpportunitiesTotal Private Equity Group
Balance at 12/31/2020$18,233 $3,485 $5,721 $27,439 
Net new par/equity commitments29 — (50)(21)
Capital reductions(2)— — (2)
Distributions(582)(52)— (634)
Change in fund value1,705 213 319 2,237 
Balance at 3/31/2021$19,383 $3,646 $5,990 $29,019 
Average AUM(1)
$18,808 $3,566 $5,856 $28,230 
Corporate Private EquityInfrastructure & PowerSpecial OpportunitiesTotal Private Equity Group
Balance at 12/31/2019$18,406 $3,233 $3,527 $25,166 
Net new par/equity commitments— — 364 364 
Capital reductions— — (25)(25)
Distributions(1,836)— (2)(1,838)
Change in fund value(1,499)(6)(147)(1,652)
Balance at 3/31/2020$15,071 $3,227 $3,717 $22,015 
Average AUM(1)
$16,739 $3,230 $3,622 $23,591 
(1) Represents the quarterly average of beginning and ending balances.
 Corporate Private Equity Private Equity - EIF Special Situations Total Private Equity Group
Balance at 6/30/2017$19,470
 $4,726
 $1,574
 $25,770
Distributions(1,299) (46) (28) (1,373)
Change in fund value211
 (60) 27
 178
Balance at 9/30/2017$18,382
 $4,620
 $1,573
 $24,575
Average AUM(1)$18,926
 $4,673
 $1,574
 $25,173

 Corporate Private Equity Private Equity - EIF Special Situations Total Private Equity Group
Balance at 6/30/2016$18,078
 $4,959
 $1,777
 $24,814
Net new equity commitments—
 10
 —
 10
Distributions(754) (55) (32) (841)
Change in fund value632
 166
 95
 893
Balance at 9/30/2016$17,956
 $5,080
 $1,840
 $24,876
Average AUM(1)$18,017
 $5,020
 $1,809
 $24,846
(1)Represents the quarterly average of beginning and ending balances.
The tables below provide the period‑to‑period rollforwardscomponents of our AUM for the Private Equity Group for the nine months ended September 30, 2017 and 2016 (in millions)are presented below ($ in billions):
 Corporate Private Equity Private Equity - EIF Special Situations Total Private Equity Group
Balance at 12/31/2016$18,162
 $5,143
 $1,736
 $25,041
Net new equity commitments23
 300
 —
 323
Distributions(1,852) (655) (169) (2,676)
Change in fund value2,049
 (168) 6
 1,887
Balance at 9/30/2017$18,382
 $4,620
 $1,573
 $24,575
Average AUM(2)$18,600
 $4,766
 $1,645
 $25,011
 Corporate Private Equity(1) Private Equity - EIF Special Situations Total Private Equity Group
Balance at 12/31/2015$15,908
 $5,207
 $1,863
 $22,978
Net new equity commitments2,154
 10
 —
 2,164
Distributions(1,401) (231) (108) (1,740)
Change in fund value1,295
 94
 85
 1,474
Balance at 9/30/2016$17,956
 $5,080
 $1,840
 $24,876
Average AUM(2)$17,524
 $5,092
 $1,816
 $24,432
ares-20210331_g17.jpgares-20210331_g18.jpg
(1)Net new equity commitments represent commitments to ACOF V for the nine months ended September 30, 2016.AUM: $29.0AUM: $22.0

(2)Represents the quarterly average of beginningFPAUMAUM not yet paying feesNon fee payingGeneral partner and ending balances.affiliates



73
Private Equity Group—Fee Paying AUM
The tables below provide the period‑to‑periodpresent rollforwards of fee paying AUM for the Private Equity Group for the three months ended September 30, 2017 and 2016 (in millions):Group:
($ in millions)Corporate Private EquityInfrastructure
& Power		Special OpportunitiesTotal Private Equity Group
FPAUM Balance at 12/31/2020$14,770 $3,679 $2,723 $21,172 
Commitments79 — — 79 
Subscriptions/deployment/increase in leverage108 — 484 592 
Distributions(410)— (166)(576)
Change in fund value(1)— — (1)
Change in fee basis(2,739)— — (2,739)
FPAUM Balance at 3/31/2021$11,807 $3,679 $3,041 $18,527 
Average FPAUM(1)
$13,289 $3,679 $2,882 $19,850 
Corporate Private EquityInfrastructure
& Power		Special OpportunitiesTotal Private Equity Group
FPAUM Balance at 12/31/2019$11,968 $3,352 $1,720 $17,040 
Subscriptions/deployment/increase in leverage19 — 333 352 
Distributions(229)— (138)(367)
Change in fund value(5)— — (5)
FPAUM Balance at 3/31/2020$11,753 $3,352 $1,915 $17,020 
Average FPAUM(1)
$11,861 $3,352 $1,818 $17,031 
(1) Represents the quarterly average of beginning and ending balances.
 Corporate Private Equity Private Equity - EIF Special Situations Total Private Equity Group
FPAUM Balance at 6/30/2017$12,437
 $4,081
 $774
 $17,292
Subscriptions/deployment/increase in leverage40
 28
 18
 86
Redemptions/distributions/decrease in leverage(352) (8) (142) (502)
Change in fund value—
 (61) (6) (67)
Change in fee basis(25) —
 —
 (25)
FPAUM Balance at 9/30/2017$12,100
 $4,040
 $644
 $16,784
Average FPAUM(1)$12,269
 $4,061
 $709
 $17,039
 Corporate Private Equity Private Equity - EIF Special Situations Total Private Equity Group
FPAUM Balance at 6/30/2016$6,678
 $4,331
 $844
 $11,853
Commitments—
 10
 —
 10
Subscriptions/deployment/increase in leverage34
 7
 —
 41
Redemptions/distributions/decrease in leverage(226) —
 (49) (275)
Change in fee basis—
 (264) —
 (264)
FPAUM Balance at 9/30/2016$6,486
 $4,084
 $795
 $11,365
Average FPAUM(1)$6,582
 $4,208
 $820
 $11,610
(1) Represents the quarterly average of beginning and ending balances.
The tables below provide the period‑to‑period rollforwards of fee paying AUM for the Private Equity Group for the nine months ended September 30, 2017 and 2016 (in millions):
 Corporate Private Equity Private Equity - EIF Special Situations Total Private Equity Group
FPAUM Balance at 12/31/2016$6,454
 $4,232
 $628
 $11,314
Commitments7,622
 300
 —
 7,922
Subscriptions/deployment/increase in leverage449
 197
 277
 923
Redemptions/distributions/decrease in leverage(873) (340) (207) (1,420)
Change in fund value—
 (349) (54) (403)
Change in fee basis(1,552) —
 —
 (1,552)
FPAUM Balance at 9/30/2017$12,100
 $4,040
 $644
 $16,784
Average FPAUM(1)$10,928
 $4,055
 $661
 $15,644
 Corporate Private Equity Private Equity - EIF Special Situations Total Private Equity Group
FPAUM Balance at 12/31/2015$6,957
 $4,454
 $1,051
 $12,462
Commitments—
 10
 —
 10
Subscriptions/deployment/increase in leverage50
 17
 (4) 63
Redemptions/distributions/decrease in leverage(226) (46) (164) (436)
Change in fund value—
 (80) (88) (168)
Change in fee basis(295) (271) —
 (566)
FPAUM Balance at 9/30/2016$6,486
 $4,084
 $795
 $11,365
Average FPAUM(1)$6,702
 $4,325
 $896
 $11,923
(1) Represents the quarterly average of beginning and ending balances.


The charts below present FPAUM for the Private Equity Group by its fee basis as of September 30, 2016 and 2017 (in millions)($ in billions):
aresmanageme_chart-08812a01.jpgaresmanageme_chart-10139a01.jpg
ares-20210331_g19.jpgares-20210331_g20.jpg
FPAUM: $11,365$18.6FPAUM: $16,784$17.0

The components of our AUM, including the portion that is FPAUM, for the Private Equity Group are presented below as of September 30, 2016 and 2017 (in millions):
aresmanageme_chart-11080a01.jpgaresmanageme_chart-12410a01.jpg

AUM: $24,876Invested capitalAUM: $24,575Capital commitments



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Private Equity Group—Fund Performance Metrics as of September 30, 2017March 31, 2021
The Private Equity Group managed 21 commingled    Six significant funds, and related co-investment vehicles as of September 30, 2017. ACOF III, ACOF IV, ACOF V, U.S. Power Fund III (“USPF III”), U.S. Power Fund IV (“USPF IV”), ACOF IV, ACOF V, AEOF, ASOF and EIF V, each considered a significantour sixth flagship corporate private equity fund, combined forcollectively contributed approximately 93%80% of the Private Equity Group’s management fees for the ninethree months ended September 30, 2017. Our Corporate Private Equity funds focus on majority or shared-control investments, principally in under-capitalized companies in North America, Europe and Asia. ACOF III and ACOF IV are in harvest mode, meaning they are generally not seeking to deploy capital into new investment opportunities, while ACOF V is in deployment mode. Each of our U.S. power and energy infrastructure funds focuses on generating long-term, stable cash-flowing investments in the power generation,

transmission and midstream energy sector. USPF III and USPF IV are in harvest mode, while EIF V is in deployment mode. We do not present fund performance metrics for significant funds with less than two years of historical information, except for those significant funds which pay management fees on invested capital, in which case performance is shown at the earlier of (i) the one year anniversary of the fund's first investment and (ii) such time the fund is 50% or more invested.March 31, 2021.
The following table presents the performance data as of March 31, 2021 for our significant funds in the Private Equity Group, all of which are drawdown funds:
($ 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
USPF IV2010$1,230 $1,688 $2,121 $1,403 $1,220 $2,623 1.2x1.1x5.41.7Infrastructure and Power
ACOF IV20124,107 4,700 4,251 6,635 3,401 10,036 2.4x2.0x21.715.4Corporate Private Equity
Funds Deploying Capital
ACOF V20178,405 7,850 6,896 995 7,209 8,204 1.2x1.1x8.24.8Corporate Private Equity
AEOF2018730 1,120 965 73 576 649 0.7x0.6x(20.1)(28.3)Corporate Private Equity
ASOF20194,305 3,518 3,138 1,395 2,599 3,994 1.5x1.4x64.848.9Special Opportunities
Sixth flagship corporate private equity fund20204,329 4,218 1,402 24 1,525 1,549 1.1x1.1xN/AN/ACorporate Private Equity
     As of September 30, 2017 (Dollars in millions)      
 Year of Inception AUM Original Capital Commitments Cumulative Invested Capital Realized Proceeds(1) Unrealized Value(2) Total Value MoIC IRR(%) Primary Investment Strategy
Fund       Gross(3) Net(4) Gross(5) Net(6) 
USPF III2007 $906
 $1,350
 $1,808
 $1,753
 $860
 $2,613
 1.5x 1.4x 8.1 5.5 U.S. Power and Energy Infrastructure
ACOF III2008 4,340
 3,510
 3,867
 5,952
 4,021
 9,973
 2.6x 2.2x 31.1 23.1 Corporate Private Equity
USPF IV2010 1,873
 1,688
 1,815
 749
 1,677
 2,426
 1.3x 1.2x 10.8 7.3 U.S. Power and Energy Infrastructure
ACOF IV2012 5,342
 4,700
 3,806
 2,438
 4,119
 6,557
 1.7x 1.6x 23.7 16.0 Corporate Private Equity
ACOF V2017 8,006
 7,850
 971
 12
 1,004
 1,016
 1.0x 0.9x N/A N/A Corporate Private Equity
EIF V(7)2015 884
 801
 290
 76
 339
 415
 1.4x 1.6x N/A N/A U.S. Power and Energy Infrastructure

(1)
Realized proceeds represent the sum of all cash dividends, interest income, other fees and cash proceeds from realizations of interests in portfolio investments.
(2)
Unrealized value represents the fair market value of remaining investments. There can be no assurance that unrealized investments will be realized at the valuations indicated.
(3)
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, performance fees as applicable and other expenses.
(4)
The net MoIC for the U.S. power and energy infrastructure funds is calculated at the fund-level. 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 partnersand if applicable, excludes those interests attributable to the non-fee paying limited partners and/or the general partner who does not pay management fees or performance fees. The net MoIC is after giving effect to management fees, performance fees as applicable and other expenses.
(5)
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. Cash flows used in the gross IRR calculation are assumed to occur at month-end. The gross IRRs are calculated before giving effect to management fees, performance fees as applicable, and other expenses.
(6)
The net IRR for the U.S. power and energy infrastructure funds 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. The cash flow dates used in the net IRR calculations are based on the actual dates of the cash flows. The net IRR for the corporate private equity funds is an annualized since inception net 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.
(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 and infrastructure and power 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 gross MoICs for the corporate private equity and special opportunities funds are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the gross MoIC would be 2.2x for ACOF IV, 1.2x for ACOF V, "N/A" for the sixth flagship corporate private equity fund, 0.7x for AEOF and 1.4x for ASOF. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. Cash flows used in the net IRR calculations are assumed to occur at month end. For all funds, the net IRRs are calculated after giving effect to management fees, performance fees as applicable, and other expenses and exclude commitments by the general partner and Schedule I investors who do not pay either management fees or carried interest. Including the timing on contribution and distributions to and from the corporate private equity funds, net investor IRRs since inception for ACOF III is 22.3% and for ACOF IV is 15.2%.
(7)
The Gross MoIC is lower than the Net MoIC due to the fund's utilization of a credit facility to fund an investment that is currently under construction and not generating cash flow.


Real Estate Group
The following table sets forth certain statement of operations data and certain other data of our Real Estate Group segment for the periods presented.
 Three Months Ended Favorable (Unfavorable) Nine Months Ended Favorable (Unfavorable)
 September 30,  September 30, 
 2017 2016 $ Change % Change 2017 2016 $ Change % Change
 (Dollars in thousands)
Management fees$17,137
 $17,819
 $(682) (4)% $49,231
 $50,794
 $(1,563) (3)%
Other fees27
 162
 (135) (83)% 37
 855
 (818) (96)%
Compensation and benefits(11,398) (9,459) (1,939) (20)% (30,848) (31,327) 479
 2 %
General, administrative and other expenses(2,125) (2,289) 164
 7 % (7,947) (8,241) 294
 4 %
Fee Related Earnings3,641
 6,233
 (2,592) (42)% 10,473
 12,081
 (1,608) (13)%
Performance fees-realized2,389
 2,170
 219
 10 % 3,883
 5,142
 (1,259) (24)%
Performance fees-unrealized20,366
 4,647
 15,719
 NM
 64,243
 10,030
 54,213
 NM
Performance fee compensation-realized(856) —
 (856) NM
 (1,033) (53) (980) NM
Performance fee compensation-unrealized(12,233) (4,322) (7,911) (183)% (39,303) (8,328) (30,975) NM
Net performance fees9,666
 2,495
 7,171
 287 % 27,790
 6,791
 20,999
 NM
Investment income (loss)-realized1,997
 (151) 2,148
 NM
 4,153
 412
 3,741
 NM
Investment income (loss)-unrealized(767) 6,211
 (6,978) NM
 (77) 7,943
 (8,020) NM
Interest and other investment income716
 714
 2
 < 1%
 2,069
 1,642
 427
 26 %
Interest expense(396) (242) (154) (64)% (1,257) (788) (469) (60)%
Net investment income1,550
 6,532
 (4,982) (76)% 4,888
 9,209
 (4,321) (47)%
Performance related earnings11,216
 9,027
 2,189
 24 % 32,678
 16,000
 16,678
 104 %
Economic net income$14,857
 $15,260
 (403) (3)% $43,151
 $28,081
 15,070
 54 %
Distributable earnings$4,736
 $6,408
 (1,672) (26)% $12,596
 $16,867
 (4,271) (25)%
NM - Not Meaningful

Accrued performance fees for the Real Estate Group are composed of the following:
 As of September 30, As of December 31,
 2017 2016
 (Dollars in thousands)
US VIII$27,528
 $12,575
EF IV40,200
 4,052
Other real estate funds37,403
 22,001
Subtotal105,131
 38,628
Other fee generating funds(1)15,518
 16,675
Total Real Estate Group$120,649
 $55,303
(1)Relates to investment income from AREA Sponsor Holdings LLC that is reclassified for segment reporting to align with the character of the underlying income generated.

Net performance fee revenues for the Real Estate Group are composed of the following:
 Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
 Realized Unrealized Net Realized Unrealized Net
 (Dollars in thousands)
US VIII$—
 $6,819
 $6,819
 $—
 $(96) $(96)
EF IV—
 8,094
 8,094
 —
 —
 —
Other real estate funds1,408
 5,248
 6,656
 —
 6,989
 6,989
Subtotal1,408

20,161

21,569
 —
 6,893
 6,893
Other fee generating funds(1)981
 205
 1,186
 2,170
 (2,246) (76)
Total Real Estate Group$2,389

$20,366

$22,755
 $2,170

$4,647

$6,817
 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
 Realized Unrealized Net Realized Unrealized Net
 (Dollars in thousands)
US VIII$—
 $14,953
 $14,953
 $—
 $2,279
 $2,279
EF IV—
 36,149
 36,149
 —
 —
 —
Other real estate funds1,702
 13,895
 15,597
 89
 11,291
 11,380
Subtotal1,702
 64,997
 66,699
 89
 13,570
 13,659
Other fee generating funds(1)2,181
 (754) 1,427
 5,053
 (3,540) 1,513
Total Real Estate Group$3,883
 $64,243
 $68,126
 $5,142
 $10,030
 $15,172
(1)Relates to investment income from AREA Sponsor Holdings LLC that is reclassified for segment reporting to align with the character of the underlying income generated.

The following tables present the components of the change in performance fees - unrealized for the Real Estate Group:
 Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
 Performance Fees - Realized Increases Decreases Performance Fees - Unrealized Performance Fees - Realized Increases Decreases Performance Fees - Unrealized
 (Dollars in thousands)
US VIII$—
 $6,819
 $—
 $6,819
 $—
 $—
 $(96) $(96)
EF IV—
 8,094
 —
 8,094
 —
 —
 —
 —
Other real estate funds(1,408) 6,887
 (231) 5,248
 —
 7,942
 (953) 6,989
Subtotal(1,408)
21,800

(231)
20,161

—

7,942

(1,049)
6,893
Other fee generating funds(1)(981) 1,186
 —
 205
 (2,170) 640
 (716) (2,246)
Total Real Estate Group$(2,389)
$22,986

$(231)
$20,366

$(2,170)
$8,582

$(1,765)
$4,647
 Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016
 Performance Fees - Realized Increases Decreases Performance Fees - Unrealized Performance Fees - Realized Increases Decreases Performance Fees - Unrealized
 (Dollars in thousands)
US VIII$—
 $14,953
 $—
 $14,953
 $—
 $2,279
 $—
 $2,279
EF IV—
 36,149
 —
 36,149
 —
 —
 —
 —
Other real estate funds(1,702) 16,137
 (540) 13,895
 (89) 12,629
 (1,249) 11,291
Subtotal(1,702) 67,239
 (540) 64,997
 (89) 14,908
 (1,249) 13,570
Other fee generating funds(1)(2,181) 1,987
 (560) (754) (5,053) 2,950
 (1,437) (3,540)
Total Real Estate Group$(3,883) $69,226
 $(1,100) $64,243
 $(5,142) $17,858
 $(2,686) $10,030
(1)Relates to investment income from AREA Sponsor Holdings LLC that is reclassified for segment reporting to align with the character of the underlying income generated.


Real Estate Group—Three and Nine Months Ended September 30, 2017Compared to Three and Nine Months Ended September 30, 2016
Fee Related Earnings:
Fee related earnings decreased by $2.6 million, or 42%, to $3.6 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and by $1.6 million, or 13%, to $10.5 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Fee related earnings were impacted by fluctuations of the following components:
Management Fees.  Total management fees decreased by $0.7 million, or 4%, to $17.1 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and decreased by $1.6 million, or 3%, to $49.2 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The decreases in the current year periods are partially attributable to the winding down of one of our U.S. Real Estate Equity funds, which resulted in management fee reductions of $0.4 million and $1.9 million for the three and nine month comparative periods. Ares Real Estate Fund VIII ("US VIII") also had decreases in management fees of $0.4 million and $0.8 million for the three and nine month comparative periods due to a change in the fee basis in connection with the launch of its successor fund. For the three months ended September 30, 2017, fees generated by Ares European Property Enhancement Program II, L.P. ("EPEP II") were $1.3 million lower than the prior year period, which included $1.8 million of one-time catch up fees. Partially offsetting these decreases, one of our U.S. Real Estate Equity funds began generating fees in the current year, contributing $1.1 million and $1.4 million of management fees for the three and nine months ended September 30, 2017.
The effective management fee rate, excluding the effect of one-time catch-up fees, remained consistent at 1.03% for the three months ended September 30, 2017 and 2016. The effective management fee rate, excluding the effect of one-time catch-up fees increased from 0.98% for the nine months ended September 30, 2016 to 0.99% for the nine months ended September 30, 2017.
Compensation and Benefits.  Compensation and benefits expenses increased by $1.9 million, or 20%, to $11.4 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016. The compensation and benefits expenses for the three month period should be considered in conjunction with the nine month period as certain adjustments were made to our expectation of incentive compensation payable for the annual period during the third quarter.
Compensation and benefits expenses decreased by $0.5 million, or 2%, to $30.8 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The decrease was due to a reorganization of the group's management team that occurred in the latter half of 2016, partially offset by an increase in incentive compensation. Compensation and benefits expenses represented 66.5% and 62.7% of management fees for the three and nine months ended September 30, 2017, respectively, compared to 53.1% and 61.7% for the three and nine months ended September 30, 2016, respectively.
General, Administrative and Other Expenses.  General, administrative and other expenses decreased $0.2 million, or 7%, to $2.1 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and by $0.3 million, or 4%, to $7.9 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. There were no significant fluctuations of general, administrative and other expenses incurred by our Real Estate Group for the comparative periods.
Performance Related Earnings:
Performance related earnings increased by $2.2 million to $11.2 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and by $16.7 million to $32.7 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Performance related earnings were impacted by fluctuations of the following components:
Net Performance Fees.  Net performance fees include realized and unrealized performance fees, net of realized and unrealized performance fee compensation. The impact of reversals of previously recognized performance fee revenue and the corresponding performance fee compensation expense is reflected as a reduction in unrealized performance fees and performance fee compensation.
Net performance fees increased by $7.2 million to $9.7 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and by $21.0 million to $27.8 million for the nine months ended September 30,

2017 compared to the nine months ended September 30, 2016. The increases in net performance fees for the current year periods were primarily driven by favorable real estate market fundamentals in both the U.S. and Europe that have resulted in appreciation across the portfolio of properties in our funds, including net performance fees attributable to Ares European Real Estate Fund IV (“EF IV”) and US VIII which collectively increased $6.0 million and $19.5 million for the three and nine month comparative periods.

Net Investment Income.  Net investment income decreased by $5.0 million to $1.6 million for the three months ended September 30, 2017 from $6.5 million for the three months ended September 30, 2016. Net investment income decreased by $4.3 million to $4.9 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The decreases were primarily driven by decreases of $4.5 million in net realized and unrealized gains on our investment in AREA Sponsor Holdings LLC for both the three and nine months ended September 30, 2017 as the appreciation of property values in the prior period was greater than the appreciation of property values in the current period, however the values of the portfolio continued to increase.
Economic Net Income:
Economic net income is composed of fee related earnings and performance related earnings. Economic net income decreased by $0.4 million, or 3%, to $14.9 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and increased by $15.1 million to $43.2 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The changes were a result of the fluctuations described above.
Distributable Earnings:
DE decreased by $1.7 million, or 26%, to $4.7 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and by $4.3 million, or 25%, to $12.6 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. DE was lower due to decreases in FRE of $2.6 million and $1.6 million and by decreases in net realized performance fees of $0.6 million and $2.2 million for the three and nine month respective periods. In addition, DE was negatively impacted by increases in non-core expenses, primarily driven by placement fees of $0.1 million and $2.2 million for the three and nine months ended September 30, 2017, respectively, compared to the prior year periods. The decreases in DE were partially offset by increases in net realized investment and other income of $1.4 million and $1.8 million for the three and nine month respective periods.

Real Estate Group—Assets Under Management
The tables below provide the period‑to‑period rollforwards of AUM for the Real Estate Group for the three months ended September 30, 2017 and 2016 (in millions):
 Real Estate Equity - U.S. Real Estate Equity - E.U. Real Estate Debt Total Real Estate Group
Balance at 6/30/2017$4,659
 $3,143
 $2,990
 $10,792
Net new equity commitments246
 —
 —
 246
Distributions(197) (437) (8) (642)
Change in fund value107
 79
 11
 197
Balance at 9/30/2017$4,815
 $2,785
 $2,993
 $10,593
Average AUM(1)$4,737
 $2,964
 $2,992
 $10,693
 Real Estate Equity - U.S. Real Estate Equity - E.U. Real Estate Debt Total Real Estate Group
Balance at 6/30/2016$4,545
 $3,095
 $2,484
 $10,124
Net new equity commitments17
 256
 —
 273
Net new debt commitments—
 —
 125
 125
Distributions(208) (63) 14
 (257)
Change in fund value62
 50
 20
 132
Balance at 9/30/2016$4,416
 $3,338
 $2,643
 $10,397
Average AUM(1)$4,481
 $3,217
 $2,564
 $10,262
(1) Represents the quarterly average of beginning and ending balances.

The tables below provide the period‑to‑period rollforwards of AUM for the Real Estate Group for the nine months ended September 30, 2017 and 2016 (in millions):
 Real Estate Equity - U.S. Real Estate Equity - E.U. Real Estate Debt Total Real Estate Group
Balance at 12/31/2016$4,106
 $3,100
 $2,546
 $9,752
Net new equity commitments767
 —
 —
 767
Net new debt commitments—
 —
 509
 509
Distributions(290) (641) (86) (1,017)
Change in fund value232
 326
 24
 582
Balance at 9/30/2017$4,815
 $2,785
 $2,993
 $10,593
Average AUM(1)$4,429
 $3,020
 $2,821
 $10,270
 Real Estate Equity - U.S. Real Estate Equity - E.U. Real Estate Debt Total Real Estate Group
Balance at 12/31/2015$4,616
 $3,059
 $2,593
 $10,268
Net new equity commitments317
 470
 —
 787
Net new debt commitments—
 —
 225
 225
Distributions(717) (197) (211) (1,125)
Change in fund value200
 6
 36
 242
Balance at 9/30/2016$4,416
 $3,338
 $2,643
 $10,397
Average AUM(1)$4,529
 $3,154
 $2,560
 $10,243
(1) Represents the quarterly average of beginning and ending balances.

Real Estate Group—Fee Paying AUM
The tables below provide the period‑to‑period rollforwards of fee paying AUM for the Real Estate Group for the three months ended September 30, 2017 and 2016 (in millions):
 Real Estate Equity - U.S. Real Estate Equity - E.U. Real Estate Debt Total Real Estate Group
FPAUM Balance at 6/30/2017$3,003
 $2,536
 $1,115
 $6,654
Commitments245
 —
 —
 245
Subscriptions/deployment/increase in leverage225
 24
 —
 249
Redemptions/distributions/decrease in leverage(107) (77) (32) (216)
Change in fund value3
 46
 11
 60
FPAUM Balance at 9/30/2017$3,369
 $2,529
 $1,094
 $6,992
Average FPAUM(1)$3,186
 $2,533
 $1,105
 $6,824
 Real Estate Equity - U.S. Real Estate Equity - E.U. Real Estate Debt Total Real Estate Group
FPAUM Balance at 6/30/2016$2,999
 $2,503
 $1,142
 $6,644
Commitments—
 251
 —
 251
Subscriptions/deployment/increase in leverage60
 —
 —
 60
Redemptions/distributions/decrease in leverage(139) (41) (32) (212)
Change in fund value(30) 9
 8
 (13)
FPAUM Balance at 9/30/2016$2,890
 $2,722
 $1,118
 $6,730
Average FPAUM(1)$2,945
 $2,613
 $1,130
 $6,688
(1) Represents the quarterly average of beginning and ending balances.

The tables below provide the period‑to‑period rollforwards of fee paying AUM for the Real Estate Group for the nine months ended September 30, 2017 and 2016 (in millions):
 Real Estate Equity - U.S. Real Estate Equity - E.U. Real Estate Debt Total Real Estate Group
FPAUM Balance at 12/31/2016$2,891
 $2,531
 $1,118
 $6,540
Commitments635
 —
 —
 635
Subscriptions/deployment/increase in leverage432
 24
 3
 459
Redemptions/distributions/decrease in leverage(306) (123) (58) (487)
Change in fund value2
 97
 31
 130
Change in fee basis(285) —
 —
 (285)
FPAUM Balance at 9/30/2017$3,369
 $2,529
 $1,094
 $6,992
Average FPAUM(1)$3,005
 $2,520
 $1,111
 $6,636
 Real Estate Equity - U.S. Real Estate Equity - E.U. Real Estate Debt Total Real Estate Group
FPAUM Balance at 12/31/2015$3,204
 $2,555
 $998
 $6,757
Commitments59
 365
 —
 424
Subscriptions/deployment/increase in leverage137
 48
 141
 326
Redemptions/distributions/decrease in leverage(484) (69) (47) (600)
Change in fund value(26) (54) 26
 (54)
Change in fee basis—
 (123) —
 (123)
FPAUM Balance at 9/30/2016$2,890
 $2,722
 $1,118
 $6,730
Average FPAUM(1)$3,042
 $2,593
 $1,067
 $6,702
(1) Represents the quarterly average of beginning and ending balances.
The charts below present FPAUM for the Real Estate Group by its fee basis as of September 30, 2016 and 2017 (in millions):
aresmanageme_chart-07878a01.jpgaresmanageme_chart-08922a01.jpg
FPAUM: $6,730FPAUM: $6,992
(1)Market value/other includes ACRE fee paying AUM, which is based on ACRE's stockholders' equity.

The components of our AUM, including the portion that is FPAUM, for the Real Estate Group are presented below as of September 30, 2016 and 2017 (in millions):
aresmanageme_chart-09901a01.jpgaresmanageme_chart-10700a01.jpg
AUM: $10,397AUM: $10,593


Real Estate Group—Fund Performance Metrics as of September 30, 2017
The Real Estate Group managed 42 funds in real estate debt and real estate equity as of September 30, 2017. Two funds in our Real Estate Group, each considered a significant fund, combined for approximately 33% of the Real Estate Group’s management fees for the nine months ended September 30, 2017: EF IV, a commingled fund focused on real estate assets located in Europe, primarily in the United Kingdom, France and Germany; and EPEP II, a commingled fund focused on Europe.
The following table presents the performance data for our significant funds in the Real Estate Group, all of which are drawdown funds:
     As of September 30, 2017 (Dollars in millions)      
 Year of Inception AUM Original Capital Commitments Cumulative Invested Capital Realized Proceeds(1) Unrealized Value(2) Total Value MoIC IRR(%) 
Primary
Investment Strategy
Fund       Gross(3) Net(4) Gross(5) Net(6) 
EF IV(7)2014 $1,040
 $1,302
 $985
 $384
 $933
 $1,317
 1.3x 1.2x 20.0 13.4 E.U. Real Estate Equity
EPEP II(8)2015 704
 747
 255
 113
 200
 313
 1.2x 1.2x N/A N/A E.U. Real Estate Equity
(1)
Realized proceeds include distributions of operating income, sales and financing proceeds received.
(2)
Unrealized value represents the fair market value of remaining investments. There can be no assurance that unrealized investments will be realized at the valuations indicated.
(3)
The gross MoIC is calculated at the investment level and is based on the interests of all partners. The gross MoIC for all funds is before giving effect to management fees, performance fees as applicable and other expenses.
(4)
The net MoIC is calculated at the fund-level and is based on the interests of the fee-paying partners and, if applicable, excludes interests attributable to the non fee-paying partners and/or the general partner who does not pay management fees or performance fees or has such fees rebated outside of the fund. The net MoIC is after giving effect to management fees, performance fees as applicable and other expenses.
(5)
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. Cash flows used in the gross IRR calculation are assumed to occur at quarter-end. The gross IRRs are calculated before giving effect to management fees, performance fees as applicable, and other expenses.
(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 partners and, if applicable, excludes interests attributable to the non fee-paying partners and/or the general partner who does not pay management fees or performance fees or has such fees rebated outside of the fund. 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, performance fees as applicable, and other expenses. The funds may utilize a credit facility

during the investment period and for general cash management purposes. Net fund-level IRRsThe gross MoIC would generally have been lower if such funds called capital from its limited partners instead of utilizing the credit facility.
(4)The net MoIC for USPF IV and ASOF is calculated at the fund-level. 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 funds may utilize a credit facility during the investment period and for general cash management purposes. The net MoIC would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.
(7)
EF IV is made up of two parallel funds, one denominated in U.S. dollars and one denominated in Euros. The gross and net MoIC and gross and net IRRs presented in the chart are for the U.S. dollar denominated parallel fund as that is the larger of the two funds. The gross and net IRRs for the Euro denominated parallel fund are 20.3% and 13.9%, respectively. The gross and net MoIC for the Euro denominated parallel fund are 1.3x and 1.2x, 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 EF IV are for the combined fund and are converted to U.S. dollars at the prevailing quarter-end exchange rate.
(8)
EPEP II is made up of dual currency investors and Euro currency investors. The gross and net MoIC presented in the chart are for dual currency investors as dual currency investors represent the largest group of investors in the fund. Multiples exclude foreign currency gains and losses since dual currency investors fund capital contributions and receive distributions in local deal currency (GBP or EUR) and therefore, do not realize foreign currency gains or losses. The gross and net MoIC for the Euro currency investors, which include foreign currency gains and losses, 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 fund's closing. All other values for EPEP II are for the combined fund and are converted to U.S. dollars at the prevailing quarter-end exchange rate.


Operations Management Group
The following table sets forth certain statement(5)For the corporate private equity and infrastructure and power funds, the gross IRR is an annualized since inception gross internal rate of operations datareturn of cash flows to and certain other datafrom investments and the residual value of the OMGinvestments 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 assumed to occur at month-end. 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 a standalone basisthe 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 periods presented.corporate private equity and special opportunities funds are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the gross IRRs would be 21.6% for ACOF IV, 8.3% for ACOF V, "N/A" for the sixth flagship corporate private equity fund, (20.0)% for AEOF and 64.2% for ASOF. The funds may utilize a credit facility during the investment period and for general cash management purposes. Gross fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility.
(6)The net IRR is an annualized since inception net internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Net IRRs reflect returns to the fee-paying limited partners and if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the net IRR calculation are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees, carried interest as applicable, and other expenses and exclude commitments by the general partner and 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.

75
 Three Months Ended Favorable (Unfavorable) Nine Months Ended Favorable (Unfavorable)
 September 30,  September 30, 
 2017 2016 $ Change % Change 2017 2016 $ Change % Change
 (Dollars in thousands)
Compensation and benefits$(27,577) $(25,960) $(1,617) (6)% $(84,881) $(77,225) $(7,656) (10)%
General, administrative and other expenses(18,380) (13,386) (4,994) (37)% (56,729) (44,616) (12,113) (27)%
Fee Related Earnings(45,957) (39,346) (6,611) (17)% (141,610) (121,841) (19,769) (16)%
Investment income (loss)-realized18
 (20,005) 20,023
 NM
 3,217
 (20,093) 23,310
 NM
Investment income-unrealized4,357
 15,979
 (11,622) (73)% 222
 4,460
 (4,238) (95)%
Interest and other investment income (loss)26
 15
 11
 73 % 1,125
 (53) 1,178
 NM
Interest expense(441) (664) 223
 34 % (1,380) (2,101) 721
 34 %
Net investment income (loss)3,960
 (4,675) 8,635
 NM
 3,184
 (17,787) 20,971
 NM
Performance related earnings3,960
 (4,675) 8,635
 NM
 3,184
 (17,787) 20,971
 NM
Economic net income$(41,997) $(44,021) 2,024
 5 % $(138,426) $(139,628) 1,202
 1 %
Distributable earnings$(53,214) $(66,696) 13,482
 20 % $(151,642) $(157,550) 5,908
 4 %
NM - Not Meaningful

Operations ManagementReal Estate Group—Three and Nine Months Ended September 30, 2017March 31, 2021Compared to Three and Nine Months Ended September 30, 2016March 31, 2020
Fee Related Earnings:
Fee related earnings decreased by $6.6 millionThe following table presents the components of the Real Estate Group's FRE:

Three months ended March 31,Favorable (Unfavorable)
($ in thousands)20212020$ Change% Change
Management fees$29,632 $24,184 $5,448 23 %
Other fees648 704 (56)(8)
Compensation and benefits(15,941)(12,413)(3,528)(28)
General, administrative and other expenses(3,295)(2,935)(360)(12)
Fee Related Earnings$11,044 $9,540 1,504 16 


Management Fees. The chart below presents Real Estate Group management fees and effective management fee rates:
ares-20210331_g21.jpg
Management fees increased for the three months ended September 30, 2017March 31, 2021 compared to the three months ended September 30, 2016 and by $19.8 million for the nine months ended September 30, 2017 comparedMarch 31, 2020 primarily due to the nine months ended September 30, 2016. Fee related earnings were impacted by fluctuations of the following components:
Compensation and Benefits.  Compensation and benefits expensesadditional commitments to Ares U.S. Real Estate Opportunity Fund III, L.P. (“AREOF III”), which increased fees by $1.6 million, and to our third European value-add real estate equity fund, which increased fees by $1.6 million. The additional commitments to $27.6these funds also generated one-time catch-up fees in the current year period.Management fees from real estate debt funds increased by $1.1 million from the prior year period primarily due to the continued fundraising and subsequent deployment of these open-ended funds. Management fees included $2.0 million of
76
deferred revenue for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and by $7.7 million to $84.9 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The increases were due to additional headcount and merit based increases. Some of the additional headcount included employees hired in connection with ARCC's acquisition of ACAS, however ACAS-related compensation expenses were largely offset by the corresponding administrative fee reimbursements that are presented as a reduction to compensation expense.
General, Administrative and Other Expenses.  General, administrative and other expenses increased by $5.0 million, or 37%, to $18.4 million for three months ended September 30, 2017 compared to the three months ended September 30, 2016 and by $12.1 million, or 27%, to $56.7 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The increases in the current year periods were primarily due to several information technology initiatives to support various system implementations and process improvement initiatives, as well as increased occupancy and business support costs associated with increased staffing levels. For the nine months ended September 30, 2017, general, administrative and other expenses also includes a $2.5 million non–recurring non-income tax paid during the first quarter of 2017.
Performance Related Earnings:
Performance related earnings increased by $8.6 million for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and by $21.0 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Performance related earnings were impacted by the fluctuations in net investment loss.

Net Investment Income (Loss). Net investment income (loss) increased by $8.6 million from a net investment loss of $4.7 million for the three months ended September 30, 2016 to net investment income of $4.0 million for the three months ended September 30, 2017. Net investment income (loss) increased by $21.0 million from a net investment loss of $17.8 million for the nine months ended September 30, 2016 to net investment income of $3.2 million for the nine months ended September 30, 2017. In the third quarter of 2016, we realized a $20.0 million loss on our minority interest equity method investment in Deimos Management Holdings LLC due to the winding down of its operations. Of the $20.0 million realized loss, $14.1 million was recognized as an unrealized loss in the second quarter of 2016. In addition, our other fund investments in non-core investment strategies experienced increases in net investment income of $2.6 million and $0.5 million for the three and nine months ended September 30, 2017, respectively, compared to the prior year periods.
Economic Net Income:
Economic net income is composed of fee related earnings and performance related earnings. Economic net income increased by $2.0 million, or 5%, for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and increased by $1.2 million, or 1%, for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The increase and decrease were a result of the fluctuations described above.
Distributable Earnings:
DE increased by $13.5 million, or 20%, for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 and by $5.9 million, or 4%, for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. DE increased primarily due to net realized investment and other losses of $20.7 million and $22.2 million for the three and nine months ended September 30, 2016, respectively,March 31, 2020 that did not recur in the current year periods. period, driven by our Real Estate Group completing the sale of its stake in a 40-property pan-European logistics portfolio.
The decrease in effective management fee rate for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily due to the increase in committed capital from the launch of our AREOF III and our third European value-add real estate equity fund. Our most recent real estate equity funds pay a fee on committed capital that increases once that capital is invested. 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 $3.5 million, or 28%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The increase in salaries and benefits was primarily driven by higher incentive compensation attributable to improved operating performance and margin expansion from scaling our business, and by headcount and merit increases across all strategies. Average headcount increased by 12% to 104 investment and investment support professionals for the first quarter of 2021 from 93 professionals for the same period in 2020.

General, Administrative and Other Expenses. General, administrative and other expenses increased by $0.4 million, or 12%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The change was driven by an increase in placement fees of $0.5 million, primarily associated with new commitments to AREOF III, and by an increase of $0.2 million in organizational and structuring costs associated with various funds.
The three months ended March 31, 2021 continued to be impacted by the COVID-19 pandemic that began at the end of the first quarter of 2020 and resulted in a decrease in certain operating expenses. During the first quarter of 2021, our operating expenses were partially offsetimpacted by FRE decreases of $6.6 millionlimitations in certain business activities, most notably travel, entertainment and $19.8marketing sponsorships, and by certain office services and fringe benefits from the modified remote working environment. Collectively, these expenses decreased by $0.6 million for the three and nine month respective periodsmonths ended March 31, 2021, when compared to the prior year.same period in 2020.

Realized Income:
The following table presents the components of the Real Estate Group's RI:
Three months ended March 31,Favorable (Unfavorable)
($ in thousands)20212020$ Change% Change
Fee Related Earnings$11,044 $9,540 $1,504 16%
Performance income—realized1,947 26,600 (24,653)(93)
Performance related compensation—realized(1,177)(17,170)15,993 93
Realized net performance income770 9,430 (8,660)(92)
Investment income (loss)—realized(222)1,290 (1,512)NM
Interest and other investment income—realized2,028 796 1,232 155
Interest expense(1,125)(971)(154)(16)
Realized net investment income681 1,115 (434)(39)
Realized Income$12,495 $20,085 (7,590)(38)
Realized net performance income for the three months ended March 31, 2021 was primarily generated from the sale of a property held in a European real estate equity fund. Realized net investment income for the three months ended March 31, 2021 was primarily attributable to a distribution from a real estate debt vehicle.
Realized net performance income and realized net investment income for the three months ended March 31, 2020 were primarily attributable to the sale of a 40-property pan-European logistics portfolio held within multiple European real estate funds.
77
Real Estate Group— Carried Interest and Incentive Fees
The following table presents the accrued carried interest and incentive fees receivable, also referred to as accrued performance income, and related performance compensation for the Real Estate Group:
 As of March 31, 2021As of December 31, 2020
($ in thousands)Accrued Performance IncomeAccrued Performance CompensationAccrued Net Performance IncomeAccrued Performance IncomeAccrued Performance CompensationAccrued Net Performance Income
Accrued Carried Interest
US IX$35,874 $22,241 $13,633 $26,704 $16,556 $10,148 
EF IV55,944 33,567 22,377 55,829 33,498 22,331 
Other real estate funds131,260 83,228 48,032 119,036 75,062 43,974 
Other fee generating funds(1)
2,841 — 2,841 2,786 — 2,786 
Total accrued carried interest225,919 139,036 86,883 204,355 125,116 79,239 
Incentive fees658 395 263 525 315 210 
Total Real Estate Group$226,577 $139,431 $87,146 $204,880 $125,431 $79,449 

(1)Relates to investment income from AREA Sponsor Holdings LLC that is reclassified for segment reporting to align with the character of the underlying income generated.

The following table presents the change in accrued carried interest during the period for the Real Estate Group:
 As of December 31, 2020Activity during the periodAs of March 31, 2021
($ in thousands)Waterfall TypeAccrued Carried InterestChange in UnrealizedRealizedAccrued Carried Interest
US IXEuropean$26,704 $9,170 $— $35,874 
EF IVAmerican55,829 115 — 55,944 
Other real estate fundsEuropean86,592 8,824 — 95,416 
Other real estate fundsAmerican32,444 4,681 (1,281)35,844 
Other fee generating funds(1)
European426 — — 426 
Other fee generating funds(1)
American2,360 55 — 2,415 
Total Real Estate Group$204,355 $22,845 $(1,281)$225,919 

(1)Relates to investment income from AREA Sponsor Holdings LLC that is reclassified for segment reporting to align with the character of the underlying income generated.


78
Real Estate Group—Assets Under Management

The tables below present rollforwards of AUM for the Real Estate Group:
($ in millions)Real Estate Equity - U.S.Real Estate Equity - EuropeReal Estate DebtTotal Real Estate Group
Balance at 12/31/2020$4,404 $4,811 $5,593 $14,808 
Net new par/equity commitments433 94 203 730 
Net new debt commitments— — 1,880 1,880 
Capital reductions— — (232)(232)
Distributions(43)(96)(32)(171)
Change in fund value115 (39)38 114 
Balance at 3/31/2021$4,909 $4,770 $7,450 $17,129 
Average AUM(1)
$4,657 $4,791 $6,522 $15,970 
Real Estate Equity - U.S.Real Estate Equity - EuropeReal Estate DebtTotal Real Estate Group
Balance at 12/31/2019$3,793 $4,588 $4,826 $13,207 
Net new par/equity commitments559 581 420 1,560 
Net new debt commitments— — 226 226 
Distributions(53)(572)(18)(643)
Change in fund value(126)(86)(26)(238)
Balance at 3/31/2020$4,173 $4,511 $5,428 $14,112 
Average AUM(1)
$3,983 $4,550 $5,127 $13,660 
(1) Represents the quarterly average of beginning and ending balances.

The components of our AUM for the Real Estate Group are presented below ($ in billions):
ares-20210331_g22.jpgares-20210331_g23.jpg
AUM: $17.2AUM: $14.1

FPAUMAUM not yet paying feesNon-fee payingGeneral partner and affiliates


79
Real Estate Group—Fee Paying AUM
The tables below present rollforwards of fee paying AUM for the Real Estate Group:
($ in millions)Real Estate Equity - U.S.Real Estate Equity - EuropeReal Estate DebtTotal Real Estate Group
FPAUM Balance at 12/31/2020$3,659 $4,088 $2,505 $10,252 
Commitments301 94 101 496 
Subscriptions/deployment/increase in leverage119 10 208 337 
Capital reductions— — (32)(32)
Distributions(43)(54)(44)(141)
Change in fund value— (122)30 (92)
FPAUM Balance at 3/31/2021$4,036 $4,016 $2,768 $10,820 
Average FPAUM(1)
$3,848 $4,052 $2,637 $10,537 
Real Estate Equity - U.S.Real Estate Equity - EuropeReal Estate DebtTotal Real Estate Group
FPAUM Balance at 12/31/2019$2,635 $3,792 $1,536 $7,963 
Commitments756 539 73 1,368 
Subscriptions/deployment/increase in leverage48 145 287 480 
Capital reductions— (10)(1)(11)
Distributions(22)(186)(18)(226)
Change in fund value— (58)10 (48)
Change in fee basis— (311)— (311)
FPAUM Balance at 3/31/2020$3,417 $3,911 $1,887 $9,215 
Average FPAUM(1)
$3,026 $3,852 $1,712 $8,590 
(1) Represents the quarterly average of beginning and ending balances.

The charts below present FPAUM for the Real Estate Group by its fee basis ($ in billions):
ares-20210331_g24.jpgares-20210331_g25.jpg
FPAUM: $10.8FPAUM: $9.2

Capital commitments
Invested capital/other(1)
Market value(2)


(1)Other consists of ACRE's FPAUM, which is based on ACRE’s stockholders’ equity.
(2)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.
80
Real Estate Group—Fund Performance Metrics as of March 31, 2021

Two significant funds, European Real Estate Fund V SCSp (“EF V”) and AREOF III, collectively contributed approximately 45% of the Real Estate Group’s management fees for the three months ended March 31, 2021.
The following table presents the performance data as of March 31, 2021 for our significant funds in the Real Estate Group, all of which are drawdown funds:
($ 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
EF V(7)
2018$2,141 $1,968 $1,007 $54 $1,175 $1,229 1.2x1.1x17.78.6European Real Estate Equity
AREOF III20191,675 1,697 330 — 334 334 1.0x0.9xNANAU.S. Real Estate Equity

(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 investment level and is based on the interests of all partners. The gross MoIC for all funds is before giving effect to management fees, carried interest and other expenses, as applicable.
(4)The net MoIC is calculated at the fund-level and is based on the interests of the fee-paying partners and, if applicable, excludes interests attributable to the non fee-paying partners and/or the general partner which does not pay management fees, carried interest or has such fees rebated outside of the fund. The net MoIC is after giving effect to management fees, carried interest as applicable and other expenses. 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 investments and the residual value of the investments at the end of the measurement period. Gross IRRs reflect returns to all partners. Cash flows used in the gross IRR calculation are assumed to occur at quarter-end. The gross IRRs are calculated before giving effect to management fees, carried interest and other expenses, as applicable.
(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 partners and, if applicable, exclude interests attributable to the non fee-paying partners and/or the general partner which does not pay management fees or carried interest or has such fees rebated outside of the fund. 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. 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)EF V is made up of two parallel 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 parallel fund. The gross and net MoIC and IRR presented in the chart is for the Euro denominated parallel fund. The gross and net MoIC for the U.S. Dollar denominated parallel fund are 1.2x and 1.1x, respectively. The gross and net IRR for the U.S. Dollar denominated parallel fund are 18.8% and 9.6%, 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 EF V are for the combined fund and are converted to U.S. dollars at the prevailing quarter-end exchange rate.



81
Strategic Initiatives—Three Months Ended March 31, 2021Compared to Three Months Ended March 31, 2020
Strategic Initiatives represents an all-other category formed in 2020 that includes operating segments and strategic investments that are seeking to broaden our distribution channels or expand our access to global markets. It includes the AUM and results of Ares SSG subsequent to the completion of the SSG Acquisition on July 1, 2020 and of Aspida Life Re Ltd subsequent to the acquisition of the outstanding common shares of F&G Re on December 18, 2020.

Strategic Initiatives—Fund Performance Metrics as of March 31, 2021
Strategic Initiatives includes two significant funds, SSG Capital Partners IV, L.P. (“SSG Fund IV”) and SSG Capital Partners V, L.P. (“SSG Fund V”), that collectively contributed approximately 57.8% of the management fees reported in Strategic Initiatives for the three months ended March 31, 2021.
The following table presents the performance data as of March 31, 2021 for our significant funds reported in Strategic Initiatives, all of which are drawdown funds:
($ 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
SSG Fund IV2016$1,336 $1,181 $1,372 $804 $721 $1,525 1.2x1.1x13.6 8.0 Asian Special Situations
SSG Fund V20182,014 1,878 956 328 763 1,091 1.2x1.1x66.5 35.5 Asian Special Situations

(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 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. The gross MoIC 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 other expenses, carried interest and credit facility interest expense, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. The net MoIC 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, 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. The gross fund-level IRR 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 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 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.


Operations Management Group—Three Months Ended March 31, 2021Compared to Three Months Ended March 31, 2020

Fee Related Earnings:
The following table presents OMG's operating expenses that are a component of FRE:
Three months ended March 31,Favorable (Unfavorable)
($ in thousands)20212020$ Change% Change
Compensation and benefits$(44,407)$(36,426)$(7,981)(22)%
General, administrative and other expenses(18,656)(21,305)2,649 12 
Fee Related Earnings$(63,063)$(57,731)(5,332)(9)

Compensation and Benefits. Compensation and benefits increased by $8.0 million, or 22%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The increases were primarily driven by the headcount growth from the expansion of our strategy and relationship management teams to support global fundraising, from the expansion of our business operations teams and from other strategic growth initiatives, including the SSG Acquisition.
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Average headcount for the year-to-date period increased by 20% to 754 operation management professionals for the first quarter of 2021 from 628 professionals for the same period in 2020. Average headcount for our operations management professionals increased by the expansion of our team in India and by the SSG Acquisition of 49 and 43, respectively.
General, Administrative and Other Expenses. General, administrative and other expenses decreased by $2.6 million, or 12%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The three months ended March 31, 2021 continued to be impacted by the COVID-19 pandemic that began at the end of the first quarter of 2020 and resulted in a decrease in certain operating expenses. During the first quarter of 2021, our operating expenses were impacted by limitations in certain business activities, most notably travel, entertainment and marketing sponsorships, and by certain office services and fringe benefits from the modified remote working environment. Collectively, these expenses decreased by $2.4 million for the three months ended March 31, 2021, when compared to the same period in 2020.
During the first quarter of 2020, we recorded $3.3 million in expenses associated with settling an SEC compliance matter that is not expected to recur.
There were certain other expenses that increased during the current period, including occupancy costs to support our growing headcount and information services and information technology to support the expansion of our business. Collectively, these expenses increased by $1.7 million for the three months ended March 31, 2021 when compared to the same period in 2020.
Realized Income:
The following table presents the components of the OMG's RI:

Three months ended March 31,Favorable (Unfavorable)
($ in thousands)20212020$ Change% Change
Fee Related Earnings$(63,063)$(57,731)$(5,332)(9)%
Investment loss—realized— (5,698)5,698 100
Interest and other investment income—realized355 168 187 111
Interest expense(90)(977)887 91
Realized net investment income (loss)265 (6,507)6,772 NM
Realized Income$(62,798)$(64,238)1,440 2

NM - Not Meaningful
Realized net investment loss for the three months ended March 31, 2020 was primarily driven by a realized loss associated with the sale of a non–core insurance-related investment.

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Liquidity and Capital Resources
Management assesses liquidity in terms of our ability to generate cash to fund operating, investing and financing activities. In the wake of the COVID-19 pandemic, 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. For further discussion regarding the potential risks and impact of the COVID-19 pandemic on the Company, see “Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q.

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, which are collected monthly, quarterly or semi-annually, and net realized performance fees,income, which areis unpredictable as to amount and timing, and(4) fund distributions related to our investments that are also unpredictable as to amount and timing and (4)(5) net borrowing provided byfrom the Credit Facility. As of September 30, 2017,March 31, 2021, our cash and cash equivalents were $186.4$609.9 million, including investments in money market funds, and we had $110.0$168.0 million of borrowings outstanding under our $1.065 billion Credit Facility. Our ability to draw from the Credit Facility is subject to a leverage covenant.and other covenants. We remain in compliance with all covenants as of March 31, 2021. 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. 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 a portion of 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 payments under the tax receivable agreement (“TRA”), (5) fund capital expenditures, (6) service our debt, (7) pay income taxes, and (8) make distributionsdividend payments to our Class A common stockholders and preferred unitholdersthe Series A Preferred stockholders in accordance with our distribution policy.

dividend policies and (9) pay distributions to AOG unitholders.
In the normal course of business, we have made distributionsexpect to pay dividends that are aligned with the expected changes in our existing owners, including distributions sourced from investment income and performance fees.after-tax fee related earnings. If cash flows from operations were insufficient to fund distributionsdividends over a sustained period of time, we expect that we would suspend or reduce paying such distributions.dividends. In addition, there is no assurance that dividends would continue at the current levels or at all. Unless quarterly distributionsdividends have been declared and paid (or declared and set apart for payment) on the preferred units,Series A Preferred Stock, we may not declare or pay or set apart payment for distributionsdividends on any shares of our Class A common unitsstock during the period. Dividends on the preferred unitsSeries A Preferred Stock are not cumulative and the preferred units areSeries A Preferred Stock is not convertible into our Class A common unitsstock or any other security.
Net realized performance fees also provide a sourceOur ability to obtain debt financing and complete stock offerings provides us with additional sources of liquidity. Performance fees are realized when a portfolio investment is profitably monetizedFor further discussion of financing transactions occurring in the current period, see “Cash Flows” within this section and the fund’s cumulative returns are“Note 7. Debt” and “Note 13. Equity and Redeemable Interest to our unaudited condensed consolidated financial statements included in excess of the preferred return or hurdle rate. Performance fees are typically realized at the end of each fund’s measurement period when investment performance exceeds a stated benchmark or hurdle rate.this Quarterly Report on Form 10-Q.
Our accrued performance fees by segment as of September 30, 2017 are set forth below:
 As of September 30, 2017
 Accrued Performance Fees Eliminations(1) Consolidated Accrued Performance Fees
Segment(Dollars in thousands)
Credit Group$154,439
 $(4,003) $150,436
Private Equity Group742,011
 —
 742,011
Real Estate Group105,131
 —
 105,131
Total$1,001,581
 $(4,003) $997,578
(1)Amounts represent accrued performance fees earned from Consolidated Funds that are eliminated in consolidation.
Our condensed consolidated financial statements reflect the cash flows of our operating businesses as well as the resultsthose 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, when required to be consolidated into our condensed consolidated financial statements, (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 treatedgenerally accounted for as investment companies for financial accounting purposes 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 typically 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.

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Cash Flows
We consolidate funds where we are deemed to hold a controlling interest. The significant captionsConsolidated Funds are not necessarily the same entities in each year presented due to changes in ownership, changes in limited partners' rights and amountsthe 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 15. Consolidation” to our unaudited condensed consolidated financial statements which includeincluded in this Quarterly Report on Form 10-Q.
 Three months ended March 31,
($ in thousands)20212020
Net cash provided by operating activities$137,408 $127,365 
Net cash used in the Consolidated Funds' operating activities, net of eliminations(878,526)(490,602)
Net cash used in operating activities(741,118)(363,237)
Net cash used in the Company's investing activities(3,284)(38,906)
Net cash provided by (used in) the Company's financing activities(63,442)944,997 
Net cash provided by the Consolidated Funds' financing activities, net of eliminations880,653 500,555 
Net cash provided by financing activities817,211 1,445,552 
Effect of exchange rate changes(2,749)(14,120)
Net change in cash and cash equivalents$70,060 $1,029,289 

Operating Activities
Cash flow from operations is composed of (i) cash generated from our core business activities, primarily consisting of profits generated principally from management fees after covering for operating expenses, (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 of the effects oflast two periods. Although cash generated from our Consolidated Funds and CLOs in accordancecore business activities increased by $89.4 million when compared to the prior year, cash provided by the Company’s operating activities increased by only $10.0 million from $127.4 million for the three months ended March 31, 2020 to $137.4 million for the three months ended March 31, 2021. Net purchases associated with GAAP, are summarized below. Negative amountsour investment portfolio, which represent a net outflow, or use of cash.
 Nine Months Ended September 30,
 2017 2016
 (Dollars in millions)
Statements of cash flows data         
Net cash used in operating activities$(1,192) $(260)
Net cash used in investing activities(28) (8)
Net cash provided by financing activities1,052
 490
Effect of foreign exchange rate change12
 (7)
Net change in cash and cash equivalents$(156) $215
Operating Activitiescash, increased by $62.0 million for the three months ended March 31, 2021 when compared to the prior year period.
Net cash used in the Consolidated Funds' operating activities is primarily driven by our earnings in the respective periods after adjusting for non-cash compensation and unrealized performance fees. Cash usedcontinues to purchase investments, as well as the proceeds from the sale of such investments, is also reflected in the operating activities of the Company and our Consolidated Funds.
Our net cash flows used in operating activities were $1.2 billion for the nine months ended September 30, 2017 comparedbe principally attributable to $259.4 million for the nine months ended September 30, 2016. For the nine months ended September 30, 2017, net purchases of investments were $1.2 billion compared to $495.3 million for the nine months ended September 30, 2016. The change in cash used in operating activities was also driveninvestment securities by fluctuations in our net income.recently launched funds during both years.
Our increasing working capital needs reflect 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. The movements within our Consolidated Funds do not adversely impact our liquidity or earnings trends. We believe that our ability to generate cash from operations, as well as the capacity under the Credit Facility, provides us with the necessary liquidity to manage short-term fluctuations in working capital and to meet our short-term commitments.

Investing Activities
Our
Three months ended March 31,
20212020
Purchase of furniture, equipment and leasehold improvements, net of disposals$(3,284)$(3,062)
Acquisitions, net of cash acquired— (35,844)
Net cash used in investing activities$(3,284)$(38,906)

Net cash used in the Company's investing activities generally reflectwas principally composed of cash used for certain acquisitions and purchases of fixed assets. Purchases of fixed assets were $27.9 million and $8.2 million forto purchase CLO collateral management agreements from Crestline Denali in the nine months ended September 30, 2017 and 2016, respectively. The increase in fixed asset purchases largely relatesprior year. We also used cash to purchase furniture, fixtures, equipment and leasehold improvements relatedpurchased during both years to a new office locationsupport the growth in Los Angeles.our staffing levels and our expanding global presence.
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Financing Activities
Three months ended March 31,
20212020
Net proceeds from issuance of Class A common stock$— $383,334 
Net borrowings of Credit Facility168,000 730,000 
Class A common stock dividends(74,684)(51,090)
AOG unitholder distributions(67,084)(55,748)
Series A Preferred Stock dividends(5,425)(5,425)
Stock option exercises— 19,551 
Taxes paid related to net share settlement of equity awards(84,590)(73,500)
Other financing activities341 (2,125)
Net cash provided by (used in) the Company's financing activities$(63,442)$944,997 

Net cash flowsused in the Company's financing activities for the three months ended March 31, 2021 was principally composed of cash used to pay higher dividends and distributions to Class A common stockholders and AOG unitholders, respectively, as we generated higher fee related earnings on an increased number of Class A shares outstanding compared to the prior year. 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 increased from the prior period primarily as a result of our appreciating 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 three months ended March 31, 2021 and 2020, we retained and did not issue shares of 1.8 million and 2.0 million, respectively.
Net cash provided by the Company's financing activities were $1.1 billion and $489.7 million for the ninethree months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017, financing activities represented a sourceMarch 31, 2020 was principally composed of cash primarily from net borrowings on debt facilities of the Company and our Consolidated funds. For the nine months ended September 30, 2016, net cash inflows were primarily due to net proceeds from the Company’s Credit Facility to enhance our preferredliquidity position as a precautionary measure in response to the uncertainty caused by the COVID-19 pandemic and of cash proceeds from the private offering of Class A common stock issuance and net borrowings on debt facilities of the Consolidated funds, which wereto SMBC, partially offset by cash used to pay dividends and distributions to Class A common stockholders and AOG and common unitholders andunitholders.
Three months ended March 31,
20212020
Contributions from redeemable and non-controlling interests in Consolidated Funds, net of eliminations$941,935 $133,265 
Distributions to non-controlling interests in Consolidated Funds, net of eliminations(38,829)(13,492)
Borrowings under loan obligations by Consolidated Funds7,000 454,391 
Repayments under loan obligations by Consolidated Funds(29,453)(73,609)
Net cash provided by the Consolidated Funds' financing activities$880,653 $500,555 
Net cash provided by net repayments on the Company's debt facilities. For our Consolidated Funds, netFunds' financing activities was principally attributable to contributions were $96.6 million and $31.9 millionfrom shareholders in the initial public offering of the SPAC.
Net cash provided by the Consolidated Funds’ financing activities for the ninethree months ended September 30, 2017 and 2016, respectively.
Net borrowings from our debt obligations were $180.0 million forMarch 31, 2020 was principally attributable to the nine months ended September 30, 2017 compared to net repayments of $110.0 million for the nine months ended September 30, 2016. In the current year period, we had net borrowings under the Credit Facility and the new Term Loans used to support purchases of CLOs that we manage within our risk retention vehicles. Our Consolidated Funds had net borrowings of $971.5 million for nine months ended September 30, 2017 from their debt obligations as compared to $427.1 million for the nine months ended September 30, 2016. The increase in net borrowing activity in 2017 for the Consolidated Funds is related to the launch of new CLOs.

    Distributions to our preferred, AOG and common unitholders were $185.3 million for the nine months ended September 30, 2017 compared to $157.2 million for the nine months ended September 30, 2016. The increase in distributions is consistent with the increase in distributable earnings.a newly issued CLO.
Capital Resources
The following table summarizes the Company's debt obligations (in thousands):
       As of September 30, 2017 December 31, 2016
 Debt Origination Date Maturity Original Borrowing Amount Carrying
Value		 Interest Rate Carrying
Value		 Interest Rate
Credit Facility(1)Revolver 2/24/2022 N/A
 $110,000
 2.75% $—
 —%
Senior Notes(2)10/8/2014 10/8/2024 $250,000
 245,149
 4.21% 244,684
 4.21%
2015 Term Loan(3)9/2/2015 7/29/2026 $35,205
 35,032
 2.79% 35,063
 2.74%
2016 Term Loan(4)12/21/2016 1/15/2029 $26,376
 25,999
 3.02% 26,037
 2.66%
2017 Term Loan A(4)3/22/2017 1/22/2028 $17,600
 17,474
 2.70% N/A
 N/A
2017 Term Loan B(4)5/10/2017 10/15/2029 $35,198
 35,147
 2.63% N/A
 N/A
2017 Term Loan C(4)6/22/2017 7/30/2029 $17,211
 17,206
 2.75% N/A
 N/A
Total debt obligations      $486,007
   $305,784
  
(1)
The AOG entities are borrowers under the Credit Facility, which, as amended in February 2017 and increased in September 2017, provides a $1.065 billion revolving line of credit. It has a variable interest rate based on LIBOR or a base rate plus an applicable margin with an unused commitment fee paid quarterly, which is subject to change with the Company’s underlying credit agency rating. As of September 30, 2017, base rate loans bear interest calculated based on the base rate plus 0.50% and the LIBOR rate loans bear interest calculated based on LIBOR plus 1.50%. The unused commitment fee is 0.20% per annum. There is a base rate and LIBOR floor of zero.
(2)
The Senior Notes were issued in October 2014 by Ares Finance Co. LLC, a subsidiary of the Company, at 98.268% of the face amount with interest paid semi-annually. The Company may redeem the Senior Notes prior to maturity, subject to the terms of the indenture.
(3)
The 2015 Term Loan was entered into in August 2015 by a subsidiary of the Company that acts as a manager to a CLO. The 2015 Term Loan is secured by collateral in the form of CLO senior tranches owned by the Company. To the extent the assets are not sufficient to cover the Term Loan, there is no further recourse to the Company to fund or repay the remaining balance. Interest is paid quarterly, and the Company also pays a fee of 0.025% of a maximum investment amount.
(4)The 2016 and 2017 Term Loans ("Term Loans") were entered into by a subsidiary of the Company that acts as a manager to a CLO. The Term Loans are secured by collateral in the form of CLO senior tranches and subordinated notes owned by the Company. Collateral associated with one of the Term Loans may be used to satisfy outstanding liabilities of another term loan should the collateral fall short. To the extent the assets associated with these Term Loans are not sufficient, there is no further recourse to the Company to fund or repay the remaining balance. Interest is paid quarterly, and the Company also pays a fee of 0.03% of a maximum investment amount.

As of September 30, 2017, we were in compliance with all covenants under the Credit Facility, Senior Notes and Term Loan obligations.
On February 24, 2017, we amended our Credit Facility to, among other things, increase the size of the Credit Facility from $1.03 billion to $1.04 billion and extend the maturity date from April 2019 to February 2022. Under the terms of the amended Credit Facility, based on our current credit agency ratings, the stated interest rate is LIBOR plus 1.50% with an unused commitment fee of 0.20%.

In September 2017, we increased our Credit Facility to $1.065 billion from $1.04 billion. The $25 million increase resulted from the exercise of the facility’s accordion feature and the addition of a new bank to the facility. No other terms of the revolving credit facility were impacted by the increase.

We intend to use a portion of our available liquidity to makepay cash distributionsdividends to our preferredSeries A Preferred stockholders and our Class A common unitholdersstockholders on a quarterly basis in accordance with our distributiondividend policies. Our ability to make cash distributionsdividends to the Series A Preferred stockholders and our preferred andClass A common unitholdersstockholders 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 United Kingdom subsidiarybroker-dealer and for our subsidiary that operates as a broker-dealer.certain subsidiaries operating outside the U.S. These net capital requirements are met in part by retaining cash, cash‑cash equivalents and investment securities. As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions. As of September 30, 2017,March 31, 2021, we were required to maintain approximately $24.2$37.0 million in liquid net assets within these
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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 Ares Management, L.P.shares of our Class A common unitsstock on a one-for-one basis. SubsequentThese exchanges are expected to result in increases in the tax basis of the tangible and intangible assets of Ares Management, L.P.AMC that otherwise would not have been available. These increases in tax basis may increase (for tax purposes) depreciation and amortization for U.S. income tax purposes and thereforethereby reduce the amount of tax that Ares Management, L.P.’s wholly owned subsidiaries that are taxable as corporations for U.S. federal income purposes, which we refer to as the “corporate taxpayers,” would otherwise be required to pay in the future. The corporate taxpayersWe entered into the TRA withthat provides payment to the TRA recipients that will provide for the payment by the corporate taxpayers 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 the corporate taxpayerswe 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. This payment obligation is an obligation of the corporate taxpayers and not of Ares Management, L.P. Future payments under the TRA in respect of subsequent exchanges are expected to be substantial. The TRA liability balance was $61.1 million as of March 31, 2021.
Preferred EquityFor a discussion of our debt obligations, including the debt obligations of our consolidated funds, see "Note 7. Debt,” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
As of September 30, 2017 and December 31, 2016, the Company had 12,400,000 units of Series A Preferred Units (the “Preferred Equity”) outstanding. When, asStock
For a discussion of our equity, including our Series A Preferred Stock, see "Note 13. Equity and if declared by the Company’s board of directors, distributions on the Preferred Equity are paid quarterly at a rate per annum equal to 7.00%. The Preferred Equity may be redeemable at our option, in whole or in part, at any time on or after June 30, 2021, at a price of $25.00 per unit.
Cash distributionsRedeemable Interest,” to our common unitholders may be impacted by any corporate tax liability owed by Ares Holdings, Inc. (“AHI”), the wholly owned U.S. corporate subsidiary of the Company. In connection with the Preferred Equity issuance, the Ares Operating Group issued mirror preferred units (“GP Mirror Units”), which pay the same 7.00% rate per annum to wholly owned subsidiaries of the Company including AHI. Although income allocatedunaudited condensed consolidated financial statements included in respect of distributionsthis Quarterly Report on the GP Mirror Units made to AHI is subject to tax, cash distributions to our preferred unitholders will not be reduced on account of any income taxes owed by AHI. As a result, the amounts ultimately distributed by us to our common unitholders may be reduced by any corporate taxes imposed on AHI.Form 10-Q.


Critical Accounting Estimates
We prepare our 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 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.

Except as disclosed below, there have been no material changes to the critical accounting estimates previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020. For a summary of our significant accounting policies, see Note 2, “Summary"Note 2. Summary of Significant Accounting Policies,” to our condensed consolidated financial statements included in this Quarterly Report on Form 10‑Q10-Q and in our Annual Report on Form 10-K. 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.
Fair Value Measurement
Equity-Based Compensation

We granted certain restricted units with a vesting condition based upon the volume-weighted, average closing price of shares of our Class A common stock meeting or exceeding a stated price for 30 consecutive calendar days on or prior to January 22, 2029, referred to as the market condition. Vesting is also generally subject to continued employment at the time such market condition is achieved. Under the terms of the awards, if the target price of the applicable market condition is not achieved by the close of business on January 22, 2029, the unvested market condition awards will be automatically canceled and forfeited for no consideration, with any expense that was previously recognized reversed. Restricted units subject to a market condition are not eligible to receive dividend equivalents.

The table below summarizesgrant date fair values are based on a probability distributed Monte-Carlo simulation. Due to the valuationexistence of investmentsthe market condition, the vesting period for the awards is not explicit, and other financial instruments included within our AUM, by segment andas such, compensation expense is recognized on a straight-line basis over the median vesting period derived from the positive iterations of the Monte Carlo simulations where the market condition is achieved.

Below is a summary of the significant assumptions used to estimate the grant date fair value hierarchy levels, as of September 30, 2017:market condition awards:

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 Credit Private Equity Real Estate Total
 (Dollars in millions)
Level I$622
 $2,785
 $—
 $3,407
Level II9,640
 404
 (78) 9,966
Level III28,116
 11,478
 5,330
 44,924
Total fair value38,378
 14,667
 5,252
 58,297
Other net asset value and available capital(1)32,099
 9,908
 5,341
 47,348
Total AUM$70,477
 $24,575
 $10,593
 $105,645
(1)Closing price of the Company's common shares as of grant date
Includes fund net non-investment assets, AUM for funds that are not reported at fair value and available capital (uncalled
$45.76
Risk-free interest rate0.88%
Volatility35.0%
Dividend yield3.5%
Cost of equity capital and undrawn debt).10.0%

Recent Accounting Pronouncements
Information regarding recent accounting pronouncements and their impact on the Company can be found in Note 2, “Summary“Note 2. Summary of Significant Accounting Policies,”Policies” in the “Notes to the Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10‑Q10-Q and in our Annual Report on Form 10-K.

Off‑Balance
Off-Balance Sheet Arrangements
In the normal course of business, we engage in off‑balanceoff-balance sheet arrangements, including transactions in derivatives, guarantees, commitments, indemnifications and potential contingent repayment obligations. See Note 8, "Commitments“Note 8. Commitments and Contingencies,"” to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Commitments and Contingencies
Capital
For further discussion of our capital commitments, indemnification arrangements and contingent obligations, see “Note 8. Commitments
As of September 30, 2017 and December 31, 2016, we had aggregate unfunded commitments of $316.5 million and $535.3 million, respectively, including commitmentsContingencies,” to both non-consolidated funds and Consolidated Funds. Total unfunded commitments included $20.0 million and $89.2 million in unfunded commitments to funds not managed by us as of September 30, 2017 and December 31, 2016, respectively.
ARCC Fee Waiver

In conjunction with the ARCC-ACAS Transaction, we agreed to waive up to $10 million per quarter of ARCC's Part I Fees for ten calendar quarters, which began in the second quarter of 2017. ARCC Part I Fees will only be waived to the extent they are paid. If Part I Fees are less than $10 million in any single quarter the shortfall will not carryover to the subsequent quarters.

There are eight remaining quarters as part of the fee waiver agreement with a maximum of $80 million in potential waivers. ARCC Part I Fees are presented herein net of the fee waiver.
Indemnifications
Consistent with standard business practices in the normal course of business, we enter into contracts that contain indemnities for our affiliates, persons acting on our behalf or such affiliates and third parties. The terms of the indemnities vary from contract to contract and the maximum exposure under these arrangements, if any, cannot be determined and has not been recorded in ouraudited consolidated financial statements. As of September 30, 2017, we have not had prior claims or losses pursuant to these contracts and expect the risk of loss to be remote.statements included in this Quarterly Report on Form 10-Q.
Contingent Obligations
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. 
The partnership documents governing our funds generally include a contingent repayment provision that, if triggered, may give rise to a contingent obligation that may require the general partner to return amounts to the fund for distribution to investors. Therefore, performance fees, generally, are subject to reversal in the event that the funds incur future losses. These losses are limited to the extent of the cumulative performance fees recognized in income to date. Due in part to our investment performance and the fact that our performance fees are generally determined on a liquidation basis, as of September 30, 2017 and December 31, 2016, if the funds were liquidated at their fair values, there would have been no contingent repayment obligation or liability. There can be no assurance that we will not incur a contingent repayment obligation in the future. If all of the existing investments were deemed worthless, the amount of cumulative revenues that has been recognized would be reversed. We believe that the possibility of all of the existing investments becoming worthless is remote. At September 30, 2017 and December 31, 2016, had we assumed all existing investments were worthless, the amount of carried interest, net of tax, subject to contingent repayment would have been approximately $471.8 million and $418.3 million, respectively, of which approximately $366.6 million and $323.9 million, respectively, would be reimbursable to the Company by certain professionals who are the recipients of such performance fees.
Performance fees are also affected by changes in the fair values of the underlying investments in the funds that we advise. Valuations, on an unrealized basis, can be significantly affected by a variety of external factors including, but not limited to, bond yields and industry trading multiples.
Our senior professionals 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 our funds provide that if a current or former professional does not fund his or her respective share for such fund, then we may have to fund additional amounts beyond what we received in carried interest, although we will generally retain the right to pursue any remedies that we have 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 us if we have recognized more performance fees 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.

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 feesincome and investment income. Uncertainty with respect to the economic effects of the COVID-19 pandemic has introduced uncertainty in the financial markets, and the effects of this uncertainty could materially impact our market risks, including those listed below. For additional information concerning the COVID-19 pandemic and its potential impact on our business and our operating results, see Item 1A. "Risk Factors" in our Annual Report on Form 10-K.
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. TheyIt may also decline due to factors that affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry.
Our credit orientation has been a central tenet of our business across our debt and equity investment strategies. Our investment professionals benefit from our independent research and relationship networks in over 50 industries, and insights from our portfolio of active investments. 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.

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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 March 31, 2021 and December 31, 2020, 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 ninethree months ended September 30, 2017.March 31, 2021. For additional information on our market risks, refer to our Annual Report on Form 10-K for the year ended December 31, 2016,2020, which is accessible on the SEC's website at sec.gov.

Item 4.  Controls Andand Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as that term is defined in Rules 13a‑15(e)13a-15(e) and 15d‑15(e)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 co-principalprincipal executive officersofficer 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, 2017.March 31, 2021. Based upon that evaluation and subject to the foregoing, our principal executive officersofficer and principal financial officer concluded that, as of September 30, 2017,March 31, 2021, 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)13a-15(f) and 15d‑15(f)15d-15(f) under the Exchange Act) during the quarter ended September 30, 2017March 31, 2021 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, 2017March 31, 2021 and December 31, 2016,2020, 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
For a discussion of ourIn addition to the other potential risksinformation set forth in this report, you should carefully consider the risk factors described below and uncertainties, see the information underin Part I, “Item 1A.1A, Risk Factors” in our Annual Report on Form 10‑K10-K for the year ended December 31, 2016,2020, which could materially affect our business, financial condition and/or operating results. The risks described below and in our Annual Report on Form 10-K for the year ended December 31, 2020 are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

The rapid development and fluidity of the ongoing COVID-19 pandemic precludes any prediction as to the ultimate adverse impact of the situation on economic and market conditions. In addition to the foregoing, COVID-19 may exacerbate the potential adverse effects on our business, financial performance, operating results, cash flows and financial condition described in the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC. Our Annual Report on Form 10-K for the year ended December 31, 2020 is accessible on the SEC’s website at www.sec.gov. There

Risks Related to Our Businesses

The COVID-19 pandemic has caused severe disruptions in the U.S. and global economy, has disrupted, and may continue to disrupt, industries in which we, our funds and our funds’ portfolio companies operate and could potentially negatively impact us, our funds or our funds’ portfolio companies.

Over the past year, the COVID-19 pandemic has resulted in a global and national health crisis, adversely impacted global commercial activity and contributed to significant volatility in equity and debt markets. Many countries and states in the United States, including those in which we, our funds’ and our funds’ portfolio companies operate, issued (and continue to re-issue) orders requiring the closure of, or certain restrictions on the operation of, nonessential businesses and/or requiring residents to stay at home. The COVID-19 pandemic and preventative measures taken to contain or mitigate its spread have caused, and are continuing to cause, business shutdowns or the re-introduction of business shutdowns, cancellations of events and restrictions on travel, significant reductions in demand for certain goods and services, reductions in business activity and financial transactions, supply chain interruptions and overall economic and financial market instability both globally and in the United States. Such measures, as well as the general uncertainty surrounding the dangers and impact of the COVID-19 pandemic, have created significant disruption in supply chains and economic activity and have had a particularly adverse impact on the energy, hospitality, travel, retail and restaurant industries, as well as other industries, including industries in which certain of our funds’ portfolio companies operate. Such effects will likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter. While several countries, as well as certain states, counties and cities in the United States, relaxed the early public health restrictions with a view to partially or fully reopening their economies, many cities, both globally and in the United States, subsequently experienced a surge in the reported number of cases and hospitalizations related to the COVID-19 pandemic. This increase in cases led to the re-introduction of such restrictions and business shutdowns in certain states, counties and cities in the United States and globally and could lead to the re-introduction of such restrictions elsewhere. In December 2020, the Federal Food and Drug Administration authorized COVID‑19 vaccines and the distribution of such vaccines has commenced. However, it remains unclear how quickly “herd immunity” will be achieved and whether the restrictions that were imposed to slow the spread of the virus will be lifted entirely. These uncertainties could lead people to continue to refrain from participating in the economy at pre-pandemic levels for a prolonged period of time. Even after the COVID-19 pandemic subsides, the U.S. economy and most other major global economies may experience a recession, and we anticipate our and our funds’ business and operations, as well as the business and operations of our funds’ portfolio companies, could be materially adversely affected by a prolonged recession in the U.S. and other major markets.

The extent of the impact of the COVID-19 pandemic (including the restrictive measures taken in response thereto) on our and our funds’ operational and financial performance will depend on many factors, including the duration, severity and scope of the public health emergency, the actions taken by governmental authorities to contain its financial and economic
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impact, the continued implementation of travel advisories and restrictions, the impact of such public health emergency on overall supply and demand, goods and services, investor liquidity, consumer confidence and levels of economic activity and the extent of its disruption to global, regional and local supply chains and economic markets, all of which are uncertain and difficult to assess. The COVID-19 pandemic is continuing as of the filing date of this Quarterly Report and its extended duration may have further adverse impacts on our business, financial performance, operating results, cash flows and financial condition, including the market price of shares of our securities, including for the reasons described below.

The effects of a public health crisis such as the COVID-19 pandemic may materially and adversely impact our value and performance and the value and performance of our funds and our funds’ portfolio companies. Further, the impact of the COVID-19 pandemic may not be fully reflected in the valuation of our or our funds’ investments, which may differ materially from the values that we may ultimately realize with respect to such investments. Our valuations, and particularly valuations of our interests in our funds and our funds’ investments, reflect a moment in time, are inherently uncertain, may fluctuate over short periods of time and are often based on subjective estimates, comparisons and qualitative evaluations of private information. Valuations, on an unrealized basis, can also be significantly affected by a variety of external factors including, but not limited to, public equity market volatility, industry trading multiples and interest rates, all of which have been noimpacted and continue to be impacted by the COVID-19 pandemic. It is uncertain whether such valuations may decline and could become increasingly difficult to ascertain depending on the pace of recovery. As a result, the valuations of our interests in our funds and our funds’ investments, may not show the complete or continuing impact of the COVID-19 pandemic and the resulting measures taken in response thereto. Accordingly, our funds may incur additional net unrealized losses or may incur realized losses in the future, which could have a material changesadverse effect on our business, financial condition and results of operations. Any public health emergency, including the COVID-19 pandemic or any outbreak of other existing or new epidemic diseases, or the threat thereof, and the resulting financial and economic market uncertainty could have a significant adverse impact on us, the fair value of our and our funds’ investments and could adversely impact our funds’ ability to fulfill our investment objectives.

Our ability to market and raise new or successor funds in the future may be impacted by the continuation and reintroduction of shelter-in-place orders, travel restrictions and social distancing requirements implemented in response to the COVID-19 pandemic. This may reduce or delay anticipated fee revenues. In addition, the significant volatility and declines in valuations in the global markets as well as liquidity concerns may impact our ability to raise funds or deter fund investors from investing in new or successor funds that we are marketing.

Our funds may experience a slowdown in the pace of their investment activity and capital deployment, which could also adversely affect the timing of raising capital for new or successor funds and could also impact the management fees we earn on funds that generate fees based on invested (and not committed) capital. While the increased volatility in the financial markets caused by the COVID-19 pandemic may present attractive investment opportunities, we or our funds may not be able to complete those investments due to, among other factors, increased competition or operational challenges such as our ability to obtain attractive financing, conduct due diligence and consummate the acquisition and disposition of investments for our funds because of continued and re-introduced shelter-in-place orders, travel restrictions and social distancing requirements.

If the impact of the COVID-19 pandemic and current market conditions continue, we and our funds may have fewer opportunities to successfully exit investments, due to, among other reasons, lower valuations, decreased revenues and earnings, lack of potential buyers with financial resources or access to financing to pursue an acquisition, lack of refinancing markets, resulting in a reduced ability to realize value from such investments at attractive valuations or at all, and thereby negatively impacting our realized income.

Adverse market conditions resulting from the COVID-19 pandemic may impact our liquidity. Our cash flows from management fees may be impacted by, among other things, a slowdown in fundraising or delayed deployment. Cash payment of adverse market conditions may make it difficult for us to refinance our existing indebtedness or obtain new indebtedness with similar terms and any failure to do so could have a material adverse effect on our business. The capital that will be available to us in the future, if at all, may be at a higher cost and on less favorable terms and conditions than we currently experience. While our senior professionals have historically made co-investments in our funds alongside our limited partners, thereby reducing our obligation to make such investments, due to financial uncertainty or liquidity concerns, our employees may be less likely to make co-investments, which would result in such general partner commitments remaining our obligation to fund and reducing our liquidity. In addition, our funds may be impacted due to failure by our fund investors to meet capital calls, which would negatively impact our funds’ ability to make investments or pay us management fees.

The COVID-19 pandemic is having a particularly severe impact on certain industries, including but not limited to the energy, hospitality, travel, retail and restaurant industries, which are industries in which some of our funds have made investments. As of March 31, 2021, approximately 2% of our total AUM was invested in the energy sector (including oil and
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gas exploration and midstream investments) and approximately 2% in the retail sector that were challenged from the market disruption and volatility seen in the recent past as a result of the COVID-19 pandemic. Many of our funds’ portfolio companies in these industries have faced and are continuing to face operational and financial challenges resulting from the spread of COVID-19 and related governmental measures, such as the closure of stores, hotels, restaurants and other locations, restrictions on travel, quarantines or continued and re-introduced stay-at-home orders. As a result of these disruptions, the businesses, financial results and prospects of certain of these portfolio companies have already been severely affected and could continue to be so affected. These disruptions have caused and may in the future result in impairment and decrease in value of our funds’ investments, which may be material.

Our funds’ portfolio companies are also facing or may face in the future increased credit and liquidity risk due to volatility in financial markets, reduced or eliminated revenue streams, and limited or higher cost of access to preferred sources of funding. Changes in the debt financing markets are impacting, and, if the volatility in financial markets continues, may in the future impact, the ability of our funds’ portfolio companies to meet their respective financial obligations and continue as going concerns. This could lead to the insolvency and/or bankruptcy of these companies which would cause our funds to realize losses in respect of those investments. Any of the foregoing would adversely affect our results of operations, perhaps materially, and could harm our reputation.

Our funds may experience similar credit and liquidity risk. Failure of our funds to meet their financial obligations could result in our funds being required to repay indebtedness or other financial obligations immediately in whole or in part, together with any attendant costs, and our funds could be forced to sell some of their assets to fund such costs. Our funds could lose both invested capital in, and anticipated profits from, the affected investment.

Borrowers of loans and other credit instruments made by our funds may be unable to make their loan payments on a timely basis and meet their loan covenants, and tenants leasing real estate properties owned by our funds may not be able to pay rents in a timely manner or at all, resulting in a decrease in value of our funds’ credit and real estate investments and lower than expected returns. In addition, for variable interest instruments, lower reference rates resulting from government stimulus programs in response to the COVID-19 pandemic could lead to lower interest income for funds making loans.

The COVID-19 pandemic may adversely impact our business and operations since an extended period of remote working by our employees could strain our technology resources and introduce operational risks, including heightened cybersecurity risk. While we have taken steps to secure our networks and systems, remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts that seek to exploit the COVID-19 pandemic. In addition, our data security, data privacy, investor reporting and business continuity processes could be impacted by a third party’s inability to perform due to the COVID-19 pandemic or by failures of, or attacks on, their information systems and technology. In addition, COVID-19 presents a significant threat to our employees’ well-being and morale, and we may experience potential loss of productivity. If our senior management or other key personnel become ill or are otherwise unable to perform their duties for an extended period of time, we may experience a loss of productivity or a delay in the implementation of certain strategic plans. In addition to any potential impact of such extended illness on our operations, we may be exposed to the risk factors disclosedof litigation by our employees against us for, among other things, failure to take adequate steps to protect their well-being, particularly in the event they become sick after a return to the office. Further, local COVID-19 related laws can be subject to rapid change depending on public health developments, which can lead to confusion and make compliance with laws uncertain and subject us, our 2016 Form 10‑K.funds or our funds’ portfolio companies to increased risk of litigation for non-compliance.


Additionally, due to stay-at-home orders, travel restrictions, and other COVID-19 related responses, many of our staff cannot travel for in-person meetings and/or have been working remotely outside of their usual work location. This could create taxable presence or residency risks for our corporate entities, professionals, funds and portfolio companies, which could lead to increased tax liability and additional compliance complexities.

Regulatory oversight and enforcement may become more rigorous for the financial services industry and other regulated industries as a result of the impact of the COVID-19 pandemic on the financial markets, especially in the wake of the array of governmental financial assistance programs provided by state and national governments around the world. In addition, new laws or regulations that are passed in response to the COVID-19 pandemic could adversely impact investment management firms. These changes may result in a more complex regulatory, tax and political environment, which could subject us to increased compliance costs and administrative burdens.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.

We did not sell any equity securities during the period covered in this report that were not registered under the
Securities Act of 1933.

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)
January 1, 2021 - January 31, 2021—$— —$150,000 
February 1, 2021 - February 28, 2021—— —150,000 
March 1, 2021 - March 31, 2021—— —150,000 
Total——

(1)In February 2021, 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 February 2022. 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.Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act



Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”) and Section 13(r) of the Exchange Act, require an issuer to disclose in its annual and quarterly reports whether it or any of its affiliates have knowingly engaged in specified activities or transactions relating to Iran. On January 31, 2019, funds and accounts managed by Ares’ European direct lending strategy (together, the “Ares funds”) collectively acquired a 32% equity stake in Daisy Group Limited (“Daisy”). Daisy is a provider of communication services to businesses based in the United Kingdom. The Ares funds do not hold a majority equity interest in Daisy and do not have the right to appoint a majority of directors to Daisy’s board of directors.

Subsequent to completion of the Ares funds’ investment in Daisy, in connection with Ares’s routine quarterly survey of its investment funds’ portfolio companies, Daisy informed the Ares funds that it has customer contracts with Melli Bank Plc and Persia International Bank Plc. Both Melli Bank Plc and Persia International Bank Plc have been designated by the Office of Foreign Assets Control within the U.S. Department of Treasury pursuant to Executive Order 13324. Daisy generated a total of £74,774 in annual revenues (less than 0.02% of Daisy’s annual revenues) from its dealings with Melli Bank Plc and Persia International Bank Plc and de minimis net profits. Daisy entered into the customer contracts with Melli Bank Plc and Persia International Bank Plc prior to the Ares funds’ investment in Daisy.
Daisy has given notice of termination of the contracts to Melli Bank Plc and Persia International Bank Plc. Following termination of the contracts, Daisy does not intend to engage in any further dealings or transactions with Melli Bank Plc or Persia International Bank Plc.


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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
3.13.1**
Second Amended and Restated Certificate of Limited PartnershipIncorporation of Ares Management L.P.Corporation.
3.2
Bylaws of Ares Management Incorporation (incorporated by reference to Exhibit 3.199.4 to the Registrant’s AnnualCurrent Report on Form 10-K for the year ended December 31, 20158-K (File No. 001-36429,001-36429) filed with the SEC on February 29, 2016)November 15, 2018).
3.210.1**
SecondFourth Amended and Restated Limited Partnership Agreement of Ares Management,Holdings L.P., dated June 8, 2016 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8‑K (File No. 001‑36429) filed with the SEC on June 9, 2016).April 1, 2021.
10.2**
Third Amended & Restated 2014 Equity Incentive Plan.
10.3**
Fifth Amended and Restated Exchange Agreement, dated April 1, 2021.
10.4**
Third Amended and Restated Tax Receivable Agreement, dated April 1, 2021.
10.5**
Form of Indemnification Agreement.
31.1*
Certification of the Chief Executive Officer pursuant to Rule 13a‑14(a)13a-14(a).
31.2*
Certification of the Chief Financial Officer pursuant to Rule 13a‑14(a)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.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*Cover 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.
** Filed herewith.herewith



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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: May 6, 2021By:/s/ Michael J Arougheti
Name:Michael J Arougheti
Title:Co-Founder, Chief Executive Officer & President (Principal Executive Officer)
Dated: May 6, 2021ARES MANAGEMENT, L.P.
By:
By:Ares Management GP LLC, its general partner
Dated: November 6, 2017By:/s/ Antony P. Ressler
Name:Antony P. Ressler
Title:Chairman, Co‑Founder & Chief Executive Officer (Principal Executive Officer)
Dated: November 6, 2017By:/s/ Michael R. McFerran
Name:Michael R. McFerran
Title:Executive Vice PresidentChief Operating Officer & Chief Financial Officer (Principal Financial and Accounting Officer)





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