Ares Management Corp 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations AMC is a Delaware corporation. Unless the context otherwise requires, references to “Ares,” “we,” “us,” “our,” and the “Company” are intended to mean the business and operations of AMC and its consolidated subsidiaries. The following discussion analyzes the financial condition and results of operations of the Company. “Consolidated Funds” refers collectively to certain Ares funds, co-investment vehicles, CLOs and SPACs that are required under generally accepted accounting principles in the United States (“GAAP”) to be consolidated within our consolidated financial statements included in this Annual Report on Form 10-K. Additional terms used by the Company are defined in the Glossary and throughout the Management’s Discussion and Analysis in this Annual Report on Form 10-K. The following discussion and analysis should be read in conjunction with the consolidated financial statements of AMC and the related notes included in this Annual Report on Form 10-K. This section of the Annual Report on Form 10-K discusses activity as of and for the years ended December 31, 2023 and 2022. For discussion on activity for the year ended December 31, 2021 and period-over-period analysis on results for the year ended December 31, 2022 to 2021, refer to Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022. Amounts and percentages presented throughout our discussion and analysis of financial condition and results of operations may reflect rounded results in thousands (unless otherwise indicated) and consequently, totals may not appear to sum. In addition, illustrative charts may not be presented at scale. “NM” refers to not meaningful. Period-over-period analysis for current year compared to prior year may be deemed to be not meaningful and are designated as “NM” within the discussion and analysis of financial condition and results of operations. Trends Affecting Our Business We believe that our disciplined investment philosophy across our distinct but complementary investment groups contributes to the stability of our performance throughout market cycles. For the year ended December 31, 2023, approximately 95% of our management fees were derived from perpetual capital vehicles and long-dated funds. Our funds have a stable base of committed capital enabling us to invest in assets with a long-term focus over different points in a market cycle and to take advantage of market volatility. However, our results from operations, including the fair value of our AUM, are affected by a 104 Table of Contents variety of factors. Conditions in the global financial markets and economic and political environments may impact our business, particularly in the U.S., Western Europe and Asia. The following table presents returns of selected market indices: Returns (%) Type of Index Name of Index Region Year ended December 31, 2023 Year ended December 31, 2022 High yield bonds ICE BAML High Yield Master II Index U.S. 13.5 (11.2) High yield bonds ICE BAML European Currency High Yield Index Europe 12.2 (11.5) Leveraged loans Credit Suisse Leveraged Loan Index (“CSLLI”) U.S. 13.0 (1.1) Leveraged loans Credit Suisse Western European Leveraged Loan Index Europe 12.5 (3.3) Equities S&P 500 Index U.S. 26.3 (18.1) Equities MSCI All Country World Ex-U.S. Index Non-U.S. 15.6 (16.0) Real estate equities FTSE NAREIT All Equity REITs Index U.S. 11.4 (24.9) Real estate equities FTSE EPRA/NAREIT Developed Europe Index Europe 17.4 (36.5) During 2023, global markets endured heightened volatility but finished the year positively with improving investor sentiment amid the possibility of monetary easing in 2024. Despite the macroeconomic headwinds and escalated conflicts in the Middle East and Ukraine, U.S. and European high yield bonds and leveraged loans returned positive performance. The Asian markets experienced mixed performance as the region overall continued to show growth primarily driven by resilient demand in Southeast Asia and India. India, in particular, demonstrated healthy economic growth driven by its manufacturing and services sectors. On the other hand, China’s weaker than expected economic recovery led Chinese policymakers to continue taking measures to support economic growth. Overall, reduced lending activity by banks and limited capital accessibility continued to fuel private credit growth. Global equity markets similarly rallied during the fourth quarter to finish the year on a positive note. While the public markets ended the year positively, the private markets continued to experience challenges with downward pressure on valuations and muted the opportunities for realizations. The private equity markets also experienced a prolonged slowdown in deal activity, and we believe potential liquidity constraints from investors have increased the need for flexible capital solutions. In addition, businesses have struggled to navigate this challenging growth and inflationary environment, which we believe has heightened the need for partnerships with value-add managers. This environment underscores the importance of investing in resilient industries with long-term secular tailwinds where we have expertise. Our focus continues to be on investment opportunities in the healthcare and services sectors, with limited exposure to energy, and we continue to invest opportunistically in consumer and industrials. Asset selectivity, deliberate portfolio construction, a flexible investment mandate and a differentiated view to drive value creation through earnings growth will be instrumental in delivering attractive returns to investors. The commercial real estate markets continued to be impacted by the macroeconomic environment throughout 2023. European and U.S. real estate deal activity remained subdued with limited transactional liquidity. Given the higher interest rate environment, property valuations remain soft, with capitalization rate yields widening further over the year. However, we believe certain of these market trends will be offset by continued strong fundamentals, such as occupancy and rental rates, in property types that include multifamily and industrial. The current market environment has had a more pronounced negative impact on certain industries, including energy, which is an industry in which few of our funds have made investments. As of December 31, 2023, 1% of our total AUM was invested in debt and equity investments in the energy sector (of which less than 1% of our total AUM was invested in midstream investments and also includes oil and gas exploration) and less than 1% of our total AUM was invested in renewable energy investments. We believe our portfolios across all strategies are well positioned for a fluctuating interest rate environment. On a market value basis, approximately 85% of our debt assets and 57% of our total assets were floating rate instruments as of December 31, 2023. In 2023, some of the considerations pertaining to our strategic decisions included: • Our ability to fundraise and increase AUM and fee paying AUM. During the year ended December 31, 2023, we raised $74.5 billion of gross new capital across our commingled funds, SMAs and other vehicles, and continued to expand our investor base, raising capital from over 125 different investment vehicles and over 625 institutional investors, including 105 Table of Contents approximately 300 direct institutional investors that were new to Ares. Our fundraising efforts helped drive AUM growth of 19% for 2023. During 2024, we expect that our fundraising will come from a combination of our existing and new strategies in the U.S., Europe and APAC. As of December 31, 2023, AUM not yet paying fees includes $62.9 billion of AUM available for future deployment which could generate approximately $621.6 million in potential incremental annual management fees. Our potential future deployment, coupled with our future fundraising prospects, gives us the opportunity to increase our management fees in 2024. • Our ability to attract new capital and investors with our broad multi-asset class product offering. Our ability to attract new capital and investors in our funds is driven, in part, by the extent to which they continue to see the alternative asset management industry generally, and our investment products specifically, as an attractive vehicle for capital appreciation and income generation. We continually seek to create avenues to meet our investors’ evolving needs by offering an expansive range of funds, developing new products and creating managed accounts and other investment vehicles tailored to our investors’ goals. We continue to expand our distribution channels, expanding into the retail channel through our global wealth management offerings, as well as the needs of traditional institutional investors, such as pension funds, sovereign wealth funds, and endowments. If market volatility persists or increases, investors may seek absolute return strategies that seek to mitigate volatility. We offer a variety of investment strategies depending upon investors’ risk tolerance and expected returns. • Our disciplined investment approach and successful deployment of capital. Our ability to maintain and grow our revenue base is dependent upon our ability to successfully deploy the capital that our investors have committed to our funds. Greater competition, high valuations, cost of credit and other general market conditions have affected and may continue to affect our ability to identify and execute attractive investments. Under our disciplined investment approach, we deploy capital only when we have sourced a suitable investment opportunity at an attractive price. During the year ended December 31, 2023, we deployed $68.1 billion of gross capital across our investment groups compared to $79.8 billion deployed in 2022. We believe we continue to be well-positioned to invest our assets opportunistically. As of December 31, 2023, we had $111.4 billion of capital available for investment compared to $84.6 billion as of December 31, 2022. • Our ability to invest capital and generate returns through market cycles. The strength of our investment performance affects investors’ willingness to commit capital to our funds. The flexibility of the capital we are able to attract is one of the main drivers of the growth of our AUM and the management fees we earn. Current market conditions and a changing regulatory environment have created opportunities for Ares’ businesses, which utilize flexible investment mandates to manage portfolios through market cycles. See “Item 1A. Risk Factors” included in this Annual Report on Form 10-K for a discussion of the risks our businesses are subject to. 106 Table of Contents Managing Business Performance Operating Metrics We measure our business performance using certain operating metrics that are common to the alternative asset management industry, which are discussed below. Assets Under Management AUM refers to the assets we manage and is viewed as a metric to measure our investment and fundraising performance as it reflects assets generally at fair value plus available uncalled capital. The tables below present rollforwards of our total AUM by segment ($ in millions): Credit Group Private Equity Group Real Assets Group Secondaries Group Other Businesses Total AUM Balance at 12/31/2022 $ 225,579 $ 34,749 $ 66,061 $ 21,961 $ 3,647 $ 351,997 Acquisitions — 3,697 — — — 3,697 Net new par/equity commitments 40,393 1,621 6,076 3,648 7,008 58,746 Net new debt commitments 14,897 — 726 — — 15,623 Capital reductions (3,858) (9) (480) — — (4,347) Distributions (7,185) (2,309) (4,796) (1,116) (423) (15,829) Redemptions (3,345) — (1,759) (1) (1,046) (6,151) Net allocations among investment strategies 4,258 — — 5 (4,263) — Change in fund value 14,057 1,356 (415) 263 (151) 15,110 Balance at 12/31/2023 $ 284,796 $ 39,105 $ 65,413 $ 24,760 $ 4,772 $ 418,846 Credit Group Private Equity Group Real Assets Group Secondaries Group Other Businesses Total AUM Balance at 12/31/2021 $ 201,405 $ 33,404 $ 45,919 $ 22,119 $ 2,928 $ 305,775 Acquisitions — — 8,184 199 — 8,383 Net new par/equity commitments 18,149 2,202 10,638 2,510 4,848 38,347 Net new debt commitments 14,462 — 3,253 — — 17,715 Capital reductions (1,280) (208) (516) — — (2,004) Distributions (6,057) (1,333) (3,183) (2,787) (1,788) (15,148) Redemptions (2,415) — (951) — — (3,366) Net allocations among investment strategies 1,975 — — — (1,975) — Change in fund value (660) 684 2,717 (80) (366) 2,295 Balance at 12/31/2022 $ 225,579 $ 34,749 $ 66,061 $ 21,961 $ 3,647 $ 351,997 The components of our AUM are presented below ($ in billions): AUM: $418.8 AUM: $352.0 FPAUM Non-fee paying (1) AUM not yet paying fees (1) Includes $15.1 billion and $14.4 billion of AUM of funds from which we indirectly earn management fees as of December 31, 2023 and 2022, respectively and includes $4.3 billion and $3.4 billion of non-fee paying AUM based on our general partner commitment as of December 31, 2023 and 2022, respectively. 107 Table of Contents Please refer to “— Results of Operations by Segment” for a more detailed presentation of AUM by segment for each of the periods presented. Fee Paying Assets Under Management FPAUM refers to AUM from which we directly earn management fees and is equal to the sum of all the individual fee bases of our funds that directly contribute to our management fees. The tables below present rollforwards of our total FPAUM by segment ($ in millions): Credit Group Private Equity Group Real Assets Group Secondaries Group Other Businesses Total Balance at 12/31/2022 $ 151,275 $ 18,447 $ 41,607 $ 17,668 $ 2,064 $ 231,061 Acquisitions — 1,692 — — — 1,692 Commitments 8,333 — 3,674 1,645 6,181 19,833 Deployment/subscriptions/increase in leverage 23,701 2,752 2,968 473 150 30,044 Capital reductions (3,657) — (455) — — (4,112) Distributions (7,927) (1,232) (3,862) (613) (415) (14,049) Redemptions (4,474) — (1,775) (1) — (6,250) Net allocations among investment strategies 4,363 — — 30 (4,393) — Change in fund value 5,176 — (917) (164) 317 4,412 Change in fee basis — (45) 98 2 (329) (274) Balance at 12/31/2023 $ 176,790 $ 21,614 $ 41,338 $ 19,040 $ 3,575 $ 262,357 Credit Group Private Equity Group Real Assets Group Secondaries Group Other Businesses Total Balance at 12/31/2021 $ 122,110 $ 16,689 $ 28,615 $ 18,364 $ 2,067 $ 187,845 Acquisitions — — 4,855 131 — 4,986 Commitments 11,327 — 6,680 2,042 3,607 23,656 Deployment/subscriptions/increase in leverage 32,780 4,489 4,002 560 (38) 41,793 Capital reductions (3,913) — (200) — — (4,113) Distributions (7,365) (1,902) (2,101) (1,319) (734) (13,421) Redemptions (2,684) — (965) — — (3,649) Net allocations among investment strategies 1,935 — — — (1,935) — Change in fund value (2,071) (4) 1,572 772 (665) (396) Change in fee basis (844) (825) (851) (2,882) (238) (5,640) Balance at 12/31/2022 $ 151,275 $ 18,447 $ 41,607 $ 17,668 $ 2,064 $ 231,061 The charts below present FPAUM by its fee bases ($ in billions): FPAUM: $262.4 FPAUM: $231.1 Invested capital/other (1) Market value (2) Collateral balances (at par) Capital commitments (1) Other consists of ACRE’s FPAUM, which is based on ACRE’s stockholders’ equity. (2) Includes $58.8 billion and $56.0 billion from funds that primarily invest in illiquid strategies as of December 31, 2023 and 2022, respectively. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies. 108 Table of Contents Please refer to “— Results of Operations by Segment” for detailed information by segment of the activity affecting total FPAUM for each of the periods presented. Perpetual Capital Assets Under Management The chart below presents our perpetual capital AUM by segment and type ($ in billions): Management Fees By Type We view the duration of funds we manage as a metric to measure the stability of our future management fees. For both the years ended December 31, 2023 and 2022, 95% of management fees were earned from perpetual capital or long-dated funds. The charts below present the composition of our segment management fees by the initial fund duration: Perpetual Capital - Publicly-Traded Vehicles Perpetual Capital - Non-Traded Vehicles Perpetual Capital - Managed Accounts Perpetual Capital - Private Commingled Vehicles Long-Dated Funds (1) Other (1) Long-dated funds generally have a contractual life of five years or more at inception. 109 Table of Contents Available Capital and Assets Under Management Not Yet Paying Fees The charts below present our available capital and AUM not yet paying fees by segment ($ in billions): Credit Private Equity Real Assets Secondaries Other Businesses As of December 31, 2023, AUM Not Yet Paying Fees includes $62.9 billion of AUM available for future deployment that could generate approximately $621.6 million in potential incremental annual management fees. As of December 31, 2022, AUM Not Yet Paying Fees included $41.8 billion of AUM available for future deployment that could generate approximately $410.9 million in potential incremental annual management fees. Incentive Eligible Assets Under Management and Incentive Generating Assets Under Management The charts below present our IEAUM and IGAUM by segment ($ in billions): Credit Private Equity Real Assets Secondaries Other Businesses 110 Table of Contents The charts below present our IGAUM by strategy for funds generating fee related performance revenues and net fee related performance revenues by strategy as of and for the years ended: U.S. Direct Lending European Direct Lending Alternative Credit Private Equity Secondaries U.S. Real Estate Equity Real Estate Debt (1) Fee related performance revenues by strategy is presented net of the associated fee related performance compensation. Fund Performance Metrics Fund performance information for our funds considered to be “significant funds” is included throughout this discussion with analysis to facilitate an understanding of our results of operations for the periods presented. Our significant funds are commingled funds that either contributed at least 1% of our total management fees or represented at least 1% of the Company’s total FPAUM for the past two consecutive quarters. In addition to management fees, each of our significant funds may generate carried interest or incentive fees upon the achievement of performance hurdles. The fund performance information reflected in this discussion and analysis is not indicative of our overall performance. An investment in Ares is not an investment in any of our funds. Past performance is not indicative of future results. As with any investment, there is always the potential for gains as well as the possibility of losses. There can be no assurance that any of these funds or our other existing and future funds will achieve similar returns. Fund performance metrics for significant funds may be marked as “NM” as they may not be considered meaningful due to the limited time since the initial investment and/or early stage of capital deployment. To further facilitate an understanding of the impact a significant fund may have on our results, we present our drawdown funds as either harvesting investments or deploying capital to indicate the fund’s stage in its life cycle. A fund harvesting investments is generally not seeking to deploy capital into new investment opportunities, while a fund deploying capital is generally seeking new investment opportunities. 111 Table of Contents Components of Consolidated Results of Operations Revenues Management Fees. The investment adviser of our funds generally receives an annual management fee based on a percentage of the fund’s capital commitments, contributed capital, net asset value or invested capital during the investment period, which may then change at the end of the investment period. For certain of our SMAs, we receive an annual management fee based on a percentage of invested capital, contributed capital or net asset value throughout the term of the SMA. We also may receive special fees, including agency and arrangement fees. In certain circumstances, we are contractually required to offset certain amounts of such special fees against management fees relating to the applicable fund. The investment adviser of each of our CLOs typically receives annual management fees based on the gross aggregate collateral balance for CLOs, at par, adjusted for cash and defaulted or discounted collateral. The management fees of CLOs accounted for approximately 2% of our total management fees on a consolidated basis and 4% on an unconsolidated basis for the year ended December 31, 2023. The management fees we receive from our drawdown style funds are typically payable on a quarterly basis over the life of the fund and do not fluctuate with the changes in investment performance of the fund. The investment management agreements we enter into with clients in connection with contractual SMAs may generally be terminated by such clients with reasonably short prior written notice. Typically, terminations do not require liquidation of the SMAs and such SMAs will continue to exist until the underlying investments are liquidated. The management fees we receive from our SMAs are generally paid on a periodic basis (typically quarterly, subject to the termination rights described above) and are based on either invested capital or on the net asset value of the separately managed account. We receive management fees in accordance with the investment advisory and management agreements of our retail vehicles, including both our publicly-traded and non-traded vehicles, that must be reviewed or approved annually by their independent boards of directors. Details regarding our management fees from our retail vehicles are presented below: Annual Fee Rate Fee Base ACRE 1.50% Stockholders’ equity AIREIT 1.25% NAV APMF 1.40% Total assets (including any assets relating to indebtedness or preferred shares that may be issued) minus liabilities (other than liabilities relating to indebtedness) ARCC 1.50% Total assets (other than cash and cash equivalents) ARCC Part I Fees 20.00% Net investment income (before ARCC Part I Fees and ARCC Part II Fees), subject to a fixed hurdle rate of 1.75% per quarter, or 7.00% per annum. No fees are recognized until ARCC’s net investment income exceeds a 1.75% hurdle rate, with a catch-up provision to ensure that the Company receives 20.00% of the net investment income from the first dollar earned ARDC 1.00% Total assets minus liabilities (other than liabilities relating to indebtedness) AREIT 1.10% NAV ASIF 1.25% NAV ASIF Part I Fees 12.50% Net investment income (before ASIF Part I Fees and ASIF Part II Fees), subject to a fixed hurdle rate of 1.25% per quarter, or 5.00% per annum. No fees are recognized until ASIF’s net investment income exceeds a 1.25% hurdle rate, with a catch-up provision to ensure that the Company receives 12.50% of the net investment income from the first dollar earned CADC 1.25% Total assets minus liabilities (other than liabilities relating to indebtedness) CADC Part I Fees 15.00% Net investment income (before CADC Part I Fees), subject to a fixed hurdle rate of 1.50% per quarter, or 6.00% per annum. No fees are recognized until CADC’s net investment income exceeds the hurdle rate, with a catch-up provision to ensure that the Company receives 15.00% of the net investment income from the first dollar earned 112 Table of Contents Details regarding our management fees by strategy are presented below: Fee Rate Fee Base Average Remaining Contract Term (1) Credit Group Liquid Credit (2) 0.25% - 1.00% Par plus cash or NAV 9.0 years (2) Alternative Credit 0.50% - 1.50% NAV, gross asset value, capital commitments or invested capital 4.4 years U.S. and European Direct Lending (3) 0.75% - 1.50% Invested capital, NAV or total assets (in certain cases, excluding cash and cash equivalents) 4.4 years APAC Credit (4) 1.15% - 2.00% Capital commitments, aggregate cost basis of unrealized portfolio investments or a combination thereof 3.7 years Private Equity Group Corporate Private Equity (5) 1.50% Capital commitments 5.2 years Special Opportunities (6) 1.50% Invested capital or aggregate cost basis of unrealized portfolio investments 7.8 years APAC Private Equity (7) 1.00% - 2.00% Invested capital, capital commitments or a combination thereof 3.9 years Real Assets Group Real Estate Equity (8) 0.50% - 1.50% Invested capital, NAV, capital commitments or a combination thereof 3.1 years Real Estate Debt 0.50% - 1.00% Invested capital or NAV N/A (9) Infrastructure Opportunities (10) 1.00% - 1.50% Capital commitments 6.0 years Infrastructure Debt 1.00% Invested capital 5.1 years Secondaries Group Private Equity, Real Estate, Infrastructure Secondaries and Credit Secondaries (11) 0.50% - 1.25% Capital commitments, invested capital, reported value (largely represents NAV of each fund’s underlying limited partnership interests), called capital plus unfunded commitments or reported value plus unfunded commitments 7.2 years Other Businesses Ares Insurance Solutions (12) 0.30% Monthly weighted average market value of the assets N/A (12) (1) Represents the average remaining contract term pursuant to the funds’ governing documents within each strategy, excluding perpetual capital vehicles, as of December 31, 2023. (2) Liquid credit includes the syndicated loan, high yield bond and multi-asset credit strategies. Fee ranges for syndicated loans generally remain unchanged at the close of the re-investment period. In certain cases, CLOs may be called upon demand by subordinated noteholders prior to the management contract term expiration date. The funds in the high yield bond and multi-asset credit strategies are generally open-ended or managed account structures, which typically do not have investment period termination or management contract expiration dates. (3) Following the expiration or termination of the investment period, the fee basis for certain closed-end funds and managed accounts in this strategy generally change either to the aggregate cost or to market value of the portfolio investments. (4) Certain funds pay a lower management fee rate on committed capital which increases when such capital is invested. The funds in this strategy are comprised of closed-end funds, with investment period termination or management contract termination dates. The funds also include co-investment accounts with fees ranging from 0.50% to 1.50%, which generally do not include investment period termination or management contract termination dates. (5) Fee range represents typical range during the investment period. Management fees for corporate private equity funds generally step down to between 0.75% and 1.25% of the aggregate adjusted cost of unrealized portfolio investments following the earlier to occur of: (i) the expiration or termination of the investment period; and (ii) the activation of a successor fund. (6) Fee range represents typical range during the investment period. Management fees for special opportunities funds generally step down to between 1.00% to 1.25% of the invested capital or the aggregate cost basis of unrealized portfolio investments following the expiration or termination of the investment period. (7) Fee range represents typical range during the investment period. Management fees for APAC private equity funds generally step down to 2.00% of the aggregate adjusted cost of unrealized portfolio investments following the expiration or termination of the investment period. The funds also include co-investment vehicles with fees rates of 2.00%, which generally do not include investment period termination or management contract termination dates. (8) Certain funds pay a lower management fee rate on committed capital which increases when such capital is invested. Following the expiration or termination of the investment period the basis on which management fees are earned for certain closed-end funds, managed accounts and co-investment vehicles in this strategy changes from committed capital to invested capital with no change in the management fee rate. AIREIT and AREIT pay management fees based on NAV plus net capital raised and outstanding from our 1031 exchange programs. (9) The funds in this strategy are generally open-ended or managed account structures, which typically do not have investment period termination or management contract expiration dates. (10) Fee range represents typical range during the investment period. Certain funds pay a lower management fee rate on committed capital which increases when such capital is invested. The infrastructure opportunities funds generally step down the fee base to the aggregated adjusted cost of unrealized portfolio investments, while retaining the same fee rate, following the expiration or termination of the investment period. (11) Funds in each strategy are comprised of closed-end funds with either investment period termination or management contract termination dates and certain open-end accounts that generally do not have termination dates. (12) Ares Insurance Solutions earns a tiered management fee that starts at 0.30% and steps down to 0.15% of the monthly weighted average market value. Ares Insurance Solutions generally includes open-ended or managed account structures, which typically do not have investment period termination or management contract expiration dates. 113 Table of Contents Incentive Fees. The general partners, managers or similar entities of certain of our funds receive performance-based fees. These fees are generally based on the annual investment returns of the applicable fund, subject to certain net loss carry-forward provisions, high-watermarks and/or preferred returns. Such performance-based fees may also be based on a fund’s cumulative net investment returns for the measurement period, in some cases subject to a high-watermark or a preferred return. Incentive fees are realized at the end of a measurement period, typically quarterly or annually. Realized incentive fees are generally higher during the second half of the year due to the nature of certain funds that typically realize incentive fees at the end of the calendar year. Once realized, such incentive fees are not subject to repayment. Cash from the realizations is typically received in the period subsequent to the measurement period. Incentive fees are composed of both fee related performance revenues, which are based on perpetual capital, and those incentive fees earned from funds with stated investment periods: Details regarding our fee related performance revenues are presented below: Fee Rate Fee Base Annual Hurdle Rate Credit Group Open-ended core alternative credit fund 15.0% Incentive eligible fund’s profits 6.0% U.S. and European Direct Lending 10.0% - 15.0% Incentive eligible fund’s profits 5.0% to 8.0% Real Assets Group AIREIT and AREIT 12.5% Annual investment returns, subject to certain net loss carry-forward provisions 5.0% ACRE 20.0% The difference between ACRE’s core earnings (as defined in ACRE’s management agreement) and its shareholders' return on equity 8.0% Secondaries Group APMF 12.5% Annual investment returns, subject to certain net loss carry-forward provisions N/A Details regarding our incentive fees earned from funds with stated investment periods, which are generally based on a fund’s eligible profits, are presented below: Fee Rate Annual Hurdle Rate Credit Group Liquid Credit 10.0% - 20.0% 3.0% to 12.0% Alternative Credit 12.5% - 20.0% 5.0% to 7.0% U.S. and European Direct Lending (1) 10.0% - 15.0% 5.0% to 8.0% Real Assets Group Real Estate Equity 15.0% - 18.0% 6.0% to 8.0% (1) We may receive Part II Fees, which are not paid unless ARCC and ASIF achieve cumulative aggregate realized capital gains (net of cumulative aggregate realized capital losses and aggregate unrealized capital depreciation). For ARCC and ASIF, incentive fees represent 20.0% and 12.5%, respectively, of the cumulative aggregate realized capital gains (net of cumulative aggregate realized losses and aggregate unrealized capital depreciation) and such fees are presented as incentive fees earned from funds with stated investment periods. Performance Income. We may receive performance income from our funds that may be either incentive fees earned from funds with stated investment periods as described above, or a special allocation of income, which we refer to as carried interest. Performance income is recognized when specified investment returns are achieved by the fund. Carried Interest Allocation. Carried interest allocation is recognized based on changes in valuation of our funds’ investments that exceed certain preferred returns as set forth in each respective partnership agreement. Carried interest allocation is based on the amount that would be due to us pursuant to the fund partnership agreement at each period end as if the funds were liquidated at such date. Accordingly, the amount recognized as carried interest allocation reflects our share of the fair value gains and losses of the associated funds’ underlying investments measured at their then-current fair values relative to the fair values as of the end of the prior period. Investment returns of one fund are not offset between or among funds. Funds generally follow either an American-style waterfall or a European-style waterfall. For American-style waterfalls, the general partner is entitled to receive carried interest after a fund investment is realized if the investors in the fund have received distributions in excess of the capital contributed for such investment and all prior realized investments (plus allocable expenses), as well as the preferred return. For European-style waterfalls, the general partner is entitled to receive carried interest if the investors in the fund have received distributions in an amount equal to all prior capital contributions plus a preferred return. 114 Table of Contents For most funds, the carried interest is subject to a preferred return ranging from 5.0% to 10.0%, after which there is typically a catch-up allocation to the general partner. Generally, if at the termination of a fund (and in some cases at interim points in the life of a fund), the fund has not achieved investment returns that exceed the preferred return threshold or the general partner receives net profits over the life of the fund in excess of its allocable share under the applicable partnership agreement, the general partner will be obligated to repay an amount equal to the extent the previously distributed carried interest exceeds the amounts to which the general partner is entitled. These repayment obligations may be related to amounts previously distributed to us and our senior professionals and are generally referred to as contingent repayment obligations. Contingent repayment obligations operate with respect to only a given fund’s net investment performance and carried interest of other funds are not netted for determining this contingent obligation. Although a contingent repayment obligation is several to each person who received a distribution, and not a joint obligation, and our professionals who receive carried interest have guaranteed repayment of such contingent obligation, the governing agreements of our funds generally provide that, if a recipient does not fund his or her respective share, we may have to fund such additional amounts beyond the amount of carried interest we retained, although we generally will retain the right to pursue remedies against those carried interest recipients who fail to fund their obligations. Certain funds may make distributions to their partners to provide them with cash sufficient to pay applicable federal, state and local tax liabilities attributable to the fund’s income that is allocated to them. These distributions are referred to as tax distributions and are not subject to contingent repayment obligations. Tax distributions from European-style waterfall funds generally precede investors in the fund receiving the preferred return. Details regarding our carried interest, which is generally based on a fund’s eligible profits, are presented below: Fee Rate Annual Hurdle Rate Credit Group Liquid Credit and Alternative Credit 15.0% - 20.0% 6.0% to 8.0% U.S. and European Direct Lending 10.0% - 20.0% 5.0% to 8.0% APAC Credit 15.0% - 20.0% 7.0% to 8.0% Private Equity Group Corporate Private Equity, Special Opportunities and APAC Private Equity 20.0% 8.0% Real Assets Group Real Estate 10.0% - 20.0% 6.0% to 10.0% Infrastructure 15.0% - 20.0% 5.0% to 8.0% Secondaries Group Private Equity, Real Estate, Infrastructure and Credit Secondaries 10.0% - 12.5% 8.0% Other Businesses Ares Insurance Solutions 20.0% 8.0% For detailed discussion of contingencies on carried interest, see “Note 8. Commitments and Contingencies,” within our consolidated financial statements and “Item 1A. Risk Factors—Risks Related to Our Funds—We may need to pay “clawback” or “contingent repayment” obligations if and when they are triggered under the governing agreements with our funds” included in this Annual Report on Form 10-K. Principal Investment Income (Loss). Principal investment income (loss) consists of interest and dividend income and net realized and unrealized gains (losses) on equity method investments where we serve as general partner. Interest and dividend income are recognized on an accrual basis to the extent that such amounts are expected to be collected. A realized gain (loss) may be recognized when all or a portion of our investment is returned to us. Unrealized gains (losses) on investments result from appreciation (depreciation) in the fair value of our investments, as well as reversals of previously recorded unrealized appreciation (depreciation) at the time the gain (loss) on an investment becomes realized. 115 Table of Contents Administrative, Transaction and Other Fees. Details regarding our administrative, transaction and other fees are presented below: Administrative fees Represent fees that we earn for providing administrative services to certain funds and may reflect either an expense reimbursements for costs incurred by certain professionals in performing services for a fund or may be based on fixed percentage of a fund’s invested capital Transaction fees Typically represent fees earned from the arrangement and origination of loans and are generated primarily from funds within our direct lending and infrastructure debt strategies Other fees: Property-related fees represent fees earned within funds in our real estate equity strategies and include the following: Acquisition fees Based on a percentage of a property’s cost at the time of property acquisition Development fees Based on a percentage of development costs over the development period Property management fees Based on tenancy of properties over the time associated property management services are provided Sale and distribution fees represent fees earned through AWMS for the sale and distribution of fund shares in our non-traded vehicles and include the following: Sales-based fees Based on a percentage of shares sold to retail investors in our non-traded vehicles. Sales-based fees are reported net of amounts re-allowed to participating broker-dealers for their ongoing shareholder services Asset-based fees Based on the NAV of the applicable asset class. Asset-based fees are reported net of amounts re-allowed to participating broker-dealers for their ongoing shareholder services Exchange program fees Based on a percentage of the value associated with the properties transacted through our 1031 exchange programs. Exchange program fees are recognized when investors contribute real property through like-kind 1031 exchanges for fund shares and through other private placements and are composed of a program administration fee and a facilitation fee for advisory services and sales-based efforts, respectively Expenses Compensation and Benefits. Compensation generally includes salaries, bonuses, health and welfare benefits, payroll related taxes, equity compensation, Part I Fee incentive compensation and fee related performance compensation expenses. Compensation and benefits expenses are typically correlated to the operating performance of our segments, which is used to determine incentive-based compensation for each segment. Incentive-based compensation is accrued over the service period to which it relates. Our discretionary incentive-based compensation generally represents our annual bonus pool, is based on our operating performance and may fluctuate throughout the year until payments are made. The majority of our incentive-based compensation is paid during the fourth quarter. Certain of our senior partners are not paid an annual salary or bonus, instead they only receive distributions based on their ownership interest when declared by our board of directors. We use changes in headcount, which represents the full-time equivalency of active employees during each period, to analyze changes in compensation and benefits. Part I Fee incentive compensation and fee related performance compensation represent approximately 60% of Part I Fees and of fee related performance revenues, respectively, before giving effect to payroll related taxes. Compensation expense also includes employee commissions that are generated in connection with our like-kind 1031 exchange program and other private placement transactions conducted through AWMS. Incremental changes in fair value of certain contingent liabilities established in connection with our various acquisitions are recognized ratably over the service period and are also presented within compensation and benefits. Equity compensation represents a form of non-cash compensation that we use to align our employees with the long-term interests of our shareholders. Equity-based awards are typically granted in the form of restricted units that generally vest over a service period between three and five years. We issue equity awards with a long-term focus of limiting the average dilutive impact on our Class A common stockholders to no more than 1.5% annually. Because we withhold shares equal to the fair value of our employee tax withholding liabilities and pay the taxes on their behalf in cash, fewer net shares are issued upon vesting. This result has reduced the average annual dilutive impact of these awards to less than 1.0% annually. We expect the expenses recognized in connection with these awards to fluctuate with changes in the price of our Class A common stock. Performance Related Compensation. Performance related compensation includes compensation directly related to carried interest allocation and incentive fees earned from funds with stated investment periods, generally consisting of percentage interests that we grant to our professionals. Depending on the nature of each fund, the performance related compensation generally represents 60% to 80% of the carried interest allocation and aforementioned incentive fees recognized by us before giving effect to payroll related taxes. We have an obligation to pay our professionals a portion of the carried interest allocation earned from certain funds. The performance related compensation payable is calculated based upon the recognition of carried interest allocation and is not paid to recipients until the carried interest allocation is received. Performance related compensation may include allocations to charitable organizations as part of our philanthropic initiatives. Although changes in performance related compensation are directly correlated with changes in carried interest allocation and incentive fees reported within our segment results, this correlation does not always exist when our results are reported on a fully consolidated basis in accordance with GAAP. This discrepancy is caused when carried interest allocation 116 Table of Contents and incentive fees earned from our Consolidated Funds is eliminated upon consolidation and performance related compensation is not. General, Administrative and Other Expenses. General and administrative expenses include costs primarily related to occupancy, professional services, travel, information services and information technology costs, placement fees, depreciation, amortization of intangibles, supplemental distribution fees and other general operating items. Placement fees are paid to placement agents and include: (i) upfront fees based on commitments to a fund; and (ii) service fees for periodic investor services that are recognized as services are provided. Supplemental distribution fees are paid to brokerage firms, banks or other financial intermediaries for the distribution of shares in our non-traded vehicles and may be calculated on either sales volumes or levels of assets under management. Expenses of Consolidated Funds. Consolidated Funds’ expenses consist primarily of costs incurred by our Consolidated Funds, including professional services fees, research expenses, trustee fees, travel expenses and other costs associated with organizing and offering these funds. Other Income (Expense) Net Realized and Unrealized Gains (Losses) on Investments. A realized gain (loss) may be recognized when all or a portion of our investment is returned to us. Unrealized gains (losses) on investments result from the change in appreciation (depreciation) in the fair value of our investments. Interest and Dividend Income. Interest and dividend income is primarily generated from investments in CLOs and other strategic investments where we do not serve as general partner. Interest and dividend income are both recognized on an accrual basis to the extent that such amounts are expected to be collected. Interest Expense. Interest expense includes interest related to our Credit Facility, which has a variable interest rate based upon SOFR plus a credit spread that is adjusted with changes to corporate credit ratings and with the achievement of certain ESG-related targets, and to our senior and subordinated notes, each of which have fixed coupon rates. Other Income (Expense), Net. Other income (expense), net consists of transaction gains (losses) on the revaluation of assets and liabilities denominated in non-functional currencies and of other non-operating and non-investment related activities, such as bargain purchase gain, changes in fair value of contingent obligations, loss on disposal of assets, among other items. Net Realized and Unrealized Gains (Losses) on Investments of Consolidated Funds. Realized gains (losses) may arise from dispositions of investments held by our Consolidated Funds. Unrealized gains (losses) are recorded to reflect the change in appreciation (depreciation) of investments held by the Consolidated Funds due to changes in fair value of the investments. Interest and Other Income of Consolidated Funds. Interest and other income of Consolidated Funds primarily includes interest and dividend income generated from the underlying investments of our Consolidated Funds. Interest Expense of Consolidated Funds. Interest expense primarily consists of interest related to our Consolidated CLOs’ loans payable and, to a lesser extent, revolving credit lines, term loans and notes of other Consolidated Funds. The interest expense of the Consolidated CLOs is solely the responsibility of such CLOs and there is no recourse to us if the CLO is unable to make interest payments. Income Taxes AMC is a corporation for U.S. federal income tax purposes and is subject to U.S. federal, state and local corporate income taxes at the entity level on its share of net taxable income. In addition, the AOG entities and certain of AMC’s subsidiaries operate in the U.S. as partnerships or disregarded entities for U.S. federal income tax purposes and as corporate entities in certain foreign jurisdictions. These entities, in some cases, are subject to U.S. state or local income taxes or foreign income taxes. Our effective tax rate is the result of AMC’s net taxable income and the applicable U.S. federal, state and local income taxes as well as, in some cases, foreign income taxes. Net taxable income is based on AMC’s ownership of the AOG entities. As such, our effective tax rate will be directly impacted by changes in AMC’s ownership of the AOG entities and changes to statutory rates in the U.S. and other foreign jurisdictions and, to a lesser extent, income taxes that are recorded for certain affiliated funds and co-investment vehicles that are consolidated in our financial results. The majority of our Consolidated Funds are not subject to income tax as the funds’ investors are responsible for reporting their share of income or loss. To the extent required by federal, state and foreign income tax laws and regulations, certain funds may incur income tax liabilities. 117 Table of Contents Redeemable and Non-Controlling Interests Net income (loss) attributable to redeemable and non-controlling interests in Consolidated Funds represents the income (loss) attributable to ownership interests that third parties hold in entities that are consolidated within our consolidated financial statements. Net income (loss) attributable to redeemable and non-controlling interests in AOG entities represents results attributable to the owners of AOG Units and other ownership interests that are not held by AMC. In connection with our acquisition of SSG in July 2020, the former owners of SSG retained a 20% ownership interest in a subsidiary of an AOG entity that is reflected as redeemable interest in AOG entities. Net income (loss) attributable to redeemable interest in AOG entities is allocated based on the ownership percentage attributable to the redeemable interest. On March 31, 2023, we acquired a portion of the remaining ownership interest in SSG that was retained by the former owners of SSG (the “SSG Buyout”), and we now own 100% of Ares SSG’s fee-generating business. Following the SSG Buyout, legacy owners of SSG retained an ownership interest in certain non-controlled investments that will continue to be reflected as redeemable interests, and the income generated by these investments will continue to be allocated ratably based on ownership. Net income (loss) attributable to non-controlling interests in AOG entities is generally allocated based on the weighted average daily ownership of the other AOG unitholders, except for income (loss) generated from certain joint venture partnerships. Net income (loss) is allocated to other strategic distribution partners with whom we have established joint ventures based on the respective ownership percentages and based on the activity of certain membership interests. For additional discussion on components of our consolidated results of operations, see “Note 2. Summary of Significant Accounting Policies,” within our consolidated financial statements included in this Annual Report on Form 10-K. Consolidation and Deconsolidation of Ares Funds Consolidated Funds represented approximately 4% of our AUM as of December 31, 2023, 2% of our management fees and 2% of our carried interest and incentive fees for the year ended December 31, 2023. As of December 31, 2023, we consolidated 28 CLOs, 10 private funds and one SPAC, and as of December 31, 2022, we consolidated 25 CLOs, 10 private funds and one SPAC. The activity of the Consolidated Funds is reflected within the consolidated financial statement line items indicated by reference thereto. The impact of consolidation also typically will decrease management fees, carried interest allocation and incentive fees reported under GAAP to the extent these amounts are eliminated upon consolidation. The assets and liabilities of our Consolidated Funds are held within separate legal entities and, as a result, the liabilities of our Consolidated Funds are typically non-recourse to us. Generally, the consolidation of our Consolidated Funds has a significant gross-up effect on our assets, liabilities and cash flows but has no net effect on the net income attributable to us or our stockholders’ equity, except where accounting for a redemption or liquidation preference requires the reallocation of ownership based on specific terms of a profit sharing agreement. 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 within our consolidated financial statements. Redeemable interest in Consolidated Funds represent the shares issued by our SPACs that are redeemable for cash by the public shareholders in the event that the SPAC does not complete a business combination or tender offer associated with shareholder approval provisions. We generally deconsolidate funds and CLOs when we are no longer deemed to have a controlling interest in the entity. During the year ended December 31, 2023, we deconsolidated one SPAC as a result of liquidation and one private fund as a result of a significant change in ownership. During the year ended December 31, 2022, we did not deconsolidate any entities. 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” within our consolidated financial statements included herein. 118 Table of Contents Results of Operations Consolidated Results of Operations Although the consolidated results presented below include the results of our operations together with those of the Consolidated Funds and other joint ventures, we separate our analysis of those items primarily impacting the Company from those of the Consolidated Funds. The following table presents our summarized consolidated results of operations ($ in thousands): Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Total revenues $ 3,631,884 $ 3,055,443 $ 576,441 19% Total expenses (2,797,858) (2,749,085) (48,773) (2) Total other income, net 499,037 204,448 294,589 144 Less: Income tax expense 172,971 71,891 (101,080) (141) Net income 1,160,092 438,915 721,177 164 Less: Net income attributable to non-controlling interests in Consolidated Funds 274,296 119,333 154,963 130 Net income attributable to Ares Operating Group entities 885,796 319,582 566,214 177 Less: Net income (loss) attributable to redeemable interest in Ares Operating Group entities 226 (851) 1,077 NM Less: Net income attributable to non-controlling interests in Ares Operating Group entities 411,244 152,892 258,352 169 Net income attributable to Ares Management Corporation Class A and non-voting common stockholders $ 474,326 $ 167,541 306,785 183 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Consolidated Results of Operations of the Company The following discussion sets forth information regarding our consolidated results of operations: Revenues Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Revenues Management fees $ 2,551,150 $ 2,136,433 $ 414,717 19% Carried interest allocation 618,579 458,012 160,567 35 Incentive fees 276,627 301,187 (24,560) (8) Principal investment income 36,516 12,279 24,237 197 Administrative, transaction and other fees 149,012 147,532 1,480 1 Total revenues $ 3,631,884 $ 3,055,443 576,441 19 Management Fees. C apital deployment in direct lending funds within the Credit Group led to a rise in FPAUM and additional management fees of $166.1 million for the year ended December 31, 2023 compared to the prior year. Part I Fees contributed $109.6 million to the increase for the year ended December 31, 2023 compared to the prior year. The increase in Part I Fees was primarily due to the increase in pre-incentive fee net investment income generated by ARCC and CADC, driven by an increase in the average size of their portfolios and the impact of rising interest rates, given their primarily floating-rate loan portfolios. Of the total increase in Part I Fees, ASIF contributed $5.1 million as it began generating fees during the third quarter of 2023. Within the Real Assets Group, AIREIT and AREIT contributed additional management fees of $11.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 driven by increases in the average capital base of AIREIT and AREIT. Also, management fees from Ares Infrastructure Debt Fund V L.P. (“IDF V”) increased by $9.3 million for the year ended December 31, 2023 compared to the prior year, primarily driven by deployment of capital. Within the Private Equity Group, the Crescent Point Acquisition contributed $7.4 million to the increase in management fees for the year ended December 31, 2023. For detail regarding the fluctuations of management fees within each of our segments see “—Results of Operations by Segment.” 119 Table of Contents Carried Interest Allocation. The activity was principally composed of the following ($ in millions): Year ended December 31, 2023 Primary Drivers Year ended December 31, 2022 Primary Drivers Credit funds $ 498.7 Primarily from six direct lending funds and one alternative credit fund with $28.2 billion of IGAUM generating returns in excess of their hurdle rates. Ares Capital Europe V, L.P. (“ACE V”), Ares Private Credit Solutions II, L.P. (“PCS II”) , Ares Sports Media and Entertainment Finance, L.P. and our sixth European direct lending fund generated carried interest allocation of $181.1 million, $37.6 million, $22.0 million and $16.6 million, respectively, driven by net investment income on an increasing invested capital base. Pathfinder I generated carried interest allocation of $66.3 million driven by market appreciation of certain investments and net investment income during the period. Ares Capital Europe IV, L.P. (“ACE IV”) and Ares Private Credit Solutions, L.P. (“PCS I”) generated carried interest allocation of $58.4 million and $45.3 million, respectively, primarily driven by net investment income during the period. Our credit funds have benefited from rising interest rates on predominately floating-rate loans. $ 200.0 Primarily from four direct lending funds and one alternative credit fund with $22.4 billion of IGAUM generating returns in excess of their hurdle rates. ACE V generated carried interest allocation of $80.9 million driven by net investment income on an increasing invested capital base. ACE IV, Pathfinder I, Ares Capital Europe III, L.P. (“ACE III”) and PCS I generated carried interest allocation of $60.0 million, $25.7 million, $18.7 million and $6.5 million, respectively, primarily driven by net investment income during the period. Private equity funds 124.6 Ares Corporate Opportunities Fund VI, L.P. (“ACOF VI”) generated carried interest allocation of $190.0 million, driven by improving operating performance of portfolio companies that primarily operate in the retail and healthcare industries and market appreciation of an investment in a services company. In addition, appreciation of Ares Special Opportunities Fund, L.P. (“ASOF I”) and Ares Special Situations Fund IV, L.P. (“SSF IV”) generated carried interest allocation of $82.7 million and $79.8 million, respectively, predominately driven by market appreciation and improved operating performance of portfolio companies that operate in the services industry. Ares Special Opportunities Fund II, L.P. (“ ASOF II ”) generated carried interest allocation of $80.9 million, driven by improving operating performance of portfolio companies that operate in the healthcare industry. The appreciation was partially offset by the reversal of unrealized carried interest allocation of $268.1 million from Ares Corporate Opportunities Fund V, L.P. (“ACOF V”), primarily driven by a lower stock price for Savers Value Village, Inc. (“SVV”), and $35.8 million from Ares Corporate Opportunities Fund IV, L.P. (“ACOF IV”), primarily driven by lower operating performance metrics of a portfolio company that operates in the healthcare industry. 187.4 Appreciation across several portfolio company investments, driven by improving operating performance metrics from portfolio companies that primarily operate in industries such as services, technology, retail, healthcare and energy, generated carried interest allocation of $76.9 million from ACOF V, $73.9 million from ACOF VI, $68.5 million from ASOF I and $42.6 million from SSF IV. The appreciation was partially offset by the reversal of unrealized carried interest allocation of $62.4 million and $27.0 million from ACOF IV and Ares Corporate Opportunities Fund III, L.P. (“ACOF III”), respectively, primarily driven by lower stock prices for certain publicly-traded investments. Real assets funds 8.5 IDF V generated carried interest allocation of $37.9 million driven by net investment income during the period. Ares Climate Infrastructure Partners, L.P. (“ACIP I”) generated carried interest allocation of $13.8 million due to market appreciation of certain investments. Appreciation from properties, driven by increasing operating income primarily from industrial and multifamily investments, generated carried interest allocation of $3.1 million from U.S. Real Estate Fund IX, L.P. (“US IX”). The appreciation was partially offset by the reversal of unrealized carried interest allocation of $12.6 million from Ares European Real Estate Fund IV SCSp. (“EF IV”), $5.7 million from Ares Real Estate Opportunity Fund III, L.P. (“AREOF III”), $5.5 million from Ares European Real Estate Fund V SCSp. (“EF V”) and $19.1 million from two European real estate equity funds, primarily driven by lower valuations of certain properties, which were impacted by the market environment. 49.6 ACIP I and Ares Energy Investors Fund V, L.P. (“EIF V”) generated carried interest allocation of $38.1 million and $31.8 million, respectively, due to market appreciation of certain investments. Appreciation from properties within real estate equity funds, driven by increasing operating income primarily from industrial and multifamily investments, generated carried interest allocation of $15.0 million from U.S. Real Estate Fund VIII, L.P. (“US VIII”), $7.4 million from US IX and $4.2 million from Ares U.S. Real Estate Fund X, L.P. (“US X”). In addition, realized gains from the sale of properties generated carried interest allocation of $17.3 million from AREOF III. The activity was partially offset by the reversal of unrealized carried interest of $64.4 million from EF V, driven by a lower stock price for one of its publicly-traded investments. Secondaries funds (13.2) Depreciation across several investments in Landmark Equity Partners XVI, L.P. (“LEP XVI”), led to the reversal of unrealized carried interest of $12.5 million. 21.0 Market appreciation of certain investments held in Landmark Real Estate Fund VIII, L.P. (“LREF VIII”) generated carried interest allocation of $32.8 million. The activity was partially offset by the reversal of unrealized carried interest of $18.4 million from LEP XVI, driven primarily by losses from the revaluation of limited partnership interests denominated in foreign currencies. Carried interest allocation $ 618.6 $ 458.0 120 Table of Contents Incentive Fees. The activity was principally composed of the following ($ in millions): Year ended December 31, 2023 Primary Drivers Year ended December 31, 2022 Primary Drivers Credit funds $ 248.4 Incentive fees generated from 24 U.S. direct lending funds, ten European direct lending funds and seven alternative credit funds. $ 101.2 Incentive fees generated from 15 European direct lending funds, 12 U.S. direct lending funds and two alternative credit funds. Real assets funds 15.4 Incentive fees generated from an open-ended industrial real estate fund. 199.4 Incentive fees generated from U.S. real estate equity funds, including $140.5 million from AIREIT, $31.6 million from an open-ended industrial real estate fund and $23.7 million from AREIT. Secondaries funds 12.8 Incentive fees generated from APMF. 0.6 Incentive fees generated from a private equity secondaries fund and APMF. Incentive fees $ 276.6 $ 301.2 Principal Investment Income. The activity for the year ended December 31, 2023 was primarily composed of: (i) appreciation of our investments in certain funds in our European and U.S. direct lending, special opportunities, infrastructure debt and alternative credit strategies; (ii) dividend income from SSF IV and a European real estate fund; (iii) interest income from an open-ended core alternative credit fund; partially offset by (iv) unrealized losses of our investments in certain funds in our corporate private equity and real estate secondaries strategies. The activity for the year ended December 31, 2022 was primarily composed of appreciation of our investments in certain funds in our infrastructure opportunities strategy, dividend income from various investments in funds within our U.S. direct lending strategy and realized gains from the sale of underlying properties held by funds in our U.S. real estate equity strategy. Administrative, Transaction and Other Fees. The increase in administrative, transaction and other fees for the year ended December 31, 2023 compared to the prior year was primarily driven by: (i) higher administrative fees of $13.6 million as a result of the deconsolidation of a commercial finance fund during the second quarter of 2023; (ii) an increase of $8.7 million in administrative service fees based on invested capital primarily from certain private funds within our Credit Group, driven by deployment; (iii) higher credit transaction fees of $2.4 million primarily from the infrastructure debt strategy that are generated periodically and relate to the arrangement and origination of loans; partially offset by (iv) lower acquisition and development fees of $11.4 million, resulting from a reduction in property-related activities within certain industrial U.S. real estate equity funds; (v) a decrease of $10.8 million in facilitation fees and program administration fees from reduced sales activity within the 1031 exchange programs associated with our non-traded REITs. Expenses Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Expenses Compensation and benefits $ 1,486,698 $ 1,498,590 $ 11,892 1% Performance related compensation 607,522 518,829 (88,693) (17) General, administrative and other expenses 660,146 695,256 35,110 5 Expenses of Consolidated Funds 43,492 36,410 (7,082) (19) Total expenses $ 2,797,858 $ 2,749,085 48,773 2 Compensation and Benefits. The decrease in compensation and benefits was primarily driven by the performance-based, acquisition-related compensation arrangements (“earnouts”) that were established in connection with the acquisition of Black Creek Group’s real estate investment advisory and distribution business (the “Black Creek Acquisition”). The maximum contingent payment associated with the Black Creek Acquisition earnout was achieved and the incremental expense of $218.1 million was recorded during the year ended December 31, 2022. Conversely, the earnout associated with a Landmark private equity secondaries fund was not achieved because revenue targets associated with fundraising did not meet certain thresholds. As a result, the associated compensation expense of $21.0 million was reversed during the year ended December 31, 2022. Excluding the impact of earnouts as described above, compensation and benefits increased by 14% for the year ended December 31, 2023 compared to the prior year , primarily driven by: (i) an increase in salary expense of $74.4 million, primarily attributable to headcount growth to support the expansion of our business; (ii) higher Part I Fees compensation of $58.3 million; and (iii) higher equity-based compensation expense of $55.6 million as the number of unvested restricted units being amortized 121 Table of Contents has increased as has the value of these units with our rising stock price. Average headcount increased by 16% to 2,674 professionals for the year-to-date period in 2023 from 2,305 professionals in 2022. For detail regarding the fluctuations of compensation and benefits within each of our segments see “—Results of Operations by Segment.” Performance Related Compensation. Changes in performance related compensation are directly associated with the changes in carried interest allocation and incentive fees described above and include associated payroll related taxes as well as carried interest and incentive fees allocated to charitable organizations as part of our philanthropic initiatives. General, Administrative and Other Expenses. For each year presented, we recognized impairment charges and recorded accelerated amortization expense in connection with acquired intangible assets (as discussed further below). Before giving effect to these costs, general, administrative and other expenses increased by 13% for the year ended December 31, 2023 compared to the prior year. However, due to the recognition of higher impairment charges in the prior year, general, administrative and other expenses over the comparative period has actually decreased by $35.1 million, or 5%, but this trend is not expected to continue. Travel, marketing and certain fringe benefits collectively increased by $26.8 million for the year ended December 31, 2023 compared to the prior year as we: (i) continued to increase our marketing efforts driven by more investor meetings and events; and (ii) conducted more in-person company meetings and events with a focus on promoting collaboration and integration of acquired businesses. Occupancy costs, information services and information technology costs also increased during the comparative period, to support our growing headcount, the expansion of our business and the build out of our new corporate headquarters. Collectively, these expenses increased by $25.9 million for the year ended December 31, 2023 compared to the prior year . Additionally, professional service fees increased by $9.8 million for the year ended December 31, 2023 compared to 2022 primarily due to the reorganization of our income tax compliance function and to higher consulting fees to support various ongoing initiatives to enhance our operations. Separately, we expect to incur higher supplemental distribution fees in future periods as we continue to develop our distribution relationships and expand our retail product offerings. These expenses were $20.2 million and increased by $7.3 million for the year ended December 31, 2023 when compared to prior year and will fluctuate with sales volumes and assets under management of our non-traded products. During the year ended December 31, 2023, we recognized non-cash impairment charges of $78.7 million related to certain intangible assets comprised of: (i) $65.7 million to the fair value of certain client relationships from Landmark in connection with lower expected FPAUM in a private equity secondaries fund from existing investors; (ii) $7.8 million to the carrying value of SSG’s trade name as we rebranded Ares SSG as APAC credit and discontinued the use of the SSG trade name; and (iii) $5.2 million to the fair value of management contracts of certain funds in connection with lower than expected future fee revenue generated from these funds, of which $4.6 million was due to the shortened investment period of an infrastructure debt fund as we directed existing limited partner commitments to other investment vehicles within the strategy. During the year ended December 31, 2022, we recognized non-cash impairment charges of $181.6 million, in connection with intangible assets associated with Landmark’s trade name, management contracts of certain Landmark funds, Black Creek funds and SSG funds and resulted in the amortization expense associated with these intangible assets to decrease in subsequent periods. Excluding the non-cash impairment charges described above, amortization expense decreased by $7.6 million for the year ended December 31, 2023 compared to the prior year, as we no longer recognize amortization expense for the aforementioned intangible assets. Other Income (Expense) Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Other income (expense) Net realized and unrealized gains on investments $ 77,573 $ 4,732 $ 72,841 NM Interest and dividend income 19,276 9,399 9,877 105 Interest expense (106,276) (71,356) (34,920) (49) Other income, net 4,819 13,119 (8,300) (63) Net realized and unrealized gains on investments of Consolidated Funds 262,700 73,386 189,314 258 Interest and other income of Consolidated Funds 995,545 586,529 409,016 70 Interest expense of Consolidated Funds (754,600) (411,361) (343,239) (83) Total other income, net $ 499,037 $ 204,448 294,589 144 122 Table of Contents Net Realized and Unrealized Gains on Investments. The activity for the year ended December 31, 2023 primarily includes a net gain of $70.9 million from our investment in X-energy. AAC I entered into a contract to merge with X-energy that ultimately did not occur as the shareholders of AAC I elected to redeem the investments held in trust in lieu of completing the merger. As the merger was not completed, we directly invested in X-energy. The net gain is primarily a result of the increase in value of various common and preferred equity securities in X-energy. The fair value of these investments are sensitive to changes in underlying assumptions and may demonstrate significant volatility over the short term. The year ended December 31, 2023 also included: (i) unrealized gains from the appreciation of certain strategic investments in companies that manage portfolios of non-performing loans and real estate owned properties; (ii) unrealized gains and dividend income from our investment in APMF; and partially offset by (iii) unrealized losses from our strategic investment in a U.S. financial technology company. The activity for the year ended December 31, 2022 reflects unrealized gains from the same strategic investments that manage portfolios of non-performing loans and real estate owned properties and was partially offset by unrealized losses from our investments in the subordinated notes of U.S. CLOs. Interest Expense . Higher average interest rates driven by rising SOFR rates and a higher average outstanding balance of the Credit Facility contributed to an increase in interest expense for the year ended December 31, 2023 compared to 2022. The issuance of the 2028 Senior Notes in November 2023 also increased interest expense by $4.6 million for the year ended December 31, 2023 compared to the same period in 2022 and will result in interest expense of $8.2 million for the full quarter prospectively. Other Income, Net. The activity for the years ended December 31, 2023 and 2022 primarily included transaction gains (losses) associated with currency fluctuations impacting the revaluation of assets and liabilities denominated in foreign currencies other than an entity’s functional currency. We recognized transaction losses for the year ended December 31, 2023 primarily due to the Euro weakening against the British pound for the year-to-date period. Transaction gains for the year ended December 31, 2022 were primarily attributable to the British pound weakening against the Euro. 123 Table of Contents Income Tax Expense Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Income before taxes $ 1,333,063 $ 510,806 $ 822,257 161% Less: Income tax expense 172,971 71,891 (101,080) (141) Net income $ 1,160,092 $ 438,915 721,177 164 The increase in income tax expense was attributable to higher pre-tax income allocable to AMC for the year ended December 31, 2023 compared to the prior year as the income attributed to redeemable and non-controlling interests is generally passed through to partners and not subject to corporate income taxes. The calculation of income taxes is also sensitive to any changes in weighted average daily ownership. The following table summarizes weighted average daily ownership: Year ended December 31, 2023 2022 AMC common stockholders 60.83 % 59.76 % Non-controlling AOG unitholders 39.17 % 40.24 % The change in ownership was primarily driven by the issuance of Class A common stock in connection with stock option exercises, vesting of restricted stock awards, the completion of the SSG Buyout and the Crescent Point Acquisition. The increase in the weighted average daily ownership for AMC common stockholders was partially offset by the issuance of AOG Units in connection with the settlement of the Black Creek earnout that increased the ownership of AOG Units not held by AMC. Redeemable and Non-Controlling Interests Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Net income $ 1,160,092 $ 438,915 $ 721,177 164% Less: Net income attributable to non-controlling interests in Consolidated Funds 274,296 119,333 154,963 130 Net income attributable to Ares Operating Group entities 885,796 319,582 566,214 177 Less: Net income (loss) attributable to redeemable interest in Ares Operating Group entities 226 (851) 1,077 NM Less: Net income attributable to non-controlling interests in Ares Operating Group entities 411,244 152,892 258,352 169 Net income attributable to Ares Management Corporation Class A and non-voting common stockholders $ 474,326 $ 167,541 306,785 183 The change in net income attributable to non-controlling interests in AOG entities over the comparative periods was a result of the respective changes in income before taxes and weighted average daily ownership, as presented above. 124 Table of Contents Consolidated Results of Operations of the Consolidated Funds The following table presents the results of operations of the Consolidated Funds ($ in thousands): Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Expenses of the Consolidated Funds $ (43,492) $ (36,410) $ (7,082) (19)% Net realized and unrealized gains on investments of Consolidated Funds 262,700 73,386 189,314 258 Interest and other income of Consolidated Funds 995,545 586,529 409,016 70 Interest expense of Consolidated Funds (754,600) (411,361) (343,239) (83) Income before taxes 460,153 212,144 248,009 117 Less: Income tax expense of Consolidated Funds 3,823 331 (3,492) NM Net income 456,330 211,813 244,517 115 Less: Revenues attributable to Ares Management Corporation eliminated upon consolidation 188,155 110,809 77,346 70 Other expense, net attributable to Ares Management Corporation eliminated upon consolidation 5,688 18,074 12,386 69 General, administrative and other expense attributable to Ares Management Corporation eliminated upon consolidation 433 255 (178) (70) Net income attributable to non-controlling interests in Consolidated Funds $ 274,296 $ 119,333 154,963 130 The results of operations of the Consolidated Funds primarily represent activities from certain funds that we are deemed to control. When a fund is consolidated, we reflect the revenues and expenses of the entity on a gross basis, subject to eliminations from consolidation. Substantially all of our results of operations related to the Consolidated Funds are attributable to ownership interests that third parties hold in those funds. The Consolidated Funds are not necessarily the same funds in each year presented due to changes in ownership, changes in limited partners’ or investor rights, and the creation or termination of funds and entities. Accordingly, such amounts may not be comparable for the periods presented, and in any event have no material impact on net income attributable to Ares Management Corporation. 125 Table of Contents Segment Analysis For segment reporting purposes, revenues and expenses are presented before giving effect to the results of our Consolidated Funds and the results attributable to non-controlling interests of joint ventures that we consolidate. As a result, segment revenues from management fees, fee related performance revenues, performance income and investment income are different than those presented on a consolidated basis in accordance with GAAP. Revenues recognized from Consolidated Funds are eliminated in consolidation and those attributable to the non-controlling interests of joint ventures have been excluded by us. Furthermore, expenses and the effects of other income (expense) are different than related amounts presented on a consolidated basis in accordance with GAAP due to the exclusion of the results of Consolidated Funds and the non-controlling interests of joint ventures. Non-GAAP Financial Measures We use the following non-GAAP measures to make operating decisions, assess performance and allocate resources: • Fee Related Earnings (“FRE”) • Realized Income (“RI”) These non-GAAP financial measures supplement and should be considered in addition to and not in lieu of, the results of operations, which are discussed further under “—Components of Consolidated Results of Operations” and are prepared in accordance with GAAP. We operate through our distinct operating segments. On March 31, 2023, we completed the SSG Buyout. We rebranded Ares SSG as Ares Asia and the Ares SSG credit business, including the Asian special situations, Asian secured lending and APAC direct lending strategies, as APAC credit. APAC credit has been reclassified effective January 1, 2023 and is now presented within the Credit Group. In connection with this reclassification, we will no longer use Strategic Initiatives to describe all other operating segments, instead reporting the collective results as Other. Separately, the Private Equity Group includes APAC private equity following the Crescent Point Acquisition. Historical periods have been modified to conform to the current period presentation. In February 2024, we announced that our special opportunities strategy, historically reported as a component of our Private Equity Group, will be integrated into the Credit Group to align management of this strategy and will form the foundation for a new opportunistic credit strategy. For segment reporting purposes, the change will require the reclassification of the special opportunities strategy from the Private Equity Group to the Credit Group and will be presented in our results beginning in 2024. Adjusted for this change, as of December 31, 2023, the Credit Group managed $299.4 billion in AUM with approximately 490 investment professionals and the Private Equity Group managed $24.5 billion in AUM with approximately 85 investment professionals, with both groups continuing to manage investments across the U.S., Europe and Asia-Pacific. The following table sets forth FRE and RI by reportable segment and the OMG ($ in thousands): Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Fee Related Earnings: Credit Group $ 1,257,528 $ 977,892 $ 279,636 29% Private Equity Group 112,541 84,467 28,074 33 Real Assets Group 218,807 271,626 (52,819) (19) Secondaries Group 104,387 110,501 (6,114) (6) Other 8,530 (2,252) 10,782 NM Operations Management Group (538,052) (447,884) (90,168) (20) Fee Related Earnings $ 1,163,741 $ 994,350 169,391 17 Realized Income: Credit Group $ 1,368,671 $ 1,055,634 $ 313,037 30% Private Equity Group 122,769 107,998 14,771 14 Real Assets Group 217,195 322,465 (105,270) (33) Secondaries Group 101,056 109,165 (8,109) (7) Other (6,703) (14,042) 7,339 52 Operations Management Group (537,460) (450,193) (87,267) (19) Realized Income $ 1,265,528 $ 1,131,027 134,501 12 126 Table of Contents Income before provision for income taxes is the GAAP financial measure most comparable to RI and FRE. The following table presents the reconciliation of income before taxes as reported within the Consolidated Statements of Operations to RI and FRE of the reportable segments and the OMG ($ in thousands): Year ended December 31, 2023 2022 Income before taxes $ 1,333,063 $ 510,806 Adjustments: Depreciation and amortization expense 233,185 335,083 Equity compensation expense 255,419 198,948 Acquisition-related compensation expense (1) 7,334 206,252 Acquisition and merger-related expense 12,000 15,197 Placement fee adjustment (5,819) 2,088 Other expense, net 976 1,874 Income before taxes of non-controlling interests in consolidated subsidiaries (17,249) (357) Income before taxes of non-controlling interests in Consolidated Funds, net of eliminations (278,119) (119,664) Total performance income—unrealized (305,370) (106,978) Total performance related compensation—unrealized 206,923 88,502 Total net investment income—unrealized (176,815) (724) Realized Income 1,265,528 1,131,027 Total performance income—realized (415,899) (418,021) Total performance related compensation—realized 282,406 274,541 Total investment loss—realized 31,706 6,803 Fee Related Earnings $ 1,163,741 $ 994,350 (1) Represents earnouts in connection with the acquisition of Landmark Partners, LLC (the “Landmark Acquisition”), the acquisition of AMP Capital’s infrastructure debt platform (“Infrastructure Debt Acquisition”), the Black Creek Acquisition and the Crescent Point Acquisition that are recorded as compensation expense and are presented within compensation and benefits within the Company’s Consolidated Statements of Operations. For the specific components and calculations of these non-GAAP measures, as well as additional reconciliations to the most comparable measures in accordance with GAAP, see “Note 14. Segment Reporting” within our consolidated financial statements included in this Annual Report on Form 10-K. Discussed below are our results of operations for our reportable segments and the OMG. 127 Table of Contents Results of Operations by Segment Credit Group—Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Fee Related Earnings The following table presents the components of the Credit Group’s FRE ($ in thousands): Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Management fees $ 1,749,796 $ 1,416,518 $ 333,278 24% Fee related performance revenues 167,333 71,497 95,836 134 Other fees 35,257 31,992 3,265 10 Compensation and benefits (598,125) (462,681) (135,444) (29) General, administrative and other expenses (96,733) (79,434) (17,299) (22) Fee Related Earnings $ 1,257,528 $ 977,892 279,636 29 Management Fees. The chart below presents Credit Group management fees and effective management fee rates ($ in millions): Management fees on existing funds increased primarily from deployment of capital with Pathfinder I, an open-ended core alternative credit fund, ACE V, PCS II and Ares Senior Direct Lending Fund II, L.P. (“ SDL II”) collectively generating additional management fees of $97.0 million for the year ended December 31, 2023 compared to the prior year . Management fees from ARCC, excluding Part I Fees described below, increased by $19.3 million for the year ended December 31, 2023 compared to the prior year primarily due to an increase in the average size of ARCC’s portfolio. Excluding catch-up fees, management fees from Ares SSG Capital Partners VI, L.P. (“SSG Fund VI”) increased by $13.7 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to new capital commitments. The remaining increase in management fees from funds in existence in both periods was primarily driven by deployment of capital in other direct lending funds and SMAs. Management fees from CLOs also increased for the year 128 Table of Contents ended December 31, 2023 compared to the prior year primarily due to the net addition of four CLOs for the year ended December 31, 2023. Part I Fees increased for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to an increase in pre-incentive fee net investment income generated by ARCC and CADC, driven by an increase in the average size of their portfolios and by the impact of rising interest rates, given their primarily floating-rate loan portfolios. The increase in Part I Fees included fees from ASIF of $5.1 million beginning in the third quarter of 2023. The increase in effective management fee rate for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by the increase in Part I Fees’ contribution to the effective management fee rate. Fee Related Performance Revenues. The increase for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily attributable to higher returns from certain perpetual capital funds that have benefited from rising interest rates on predominately floating-rate loans. Incentive fees from perpetual capital were mostly generated from 14 U.S. direct lending funds, ten European direct lending funds and one alternative credit fund for the year ended December 31, 2023 compared to ten European direct lending and eight U.S. direct lending funds for the year ended December 31, 2022. Other Fees. The increase in other fees for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by higher administrative service fees of $8.1 million mostly earned from certain private funds that pay on invested capital. The increase in other fees is partially offset by a decrease of $5.1 million in transaction fees, primarily from lower loan origination income generated from certain credit funds. Compensation and Benefits. The increase in compensation and benefits for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by: (i) higher fee related performance compensation and Part I Fees compensation of $59.4 million and $58.3 million, respectively, corresponding to the increases in revenues; and (ii) an increase in salary expense of $14.1 million, primarily attributable to headcount growth to support the expansion of our business. Separately, compensation and benefits increased by $4.7 million for the nine months ended December 31, 2023 following the SSG Buyout on March 31, 2023, reflecting the costs associated with the 20% change in ownership that were previously not part of our cost structure. Average headcount increased by 12% to 566 investment and investment support professionals for the year-to-date period in 2023 from 504 professionals in 2022 as we continued to add professionals primarily to support our growing direct lending and APAC credit platforms. General, Administrative and Other Expenses. Certain expenses increased during the current period, including: (i) occupancy costs, which support our growing headcount that are based in higher cost locations; (ii) information services such as research and market data; and (iii) information technology costs. These expenses collectively increased by $9.4 million for the year ended December 31, 2023 compared to the prior year . Additionally, supplemental distribution fees which fluctuate with sales volumes and managed assets of our non-traded products, contributed $5.1 million of the increase for the year ended December 31, 2023 when compared to prior year. We expect to incur higher supplemental distribution fees in future periods as we continue to develop our distribution relationships and expand our retail product offerings. For the year ended December 31, 2023, travel and marketing expenses have also increased by $4.1 million when compared to the year ended December 31, 2022, as marketing efforts continued to increase driven by more in-person investor meetings and events. 129 Table of Contents Realized Income The following table presents the components of the Credit Group’s RI ($ in thousands): Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Fee Related Earnings $ 1,257,528 $ 977,892 $ 279,636 29% Performance income—realized 271,550 156,929 114,621 73 Performance related compensation—realized (175,193) (97,621) (77,572) (79) Realized net performance income 96,357 59,308 37,049 62 Investment income—realized 20,111 7,078 13,033 184 Interest and other investment income—realized 21,975 27,288 (5,313) (19) Interest expense (27,300) (15,932) (11,368) (71) Realized net investment income 14,786 18,434 (3,648) (20) Realized Income $ 1,368,671 $ 1,055,634 313,037 30 Realized net performance income for the years ended December 31, 2023 and 2022 included aggregate tax distributions of $54.7 million and $48.1 million, respectively, from ACE IV, ACE V and PCS I, among other European direct lending funds. Realized net performance income for the year ended December 31, 2023 also included incentive fees primarily from ten direct lending funds and six alternative credit funds. Realized net performance income for the year ended December 31, 2022 also included incentive fees primarily from nine direct lending funds and two alternative credit funds. Realized net investment income for the years ended December 31, 2023 and 2022 was primarily attributable to interest income generated from our CLO investments. In addition, the year ended December 31, 2023 included realized gains from the sale of our investment in a commercial finance fund during the second quarter of 2023. Realized net investment income for the year ended December 31, 2022 was also attributable to: (i) realizations from the settlement of forward contracts entered into to hedge our exposure to foreign currency fluctuations, primarily from the Euro; (ii) distributions from a U.S. direct lending fund and a European direct lending fund; and (iii) income recognized in connection with distributions from a commercial finance fund. Interest expense, which is allocated among our segments based on the cost basis of balance sheet investments, increased over the comparative periods primarily due to rising SOFR rates and a higher average outstanding balance of the Credit Facility and to the issuance of the 2028 Senior Notes in November 2023. 130 Table of Contents Credit Group—Performance Income The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Credit Group. Accrued net performance income excludes net performance income that has been realized but not yet received as of the reporting date ($ in thousands): As of December 31, 2023 2022 Accrued Performance Income Accrued Performance Compensation Accrued Net Performance Income Accrued Performance Income Accrued Performance Compensation Accrued Net Performance Income ACE III $ 92,546 $ 57,948 $ 34,598 $ 100,774 $ 60,465 $ 40,309 ACE IV 149,584 97,123 52,461 168,204 104,286 63,918 ACE V 232,201 146,219 85,982 115,969 69,581 46,388 PCS I 123,979 73,258 50,721 98,143 57,994 40,149 PCS II 38,128 22,573 15,555 — — — Pathfinder I 155,136 131,866 23,270 88,879 75,547 13,332 Other credit funds 184,783 106,447 78,336 93,640 52,482 41,158 Total Credit Group $ 976,357 $ 635,434 $ 340,923 $ 665,609 $ 420,355 $ 245,254 The following table presents the change in accrued performance income for the Credit Group ($ in thousands): As of December 31, 2022 Activity during the period As of December 31, 2023 Waterfall Type Accrued Performance Income Change in Unrealized Realized Other Adjustments Accrued Performance Income Accrued Carried Interest ACE III European $ 100,774 $ (1,931) $ (6,237) $ (60) $ 92,546 ACE IV European 168,204 58,421 (77,097) 56 149,584 ACE V European 115,969 181,054 (64,079) (743) 232,201 PCS I European 98,143 45,308 (19,867) 395 123,979 PCS II European — 37,621 — 507 38,128 Pathfinder I European 88,879 66,257 — — 155,136 Other credit funds European 85,463 92,590 (19,078) 1,377 160,352 Other credit funds American 8,177 19,394 (3,083) (57) 24,431 Total accrued carried interest 665,609 498,714 (189,441) 1,475 976,357 Other credit funds Incentive — 82,109 (82,109) — — Total Credit Group $ 665,609 $ 580,823 $ (271,550) $ 1,475 $ 976,357 131 Table of Contents Credit Group—Assets Under Management The tables below present rollforwards of AUM for the Credit Group ($ in millions): Liquid Credit Alternative Credit U.S. Direct Lending European Direct Lending APAC Credit Other (1) Total Credit Group Balance at 12/31/2022 $ 43,864 $ 21,363 $ 98,327 $ 50,642 $ 11,383 $ — $ 225,579 Net new par/equity commitments 2,808 8,351 15,960 12,508 387 379 40,393 Net new debt commitments 1,978 400 8,492 3,826 201 — 14,897 Capital reductions (858) — (1,935) (1,065) — — (3,858) Distributions (319) (1,484) (2,976) (1,977) (429) — (7,185) Redemptions (2,069) (984) (290) (2) — — (3,345) Net allocations among investment strategies (33) 4,291 — — 25 (25) 4,258 Change in fund value 1,928 1,949 5,495 4,332 353 — 14,057 Balance at 12/31/2023 $ 47,299 $ 33,886 $ 123,073 $ 68,264 $ 11,920 $ 354 $ 284,796 Liquid Credit Alternative Credit U.S. Direct Lending European Direct Lending APAC Credit Other Total Credit Group Balance at 12/31/2021 $ 40,335 $ 17,424 $ 85,849 $ 49,102 $ 8,695 $ — $ 201,405 Net new par/equity commitments 3,126 4,628 7,137 1,476 1,782 — 18,149 Net new debt commitments 3,777 — 7,310 1,901 1,474 — 14,462 Capital reductions (237) (45) (991) (2) (5) — (1,280) Distributions (117) (1,752) (2,269) (1,182) (737) — (6,057) Redemptions (1,699) (456) (260) — — — (2,415) Net allocations among investment strategies (8) 1,983 — — — — 1,975 Change in fund value (1,313) (419) 1,551 (653) 174 — (660) Balance at 12/31/2022 $ 43,864 $ 21,363 $ 98,327 $ 50,642 $ 11,383 $ — $ 225,579 (1) Activity within Other represents equity commitments to the platform that have not yet been allocated to an investment strategy. The components of our AUM for the Credit Group are presented below ($ in billions): AUM: $284.8 AUM: $225.6 FPAUM AUM not yet paying fees Non-fee paying (1) (1) Includes $15.1 billion and $14.4 billion of AUM of funds from which we indirectly earn management fees as of December 31, 2023 and 2022, respectively, and includes $1.5 billion and $1.2 billion of non-fee paying AUM based on our general partner commitment as of December 31, 2023 and 2022, respectively. 132 Table of Contents Credit Group—Fee Paying AUM The tables below present rollforwards of fee paying AUM for the Credit Group ($ in millions): Liquid Credit Alternative Credit U.S. Direct Lending European Direct Lending APAC Credit Total Credit Group Balance at 12/31/2022 $ 42,191 $ 15,904 $ 57,568 $ 29,561 $ 6,051 $ 151,275 Commitments 4,958 65 3,068 — 242 8,333 Deployment/subscriptions/increase in leverage 282 5,463 11,246 5,554 1,156 23,701 Capital reductions (892) — (2,304) (268) (193) (3,657) Distributions (335) (1,913) (3,707) (450) (1,522) (7,927) Redemptions (2,067) (901) (305) (1,201) — (4,474) Net allocations among investment strategies (33) 4,396 — — — 4,363 Change in fund value 2,036 204 2,030 1,050 (144) 5,176 Balance at 12/31/2023 $ 46,140 $ 23,218 $ 67,596 $ 34,246 $ 5,590 $ 176,790 Liquid Credit Alternative Credit U.S. Direct Lending European Direct Lending APAC Credit Total Credit Group Balance at 12/31/2021 $ 38,673 $ 8,742 $ 46,128 $ 23,847 $ 4,720 $ 122,110 Commitments 6,739 369 2,291 — 1,928 11,327 Deployment/subscriptions/increase in leverage 21 7,128 14,137 9,194 2,300 32,780 Capital reductions (289) (25) (1,645) (1,563) (391) (3,913) Distributions (138) (1,442) (3,501) (764) (1,520) (7,365) Redemptions (1,713) (400) (260) (311) — (2,684) Net allocations among investment strategies (8) 1,943 — — — 1,935 Change in fund value (1,094) (410) 418 (842) (143) (2,071) Change in fee basis — (1) — — (843) (844) Balance at 12/31/2022 $ 42,191 $ 15,904 $ 57,568 $ 29,561 $ 6,051 $ 151,275 The charts below present FPAUM for the Credit Group by its fee bases ($ in billions): FPAUM: $176.8 FPAUM: $151.3 Invested capital Market value (1) Collateral balances (at par) Capital commitments (1) Includes $35.4 billion and $31.1 billion from funds that primarily invest in illiquid strategies as of December 31, 2023 and 2022, respectively. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies. 133 Table of Contents Credit Group—Fund Performance Metrics as of December 31, 2023 ARCC contributed approximately 37% of the Credit Group’s total management fees for the year ended December 31, 2023. In addition, eight other significant funds, CADC, Ares Senior Direct Lending Fund I, L.P. (“ SDL I”) , ACE IV, ACE V, PCS II, Pathfinder I, SDL II and an open-ended core alternative credit fund, collectively contributed approximately 27% of the Credit Group’s management fees for the year ended December 31, 2023. The following table presents the performance data for our significant funds that are not drawdown funds in the Credit Group as of December 31, 2023 ($ in millions): Returns(%) Year of Inception AUM Year-To-Date Since Inception (1) Primary Investment Strategy Fund Gross Net Gross Net ARCC (2) 2004 $ 27,977 N/A 12.0 N/A 15.7 U.S. Direct Lending CADC (3) 2017 5,030 N/A 13.8 N/A 6.4 U.S. Direct Lending (1) Since inception returns are annualized. (2) Returns are time-weighted rates of return and include the reinvestment of income and other earnings from securities or other investments and reflect the deduction of all trading expenses. Net returns are calculated using the fund’s NAV and assume dividends are reinvested at the closest quarter-end NAV to the relevant quarterly ex-dividend dates. Additional information related to ARCC can be found in its filings with the SEC, which are not part of this report. (3) Returns are time-weighted rates of return and include the reinvestment of income and other earnings from securities or other investments and reflect the deduction of all trading expenses. Returns are shown for institutional share class. Shares of other classes may have lower returns due to higher selling commissions and fees. Net returns are calculated using the fund’s NAV and assume distributions are reinvested at the NAV on the date of distribution. Additional information related to CADC can be found in its filings with the SEC, which are not part of this report. 134 Table of Contents The following table presents the performance data of the Credit Group’s significant drawdown funds as of December 31, 2023 ($ in millions): Year of Inception AUM Original Capital Commitments Capital Invested to Date Realized Value (1) Unrealized Value (2) Total Value MoIC IRR(%) Primary Investment Strategy Fund Gross (3) Net (4) Gross (5) Net (6) Funds Harvesting Investments SDL I Unlevered 2018 $ 4,818 $ 922 $ 872 $ 342 $ 711 $ 1,053 1.3x 1.2x 9.0 6.9 U.S. Direct Lending SDL I Levered 2,045 2,022 915 1,755 2,670 1.4x 1.3x 15.3 11.4 ACE IV Unlevered (7) 2018 10,199 2,851 2,311 746 2,123 2,869 1.3x 1.2x 8.1 5.8 European Direct Lending ACE IV Levered (7) 4,819 3,903 1,752 3,502 5,254 1.5x 1.3x 11.5 8.2 Funds Deploying Capital ACE V Unlevered (8) 2020 17,270 7,026 5,201 555 5,433 5,988 1.2x 1.2x 11.4 8.5 European Direct Lending ACE V Levered (8) 6,376 4,723 741 5,093 5,834 1.3x 1.2x 17.3 12.5 PCS II 2020 5,524 5,114 3,240 223 3,409 3,632 1.2x 1.1x 10.1 7.2 U.S. Direct Lending Pathfinder I 2020 4,286 3,683 2,702 201 3,127 3,328 1.3x 1.2x 18.1 12.9 Alternative Credit SDL II Unlevered 2021 15,747 1,989 1,221 129 1,242 1,371 1.2x 1.1x 12.2 9.5 U.S. Direct Lending SDL II Levered 6,047 3,567 602 3,655 4,257 1.3x 1.2x 20.2 15.2 Open-ended core alternative credit fund (9) 2021 4,674 4,229 3,219 263 3,260 3,523 1.1x 1.1x 11.9 8.6 Alternative Credit (1) Realized value represents the sum of all cash distributions to all partners and if applicable, exclude tax and incentive distributions made to the general partner. (2) Unrealized value represents the fund’s NAV reduced by the accrued incentive allocation, if applicable. There can be no assurance that unrealized values will be realized at the valuations indicated. (3) The gross multiple of invested capital (“MoIC”) is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The gross MoIC is before giving effect to management fees, carried interest and other expenses, as applicable, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the gross fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (4) The net MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes those interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The net MoIC is after giving effect to management fees and carried interest, other expenses and credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (5) The gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Gross IRR reflects returns to the fee-paying limited partners and, if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest and other expenses, as applicable, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Gross fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (6) The net IRR is an annualized since inception net internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Net IRRs reflect returns to the fee-paying limited partners and, if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the net IRR calculations are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees and carried interest, other expenses and credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (7) ACE IV is made up of four parallel funds, two denominated in Euros and two denominated in pound sterling: ACE IV (E) Unlevered, ACE IV (G) Unlevered, ACE IV (E) Levered and ACE IV (G) Levered. The gross and net IRR and MoIC presented in the table are for ACE IV (E) Unlevered and ACE IV (E) Levered. Metrics for ACE IV (E) Levered are inclusive of a U.S. dollar denominated feeder fund, which has not been presented separately. The gross and net IRR for ACE IV (G) Unlevered are 9.7% and 7.0%, respectively. The gross and net MoIC for ACE IV (G) Unlevered are 1.4x and 1.3x, respectively. The gross and net IRR for ACE IV (G) Levered are 12.8% and 9.1%, respectively. The gross and net MoIC for ACE IV (G) Levered are 1.5x and 1.4x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund’s closing. All other values for ACE IV Unlevered and ACE IV Levered are for the combined levered and unlevered parallel funds and are converted to U.S. dollars at the prevailing quarter-end exchange rate. (8) ACE V is made up of four parallel funds, two denominated in Euros and two denominated in pound sterling: ACE V (E) Unlevered, ACE V (G) Unlevered, ACE V (E) Levered, and ACE V (G) Levered, and two feeder funds: ACE V (D) Levered and ACE V (Y) Unlevered. ACE V (E) Levered includes the ACE V (D) Levered feeder fund and ACE V (E) Unlevered includes the ACE V (Y) Unlevered feeder fund. The gross and net IRR and gross and net MoIC presented in the table are for ACE V (E) Unlevered and ACE V (E) Levered. Metrics for ACE V (E) Levered exclude the ACE V (D) Levered feeder fund and metrics for ACE V (E) Unlevered exclude the ACE V (Y) Unlevered feeder fund. The gross and net IRR for ACE V (G) Unlevered are 13.3% and 10.0%, respectively. The gross and net MoIC for ACE V (G) Unlevered are 1.2x and 1.2x, respectively. The gross and net IRR for ACE V (G) Levered are 18.1% and 13.2%, respectively. The gross and net MoIC for ACE V (G) Levered are 1.3x and 1.2x, respectively. The gross and net IRR for ACE V (D) Levered are 16.6% and 12.3%, respectively. The gross and net MoIC for ACE V (D) Levered are 1.3x and 1.2x, respectively. The gross and net IRR for ACE V (Y) Unlevered are 11.1% and 8.0%, respectively. The gross and net MoIC for ACE V (Y) Unlevered are 1.2x and 1.1x, respectively. Original capital commitments are converted to U.S. dollars at the prevailing exchange rate at the time of the fund's closing. All other values for ACE V Unlevered and ACE V Levered are for the combined levered and unlevered parallel funds and are converted to U.S. dollars at the prevailing quarter-end exchange rate. (9) Performance for the open-ended core alternative credit fund, a perpetual capital vehicle, is presented as a drawdown fund as investor commitments to the fund are drawn sequentially in order of closing date, typically over a period of approximately 12 to 18 months. The fund is made up of a Class M (“Main Class”) and a Class C (“Constrained Class”). The Main Class includes investors electing to participate in all investments and the Constrained Class includes investors electing to be excluded from exposure to liquid investments. The gross and net IRR and gross and net MoIC presented in the table are for the Main Class. The gross and net IRRs for the Constrained Class are 10.8% and 7.7%, respectively. The gross and net MoIC for the Constrained Class are 1.2x and 1.1x, respectively. 135 Table of Contents Private Equity Group—Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Fee Related Earnings The following table presents the components of the Private Equity Group’s FRE ($ in thousands): Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Management fees $ 230,251 $ 199,837 $ 30,414 15% Other fees 3,076 1,888 1,188 63 Compensation and benefits (85,024) (86,561) 1,537 2 General, administrative and other expenses (35,762) (30,697) (5,065) (16) Fee Related Earnings $ 112,541 $ 84,467 28,074 33 Management Fees. The chart below presents Private Equity Group management fees and effective management fee rates ($ in millions): Management fees from ASOF II increased by $35.3 million for the year ended December 31, 2023 compared to the prior year primarily driven by deployment. Management fees also increased by $7.4 million for the year ended December 31, 2023 due to the Crescent Point Acquisition. The increase in management fees was partially offset by decrease of $5.0 million in fees from ACOF IV for the year ended December 31, 2023 compared to the prior year as the fund stopped paying management fees during the fourth quarter of 2022. M anagement fees from ASOF I also decreased by $5.6 million for the year ended December 31, 2023 compared to the prior year due to asset realizations that reduced the fee base. The increase in effective management fee rate for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by deployment of capital in ASOF II, which has a higher effective management fee rate than the Private Equity Group’s average effective management fee rate. In addition, certain funds from the Crescent Point Acquisition contributed to the increase in effective management fee rate as those funds have a higher effective management fee rate than the Private Equity Group’s average effective management fee rate. 136 Table of Contents Other Fees. Other fees increased year ended December 31, 2023 compared to the prior year primarily due to higher administrative service fees on funds that pay on invested capital, driven by deployment from ASOF II and ACOF VI. Compensation and Benefits. Although salary and benefits costs have modestly increased during the year ended December 31, 2023 compared to the prior year to reflect merit increases for existing personnel, as well as changes in headcount from the Crescent Point Acquisition, compensation and benefits have decreased over the comparative period, primarily driven by lower incentive-based compensation which is discretionary and may fluctuate each year. In connection to the Crescent Point Acquisition, we recognized $3.1 million of compensation and benefits for the three months ended December 31, 2023 following the transaction close date of October 2, 2023. Average headcount increased by 6% to 129 investment and investment support professionals for the year-to-date period in 2023 from 122 professionals in 2022, primarily due to the Crescent Point Acquisition. General, Administrative and Other Expenses. Placement fees increased by $2.9 million for the year ended December 31, 2023 compared to the prior year primarily driven by new capital commitments to ASOF II subsequent to the second quarter of 2022 and through its final close in the fourth quarter of 2022. Additionally, occupancy costs which support our professionals that are based in higher cost locations, increased by $1.4 million for the year ended December 31, 2023 when compared to the year ended December 31, 2022. Separately, the Crescent Point Acquisition that closed on October 2, 2023, contributed an additional $1.2 million of expenses, primarily consisted of consulting fees and occupancy costs. Realized Income The following table presents the components of the Private Equity Group’s RI ($ in thousands): Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Fee Related Earnings $ 112,541 $ 84,467 $ 28,074 33% Performance income—realized 117,899 123,806 (5,907) (5) Performance related compensation—realized (89,767) (90,300) 533 1 Realized net performance income 28,132 33,506 (5,374) (16) Investment income (loss)—realized (1,434) 3,432 (4,866) NM Interest and other investment income—realized 4,952 2,546 2,406 95 Interest expense (21,422) (15,953) (5,469) (34) Realized net investment loss (17,904) (9,975) (7,929) (79) Realized Income $ 122,769 $ 107,998 14,771 14 Realized net performance income for the years ended December 31, 2023 and 2022 was primarily attributable to tax distributions from ASOF I. Realized net performance income for the year ended December 31, 2023 also included realized gains from the partial sale of ACOF IV’s investment in AZEK, while the year ended December 31, 2022 included realized gains from the partial sale and recapitalization of ACOF IV’s investment in an energy company. Realized net investment loss for the years ended December 31, 2023 and 2022 was primarily attributable to interest expense exceeding investment income during these periods. Interest expense, which is allocated among our segments based on the cost basis of balance sheet investments, increased over the comparative periods primarily due to rising SOFR rates and a higher average outstanding balance of the Credit Facility and to the issuance of the 2028 Senior Notes in November 2023. Realized net investment loss for the year ended December 31, 2023 also reflects realized losses from two corporate private equity funds, including the liquidation of one of those funds following the disposition of its remaining assets. The activity for the year ended December 31, 2023 was partially offset by dividend income from SSF IV and realized gains from the partial sale of ACOF IV’s investment in AZEK. 137 Table of Contents Private Equity Group—Performance Income The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Private Equity Group ($ in thousands): As of December 31, 2023 2022 Accrued Performance Income Accrued Performance Compensation Accrued Net Performance Income Accrued Performance Income Accrued Performance Compensation Accrued Net Performance Income ACOF IV $ 181,317 $ 145,197 $ 36,120 $ 282,624 $ 226,099 $ 56,525 ACOF V 474,878 380,807 94,071 742,962 594,369 148,593 ACOF VI 337,142 289,118 48,024 147,185 117,748 29,437 ASOF I 357,016 250,198 106,818 326,471 228,529 97,942 ASOF II 80,926 56,648 24,278 — — — Other funds 192,167 141,481 50,686 108,997 75,583 33,414 Total Private Equity Group $ 1,623,446 $ 1,263,449 $ 359,997 $ 1,608,239 $ 1,242,328 $ 365,911 The following table presents the change in accrued carried interest for the Private Equity Group ($ in thousands): As of December 31, 2022 Activity during the period As of December 31, 2023 Waterfall Type Accrued Carried Interest Change in Unrealized Realized Other Adjustments Accrued Carried Interest ACOF IV American $ 282,624 $ (35,830) $ (65,477) $ — $ 181,317 ACOF V American 742,962 (268,084) — — 474,878 ACOF VI American 147,185 189,957 — — 337,142 ASOF I European 326,471 82,728 (52,183) — 357,016 ASOF II European — 80,926 — — 80,926 Other funds European 92,509 82,079 — 8,479 183,067 Other funds American 16,488 (7,149) (239) — 9,100 Total Private Equity Group $ 1,608,239 $ 124,627 $ (117,899) $ 8,479 $ 1,623,446 Private Equity Group—Assets Under Management The tables below present rollforwards of AUM for the Private Equity Group ($ in millions): Corporate Private Equity Special Opportunities APAC Private Equity Other (1) Total Private Equity Group Balance at 12/31/2022 $ 20,939 $ 13,720 $ 90 $ — $ 34,749 Acquisitions — — 3,697 — 3,697 Net new par/equity commitments 1,482 — — 139 1,621 Capital reductions (9) — — — (9) Distributions (1,794) (499) (16) — (2,309) Change in fund value 380 1,333 (357) — 1,356 Balance at 12/31/2023 $ 20,998 $ 14,554 $ 3,414 $ 139 $ 39,105 Corporate Private Equity Special Opportunities APAC Private Equity Other Total Private Equity Group Balance at 12/31/2021 $ 21,502 $ 11,765 $ 137 $ — $ 33,404 Net new par/equity commitments — 2,202 — — 2,202 Capital reductions (8) (200) — — (208) Distributions (1,009) (268) (56) — (1,333) Change in fund value 453 221 10 — 684 Balance at 12/31/2022 $ 20,938 $ 13,720 $ 91 $ — $ 34,749 (1) Activity within Other represents equity commitments to the platform that have not yet been allocated to an investment strategy. 138 Table of Contents The components of our AUM for the Private Equity Group are presented below ($ in billions): AUM: $39.1 AUM: $34.7 FPAUM Non-fee paying (1) AUM not yet paying fees (1) Includes $1.7 billion and $1.3 billion of non-fee paying AUM based on our general partner commitment as of December 31, 2023 and 2022, respectively. Private Equity Group—Fee Paying AUM The tables below present rollforwards of fee paying AUM for the Private Equity Group ($ in millions): Corporate Private Equity Special Opportunities APAC Private Equity Total Private Equity Group Balance at 12/31/2022 $ 11,277 $ 7,166 $ 4 $ 18,447 Acquisitions — — 1,692 1,692 Deployment/subscriptions/increase in leverage 220 2,518 14 2,752 Distributions (38) (1,194) — (1,232) Change in fee basis — — (45) (45) Balance at 12/31/2023 $ 11,459 $ 8,490 $ 1,665 $ 21,614 Corporate Private Equity Special Opportunities APAC Private Equity Total Private Equity Group Balance at 12/31/2021 $ 12,420 $ 4,216 $ 53 $ 16,689 Deployment/subscriptions/increase in leverage 36 4,453 — 4,489 Distributions (385) (1,503) (14) (1,902) Change in fund value — — (4) (4) Change in fee basis (794) — (31) (825) Balance at 12/31/2022 $ 11,277 $ 7,166 $ 4 $ 18,447 139 Table of Contents The charts below present FPAUM for the Private Equity Group by its fee bases ($ in billions): FPAUM: $21.6 FPAUM: $18.5 Invested capital Capital commitments Private Equity Group—Fund Performance Metrics as of December 31, 2023 Four significant funds, ACOF V, ASOF I, ACOF VI and ASOF II, collectively contributed approximately 85% of the Private Equity Group’s management fees for the year ended December 31, 2023. The following table presents the performance data of the Private Equity Group’s significant drawdown funds as of December 31, 2023 ($ in millions): Year of Inception AUM Original Capital Commitments Capital Invested to Date Realized Value (1) Unrealized Value (2) Total Value MoIC IRR(%) Primary Investment Strategy Fund Gross (3) Net (4) Gross (5) Net (6) Funds Harvesting Investments ACOF V 2017 $ 8,765 $ 7,850 $ 7,611 $ 3,505 $ 8,253 $ 11,758 1.5x 1.4x 11.6 8.3 Corporate Private Equity ASOF I 2019 5,559 3,518 5,500 4,462 3,775 8,237 1.8x 1.6x 26.0 20.2 Special Opportunities Funds Deploying Capital ACOF VI 2020 7,419 5,743 5,109 593 6,696 7,289 1.4x 1.3x 24.2 17.9 Corporate Private Equity ASOF II 2021 7,580 7,128 5,926 1,371 5,241 6,612 1.2x 1.1x 14.4 9.6 Special Opportunities (1) Realized value represents the sum of all cash dividends, interest income, other fees and cash proceeds from realizations of interests in portfolio investments. Realized value excludes any proceeds related to bridge financings. (2) Unrealized value represents the fair market value of remaining investments. Unrealized value does not take into account any bridge financings. There can be no assurance that unrealized investments will be realized at the valuations indicated. (3) The gross MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The gross MoIC is before giving effect to management fees, carried interest, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The gross MoICs are also calculated before giving effect to any bridge financings. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the gross fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (4) The net MoIC is calculated at the fund-level. The net MoIC is based on the interests of the fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or performance fees. The net MoIC is after giving effect to management fees, carried interest, as applicable, and other expenses. The net MoICs are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the net MoIC would be 1.3x for ACOF V and 1.2x for ACOF VI. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (5) The gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Gross IRRs reflect returns to the fee-paying limited partners and, if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The gross IRRs are also calculated before giving effect to any bridge financings. The funds may utilize a credit facility during the investment period and for general cash management purposes. Gross fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (6) The net IRR is an annualized since inception net internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Net IRRs reflect returns to the fee-paying limited partners and if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the net IRR calculation are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees, carried interest as applicable, and other expenses and exclude commitments by the general partner and Schedule I investors who do not pay either management fees or carried interest. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. The net IRRs are also calculated before giving effect to any bridge financings. Inclusive of bridge financings, the net IRRs would be 8.4% for ACOF V and 16.6% for ACOF VI. 140 Table of Contents Real Assets Group—Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Fee Related Earnings The following table presents the components of the Real Assets Group’s FRE ($ in thousands): Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Management fees $ 389,437 $ 347,808 $ 41,629 12% Fee related performance revenues 334 167,693 (167,359) (100) Other fees 29,695 35,879 (6,184) (17) Compensation and benefits (153,870) (240,015) 86,145 36 General, administrative and other expenses (46,789) (39,739) (7,050) (18) Fee Related Earnings $ 218,807 $ 271,626 (52,819) (19) Management Fees. The chart below presents Real Assets Group management fees and effective management fee rates ($ in millions): Management fees from IDF V increased by $9.3 million for the year ended December 31, 2023 compared to the prior year primarily driven by deployment of capital. Our second climate infrastructure fund, which launched during the second quarter of 2023, contributed additional management fees of $4.8 million primarily driven by new capital commitments for the year ended December 31, 2023. Management fees from AREIT and AIREIT also collectively increased by $11.4 million for the year ended December 31, 2023 compared to the prior year driven by increases in the average capital base of AREIT and AIREIT. The increase over the comparative period also included $1.5 million from make-whole termination fees, driven by the early termination of the advisory agreements of two U.S. industrial real estate equity funds, which resulted in the acceleration of contractual management fees. 141 Table of Contents Management fees for the year ended December 31, 2023 included: (i) $1.8 million of catch-up fees from our fourth U.S. opportunistic real estate equity fund; and (ii) $0.3 million of catch-up fees from Ares European Real Estate Fund VI, L.P. (“EF VI”). Catch-up fees for the year ended December 31, 2022 included $4.8 million from US X. Excluding catch-up fees previously discussed, management fees for the year ended December 31, 2023 compared to the prior year increased by: (i) $15.1 million for our fourth U.S. opportunistic real estate equity fund; (ii) $2.9 million for EF VI; and (iii) $3.3 million for US X, which closed in the third quarter of 2022. The increase in management fees for these funds was primarily driven by new capital commitments. Management fees from our most recent real estate equity funds increase once capital is invested and deployment in these funds has also contributed to the increase in fees over the comparative period. The increase in effective management fee rate for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to additional capital raised in our non-traded REITs, which have effective management fee rates between 1.10% and 1.25%. Fee Related Performance Revenues. AREIT and AIREIT generated $164.3 million of incentive fees for the year ended December 31, 2022 but did not meet the performance hurdles to generate incentive fees for the year ended December 31, 2023, resulting in a decrease in fee related performance revenues. Other Fees. The decrease in other fees for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily attributable to a decrease of: (i) $11.4 million in acquisition and development fees resulting from a reduction in property-related activities within certain industrial U.S. real estate equity funds; and (ii) $2.9 million related to program administration fees resulting from the management and creation of our 1031 exchange program that is used by our non-traded REITs. The decrease for the year ended December 31, 2023 compared to the year ended December 31, 2022 was partially offset by higher credit transaction fees of $7.5 million. Credit transaction fees are generated periodically within the infrastructure debt strategy and relate to the arrangement and origination of loans. Compensation and Benefits. The decrease in compensation and benefits for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by lower fee related performance compensation of $103.3 million, corresponding to the decrease in fee related performance revenues. The decrease over the comparative period was partially offset by higher salary expense of $11.5 million, primarily attributable to headcount growth. Average headcount increased by 13% to 356 investment and investment support professionals for the year-to-date period in 2023 from 314 professionals in 2022. General, Administrative and Other Expenses. Certain expenses increased during the current period, including: (i) occupancy costs which support our growing headcount that are based in higher cost locations; (ii) information services such as research and market data; and (iii) information technology costs. Collectively, these expenses increased by $4.0 million for the year ended December 31, 2023 compared to the prior year . Additionally, the increase in general, administrative and other expenses was also driven by: (i) travel, marketing and certain fringe benefits, which collectively increased by $3.1 million, as we continued to increase marketing efforts driven by more investor meetings and events and conducted more in-person company meetings and events with a focus on promoting collaboration; and (ii) placement fees, which increased by $1.5 million, primarily attributable to new commitments in IDF V during 2022 and our fourth U.S. opportunistic real estate equity fund in connection with our fundraising efforts. 142 Table of Contents Realized Income The following table presents the components of the Real Assets Group’s RI ($ in thousands): Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Fee Related Earnings $ 218,807 $ 271,626 $ (52,819) (19)% Performance income—realized 20,990 133,130 (112,140) (84) Performance related compensation—realized (12,768) (83,105) 70,337 85 Realized net performance income 8,222 50,025 (41,803) (84) Investment income (loss)—realized (4,498) 3,115 (7,613) NM Interest and other investment income—realized 11,055 9,045 2,010 22 Interest expense (16,391) (11,346) (5,045) (44) Realized net investment income (loss) (9,834) 814 (10,648) NM Realized Income $ 217,195 $ 322,465 (105,270) (33) Realized net performance income for the years ended December 31, 2023 and 2022 included incentive fees generated from an open-ended industrial real estate fund and carried interest received upon realizations from US VIII, driven by multifamily property sales. Realized net performance income for the year ended December 31, 2023 also included carried interest received upon realizations from a U.S. real estate equity fund driven by multifamily property sales, while realized net performance income for the year ended December 31, 2022 included tax distributions from US IX. Realized net investment loss for the year ended December 31, 2023 was primarily attributable to: (i) interest expense exceeding investment income during the periods; and (ii) realized losses recognized from a real estate debt vehicle, where financing costs are exceeding investment returns due to limited investment opportunities. This activity was partially offset by distributions of investment income from multiple real estate equity and real estate debt vehicles during the period. Realized net investment income for the year ended December 31, 2022 included dividend income generated from an infrastructure opportunities fund. Interest expense, which is allocated among our segments based on the cost basis of balance sheet investments, increased over the comparative periods primarily due to rising SOFR rates and a higher average outstanding balance of the Credit Facility and to the issuance of the 2028 Senior Notes in November 2023. Real Assets Group—Performance Income The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Real Assets Group. Accrued net performance income excludes net performance income that has been realized but not yet received as of the reporting date ($ in thousands): As of December 31, 2023 2022 Accrued Performance Income Accrued Performance Compensation Accrued Net Performance Income Accrued Performance Income Accrued Performance Compensation Accrued Net Performance Income US VIII $ 32,199 $ 20,651 $ 11,548 $ 36,822 $ 23,566 $ 13,256 US IX 89,958 55,774 34,184 86,905 53,881 33,024 EF IV 49,150 29,490 19,660 61,791 37,075 24,716 IDF V 56,065 33,677 22,388 16,848 10,108 6,740 AREOF III 35,715 21,429 14,286 41,463 24,878 16,585 EIF V 93,598 69,969 23,629 94,398 70,562 23,836 Other real assets funds 140,167 92,468 47,699 154,641 97,894 56,747 Total Real Assets Group $ 496,852 $ 323,458 $ 173,394 $ 492,868 $ 317,964 $ 174,904 143 Table of Contents The following table presents the change in accrued performance income for the Real Assets Group ($ in thousands): As of December 31, 2022 Activity during the period As of December 31, 2023 Waterfall Type Accrued Performance Income Change in Unrealized Realized Other Adjustments Accrued Performance Income Accrued Carried Interest US VIII European $ 36,822 $ (2,162) $ (2,461) $ — $ 32,199 US IX European 86,905 3,053 — — 89,958 EF IV American 61,791 (12,641) — — 49,150 IDF V European 16,848 37,875 — 1,342 56,065 AREOF III European 41,463 (5,748) — — 35,715 EIF V European 94,398 (800) — — 93,598 Other real assets funds European 97,934 16,973 (2,462) 32 112,477 Other real assets funds American 56,707 (28,074) (926) (17) 27,690 Total accrued carried interest 492,868 8,476 (5,849) 1,357 496,852 Other real assets funds Incentive — 15,141 (15,141) — — Total Real Assets Group $ 492,868 $ 23,617 $ (20,990) $ 1,357 $ 496,852 Real Assets Group—Assets Under Management The tables below present rollforwards of AUM for the Real Assets Group ($ in millions): U.S. Real Estate Equity European Real Estate Equity Real Estate Debt Infrastructure Opportunities Infrastructure Debt Total Real Assets Group Balance at 12/31/2022 $ 31,460 $ 8,561 $ 11,161 $ 5,194 $ 9,685 $ 66,061 Net new par/equity commitments 3,116 775 539 1,218 428 6,076 Net new debt commitments — 326 400 — — 726 Capital reductions (245) — (235) — — (480) Distributions (2,813) (264) (259) (322) (1,138) (4,796) Redemptions (1,207) — (552) — — (1,759) Change in fund value (1,134) (12) 98 158 475 (415) Balance at 12/31/2023 $ 29,177 $ 9,386 $ 11,152 $ 6,248 $ 9,450 $ 65,413 U.S. Real Estate Equity European Real Estate Equity Real Estate Debt Infrastructure Opportunities Infrastructure Debt Total Real Assets Group Balance at 12/31/2021 $ 24,677 $ 6,827 $ 9,659 $ 4,756 $ — $ 45,919 Acquisitions — — — — 8,184 8,184 Net new par/equity commitments 5,811 2,038 1,012 431 1,346 10,638 Net new debt commitments 1,305 719 1,229 — — 3,253 Capital reductions (234) — (282) — — (516) Distributions (1,539) (538) (196) (514) (396) (3,183) Redemptions (516) — (435) — — (951) Change in fund value 1,956 (485) 174 521 551 2,717 Balance at 12/31/2022 $ 31,460 $ 8,561 $ 11,161 $ 5,194 $ 9,685 $ 66,061 144 Table of Contents The components of our AUM for the Real Assets Group are presented below ($ in billions): AUM: $65.4 AUM: $66.1 FPAUM Non-fee paying (1) AUM not yet paying fees (1) Includes $0.6 billion of non-fee paying AUM based on our general partner commitment as of December 31, 2023 and 2022, respectively. Real Assets Group—Fee Paying AUM The tables below present rollforwards of fee paying AUM for the Real Assets Group ($ in millions): U.S. Real Estate Equity European Real Estate Equity Real Estate Debt Infrastructure Opportunities Infrastructure Debt Total Real Assets Group Balance at 12/31/2022 $ 21,788 $ 5,634 $ 3,691 $ 4,524 $ 5,970 $ 41,607 Commitments 2,525 26 (5) 1,128 — 3,674 Deployment/subscriptions/increase in leverage 199 455 368 350 1,596 2,968 Capital reductions (245) (99) (111) — — (455) Distributions (1,125) (7) (264) (854) (1,612) (3,862) Redemptions (1,207) (3) (565) — — (1,775) Change in fund value (1,091) 85 163 — (74) (917) Change in fee basis — 98 — — — 98 Balance at 12/31/2023 $ 20,844 $ 6,189 $ 3,277 $ 5,148 $ 5,880 $ 41,338 U.S. Real Estate Equity European Real Estate Equity Real Estate Debt Infrastructure Opportunities Infrastructure Debt Total Real Assets Group Balance at 12/31/2021 $ 15,687 $ 4,916 $ 3,516 $ 4,496 $ — $ 28,615 Acquisitions — — — — 4,855 4,855 Commitments 4,947 1,627 106 — — 6,680 Deployment/subscriptions/increase in leverage 871 433 740 363 1,595 4,002 Capital reductions — (17) (183) — — (200) Distributions (865) (252) (237) (360) (387) (2,101) Redemptions (516) — (449) — — (965) Change in fund value 1,696 (254) 198 25 (93) 1,572 Change in fee basis (32) (819) — — — (851) Balance at 12/31/2022 $ 21,788 $ 5,634 $ 3,691 $ 4,524 $ 5,970 $ 41,607 145 Table of Contents The charts below present FPAUM for the Real Assets Group by its fee bases ($ in billions): FPAUM: $41.3 FPAUM: $41.6 Market value (1) Invested capital/other (2) Capital commitments (1) Amounts represent FPAUM from funds that primarily invest in illiquid strategies. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies. (2) Other consists of ACRE’s FPAUM, which is based on ACRE’s stockholders’ equity. Real Assets Group—Fund Performance Metrics as of December 31, 2023 Five significant funds, AIREIT, AREIT, Ares Infrastructure Debt Fund IV L.P. (“IDF IV”), IDF V and an open-ended industrial real estate fund, collectively contributed approximately 44% of the Real Assets Group’s management fees for the year ended December 31, 2023. The following table presents the performance data for our significant funds that are not drawdown funds in the Real Assets Group as of December 31, 2023 ($ in millions): Returns(%) Year of Inception AUM Year-To-Date Since Inception (1) Primary Investment Strategy Fund Gross Net Gross Net AREIT (2) 2012 $ 5,267 N/A (4.8) N/A 6.7 U.S. Real Estate Equity AIREIT (3) 2017 7,718 N/A (9.8) N/A 9.9 U.S. Real Estate Equity Open-ended industrial real estate fund (4) 2017 4,957 (8.1) (7.7) 19.9 16.2 U.S. Real Estate Equity (1) Since inception returns are annualized. (2) Performance is measured by total return, which includes income and appreciation and reinvestment of all distributions for the respective time period. Returns are shown for institutional share class. Shares of other classes may have lower returns due to higher selling commissions and fees. Actual individual stockholder returns will vary. Net returns are calculated using the fund’s NAV and assume distributions are reinvested at the NAV on the date of distribution. The inception date used in the calculation of the since inception return is the date in which the first shares of common stock were sold after converting to a NAV-based REIT. Additional information related to AREIT can be found in its filings with the SEC, which are not part of this report. (3) Performance is measured by total return, which includes income and appreciation and reinvestment of all distributions for the respective time period. Returns are shown for institutional share class. Shares of other classes may have lower returns due to higher selling commissions and fees. Actual individual stockholder returns will vary. Net returns are calculated using the fund’s NAV and assume distributions are reinvested at the NAV on the date of distribution. Additional information related to AIREIT can be found in its filings with the SEC, which are not part of this report. (4) Returns are time-weighted rates of return and include the reinvestment of income and other earnings from securities or other investments and reflect the deduction of all trading expenses. Gross returns do not reflect the deduction of management fees, incentive fees, as applicable, or other expenses. Net returns are calculated by subtracting the applicable management fees, incentive fees, as applicable and other expenses from the gross returns on a quarterly basis. 146 Table of Contents The following table presents the performance data of the Real Assets Group’s significant drawdown funds as of December 31, 2023 ($ in millions): Year of Inception AUM Original Capital Commitments Capital Invested to Date Realized Value (1) Unrealized Value (2) Total Value MoIC IRR(%) Primary Investment Strategy Fund Gross (3) Net (4) Gross (5) Net (6) Fund Harvesting Investments IDF IV (7) 2018 $ 3,120 $ 4,012 $ 4,531 $ 2,235 $ 2,875 $ 5,110 1.2x 1.2x 6.9 5.3 Infrastructure Debt Fund Deploying Capital IDF V (8) 2020 4,771 4,585 3,152 519 2,945 3,464 1.1x 1.1x 12.4 9.5 Infrastructure Debt (1) Realized value includes distributions of operating income, sales and financing proceeds received. (2) Unrealized value represents the fund's NAV reduced by the accrued incentive allocation, if applicable. There can be no assurance that unrealized values will be realized at the valuations indicated. (3) The gross MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The gross MoIC is before giving effect to management fees, carried interest, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the gross fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (4) The net MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and, if applicable, excludes interests attributable to the non fee-paying limited partners and/or the general partner which does not pay management fees or carried interest. The net MoIC is after giving effect to management fees, carried interest, as applicable, credit facility interest expense, as applicable, and other expenses. The funds may utilize a credit facility during the investment period and for general cash management purposes. Early in the life of a fund, the net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (5) The gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Gross IRR reflects returns to the fee-paying limited partners and, if applicable, excludes interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Gross fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (6) The net IRR is an annualized since inception net internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Net IRRs reflect returns to the fee-paying limited partners and, if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The cash flow dates used in the net IRR calculations are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees and carried interest, other expenses and credit facility interest expenses, as applicable. The funds may utilize a credit facility during the investment period and for general cash management purposes. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (7) IDF IV is made up of U.S. Dollar hedged, U.S. Dollar unhedged, Euro unhedged, Yen hedged parallel funds and a single investor U.S. Dollar parallel fund. The gross and net IRR and MoIC presented in the table are for the U.S. Dollar hedged parallel fund. The gross and net IRR for the U.S. Dollar unhedged parallel fund are 6.6% and 4.5%, respectively. The gross and net MoIC for the U.S. Dollar unhedged parallel fund are 1.2x and 1.1x, respectively. The gross and net IRR for the Euro unhedged parallel fund are 6.4% and 5.1%, respectively. The gross and net MoIC for the Euro unhedged parallel fund are 1.2x and 1.1x, respectively. The gross and net IRR for the Yen hedged parallel fund are 4.6% and 2.8%, respectively. The gross and net MoIC for the Yen hedged parallel fund are 1.1x and 1.1x, respectively. The gross and net IRR for the single investor U.S. Dollar parallel fund are 5.1% and 4.0%, respectively. The gross and net MoIC for the single investor U.S. Dollar parallel fund are 1.1x and 1.1x, respectively. Original capital commitments are converted to U.S. Dollars at the prevailing exchange rate at the time of fund's closing. All other values for IDF IV are for the combined fund and are converted to U.S. Dollars at the prevailing quarter-end exchange rate. (8) IDF V is made up of U.S. Dollar hedged, Euro unhedged, GBP hedged, Yen hedged and a single investor parallel fund. The gross and net IRR and MoIC presented in the table are for the U.S. Dollar hedged parallel fund. The gross and net IRR for the Euro unhedged parallel fund are 11.5% and 8.6%, respectively. The gross and net MoIC for the Euro unhedged parallel fund are 1.1x and 1.1x, respectively. The gross and net IRR for the GBP hedged parallel fund are 11.9% and 8.8%, respectively. The gross and net MoIC for the GBP hedged parallel fund are 1.1x and 1.1x, respectively. The gross and net IRR for the Yen hedged parallel fund are 9.5% and 6.7%, respectively. The gross and net MoIC for the Yen hedged parallel fund are 1.1x and 1.0x, respectively. The gross and net IRR for the single investor U.S. Dollar parallel fund are 10.0% and 7.7%, respectively. The gross and net MoIC for the single investor U.S. Dollar parallel fund are 1.1x and 1.1x, respectively. Original capital commitments are converted to U.S. Dollars at the prevailing exchange rate at the time of fund's closing. All other values for IDF V are for the combined fund and are converted to U.S. Dollars at the prevailing quarter-end exchange rate. 147 Table of Contents Secondaries Group—Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Fee Related Earnings The following table presents the components of the Secondaries Group’s FRE ($ in thousands): Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Management fees $ 174,942 $ 176,694 $ (1,752) (1)% Fee related performance revenues 12,782 235 12,547 NM Other fees 22 — 22 NM Compensation and benefits (62,160) (53,743) (8,417) (16) General, administrative and other expenses (21,199) (12,685) (8,514) (67) Fee Related Earnings $ 104,387 $ 110,501 (6,114) (6) Management Fees. The chart below presents Secondaries Group management fees and effective management fee rates ($ in millions): Management fees from Landmark Equity Partners XV, L.P. (“LEP XV”) decreased by $8.0 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to the change in fee base to reported value, which largely reflects the NAV of each fund’s limited partnership interests, from called capital plus unfunded commitments. Management fees also decreased by $3.3 million from a real estate secondaries fund and three private equity secondaries funds due to distributions that reduced their fee bases. Management fees for the year ended December 31, 2023 included: (i) $7.9 million of catch-up fees from Landmark Real Estate Fund IX, L.P. (“LREF IX”). Management fees for the year ended December 31, 2022 included: (i) $9.2 million of catch-up fees from Landmark Equity Partners XVII, L.P. (“LEP XVII”); and (ii) $0.2 million from LREF IX. 148 Table of Contents The decrease in management fees was partially offset by: (i) additional management fees from LREF IX of $7.7 million, generated from new commitments, excluding catch-up fees previously discussed; and (ii) higher management fees from APMF of $4.0 million, as we contractually agreed to a reduced fee rate of 0.25% from inception through March 31, 2023 that subsequently increased to 1.40%. The increase in effective management fee rate for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to the higher fee rate for APMF following the expiration of the contractually reduced rate. Fee Related Performance Revenues. Fee related performance revenues reflects incentive fees recognized from APMF for the years ended December 31, 2023 and 2022. Compensation and Benefits. The increase in compensation and benefits for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by: (i) higher fee related performance compensation of $5.5 million corresponding to the increase in fee related performance revenue; and (ii) an increase in salary expense of $3.8 million which primarily attributable to headcount growth. Average headcount increased by 12% to 105 investment and investment support professionals for the year-to-date period in 2023 from 94 professionals in 2022. General, Administrative and Other Expenses. In an effort to accelerate the growth of APMF’s assets, we have entered into agreements that pay distribution partners a fee based on assets and/or sales. These agreements increased our expenses by $3.7 million for the year ended December 31, 2023 when compared to prior year and are expected to fluctuate with sales and the growth in assets. Additionally, travel and marketing collectively increased by $2.9 million for the year ended December 31, 2023 compared to the prior year driven by more in-person company meetings and events. Certain other expenses have also increased during the current period, primarily from occupancy costs which support our growing headcount that are based in higher cost locations and information technology costs. Collectively, these expenses increased by $1.3 million for the year ended December 31, 2023 compared to the prior year. Realized Income The following table presents the components of the Secondaries Group’s RI ($ in thousands): Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Fee Related Earnings $ 104,387 $ 110,501 $ (6,114) (6)% Performance income—realized 5,460 4,156 1,304 31 Performance related compensation—realized (4,678) (3,515) (1,163) (33) Realized net performance income 782 641 141 22 Interest and other investment income—realized 4,867 3,683 1,184 32 Interest expense (8,980) (5,660) (3,320) (59) Realized net investment loss (4,113) (1,977) (2,136) (108) Realized Income $ 101,056 $ 109,165 (8,109) (7) Realized net performance income for the years ended December 31, 2023 and 2022 was primarily attributable to tax distributions from LREF VIII. Realized investment income for the year ended December 31, 2023 reflects dividend income received from APMF. Realized investment income for the year ended December 31, 2022 included dividend income received from LREF VIII and an infrastructure secondaries fund. Interest expense, which is allocated among our segments based on the cost basis of balance sheet investments, increased over the comparative periods primarily due to rising SOFR rates and a higher average outstanding balance of the Credit Facility and to the issuance of the 2028 Senior Notes in November 2023. 149 Table of Contents Secondaries Group—Performance Income The following table presents the accrued carried interest, also referred to as accrued performance income, and related performance compensation for the Secondaries Group. Accrued net performance income excludes net performance income that has been realized but not yet received as of the reporting date ($ in thousands): As of December 31, 2023 2022 Accrued Performance Income Accrued Performance Compensation Accrued Net Performance Income Accrued Performance Income Accrued Performance Compensation Accrued Net Performance Income LEP XVI $ 128,650 $ 110,053 $ 18,597 $ 141,122 $ 120,659 $ 20,463 LREF VIII 97,366 84,256 13,110 109,928 94,538 15,390 Other secondaries funds 57,339 48,897 8,442 58,135 49,726 8,409 Total Secondaries Group $ 283,355 $ 243,206 $ 40,149 $ 309,185 $ 264,923 $ 44,262 The following table presents the change in accrued performance income for the Secondaries Group ($ in thousands): As of December 31, 2022 Activity during the period As of December 31, 2023 Waterfall Type Accrued Carried Interest Change in Unrealized Realized Accrued Carried Interest Accrued Carried Interest LEP XVI European $ 141,122 $ (12,472) $ — $ 128,650 LREF VIII European 109,928 (8,002) (4,560) 97,366 Other secondaries funds European 58,135 104 (900) 57,339 Total Secondaries Group $ 309,185 $ (20,370) $ (5,460) $ 283,355 Secondaries Group—Assets Under Management The table below presents the rollforwards of AUM for the Secondaries Group ($ in millions): Private Equity Secondaries Real Estate Secondaries Infrastructure Secondaries Credit Secondaries Other (1) Total Secondaries Group Balance at 12/31/2022 $ 12,769 $ 7,552 $ 1,640 $ — $ — $ 21,961 Net new par/equity commitments 567 952 721 1,358 50 3,648 Distributions (477) (537) (102) — — (1,116) Redemptions (1) — — — — (1) Net allocations among investment strategies 30 — — 25 (50) 5 Change in fund value 286 (141) 121 (3) — 263 Balance at 12/31/2023 $ 13,174 $ 7,826 $ 2,380 $ 1,380 $ — $ 24,760 Private Equity Secondaries Real Estate Secondaries Infrastructure Secondaries Credit Secondaries Other Total Secondaries Group Balance at 12/31/2021 $ 13,833 $ 6,662 $ 1,624 $ — $ — $ 22,119 Acquisitions 199 — — — — 199 Net new par/equity commitments 1,011 1,425 74 — — 2,510 Distributions (1,632) (932) (223) — — (2,787) Change in fund value (642) 397 165 — — (80) Balance at 12/31/2022 $ 12,769 $ 7,552 $ 1,640 $ — $ — $ 21,961 (1) Activity within Other represents equity commitments to the platform that have not yet been allocated to an investment strategy. 150 Table of Contents The components of our AUM for the Secondaries Group are presented below ($ in billions): AUM: $24.7 AUM: $22.0 FPAUM AUM not yet paying fees Non-fee paying (1) (1) Includes $0.5 billion and $0.3 billion of non-fee paying AUM based on our general partner commitment as of December 31, 2023 and 2022, respectively. Secondaries Group—Fee Paying AUM The table below presents the rollforwards of fee paying AUM for the Secondaries Group ($ in millions): Private Equity Secondaries Real Estate Secondaries Infrastructure Secondaries Credit Secondaries Total Secondaries Group Balance at 12/31/2022 $ 11,062 $ 5,313 $ 1,293 $ — $ 17,668 Commitments 367 772 506 — 1,645 Deployment/subscriptions/increase in leverage 51 317 20 85 473 Distributions (95) (421) (88) (9) (613) Redemptions (1) — — — (1) Net allocations among investment strategies 30 — — — 30 Change in fund value (162) (53) 32 19 (164) Change in fee basis (48) 50 — — 2 Balance at 12/31/2023 $ 11,204 $ 5,978 $ 1,763 $ 95 $ 19,040 Private Equity Secondaries Real Estate Secondaries Infrastructure Secondaries Credit Secondaries Total Secondaries Group Balance at 12/31/2021 $ 11,787 $ 5,389 $ 1,188 $ — $ 18,364 Acquisitions 131 — — — 131 Commitments 929 1,039 74 — 2,042 Deployment/subscriptions/increase in leverage 58 473 29 — 560 Distributions (229) (906) (184) — (1,319) Change in fund value (130) 716 186 — 772 Change in fee basis (1,484) (1,398) — — (2,882) Balance at 12/31/2022 $ 11,062 $ 5,313 $ 1,293 $ — $ 17,668 151 Table of Contents The chart below presents FPAUM for the Secondaries Group by its fee bases ($ in billions): FPAUM: $19.1 FPAUM: $17.7 Market value (1) Capital commitments Invested capital/other (1) Amounts represent FPAUM from funds that primarily invest in illiquid strategies. The underlying investments held in these funds are generally subject to less market volatility than investments held in liquid strategies. Secondaries Group—Fund Performance Metrics as of December 31, 2023 One significant fund LEP XVI contributed approximately 26% of the Secondaries Group’s management fees for the year ended December 31, 2023. The following table presents the performance data of the Secondaries Group’s significant drawdown fund as of December 31, 2023 ($ in millions): Year of Inception AUM Original Capital Commitments Capital Invested to Date Realized Value (1) Unrealized Value (2) Total Value MoIC IRR(%) Primary Investment Strategy Fund Gross (3) Net (4) Gross (5) Net (6) Fund Harvesting Investments LEP XVI (7) 2016 $ 4,769 $ 4,896 $ 3,571 $ 1,990 $ 2,952 $ 4,942 1.5x 1.4x 26.9 18.1 Private Equity Secondaries For all funds in the Secondaries Group, returns are calculated from results of the underlying portfolio that are generally reported on a three month lag and may not include the impact of economic and market activities occurring in the current reporting period. (1) Realized value represents the sum of all cash distributions to all limited partners and if applicable, exclude tax and incentive distributions made to the general partner. (2) Unrealized value represents the limited partners’ share of fund’s NAV reduced by the accrued incentive allocation, if applicable. There can be no assurance that unrealized values will be realized at the valuations indicated. (3) The gross MoIC is calculated at the fund-level and is based on the interests of all partners. If applicable, limiting the gross MoIC to exclude interests attributable to the non-fee paying limited partners and/or the general partner who does not pay management fees or carried interest would have no material impact on the result. The gross MoIC is before giving effect to management fees, carried interest, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a short-term credit facility for general cash management purposes, as well as a long-term credit facility as permitted by the respective fund’s governing documentation. The gross fund-level MoIC would have generally been lower had such fund called capital from its partners instead of utilizing the credit facility. (4) The net MoIC is calculated at the fund-level and is based on the interests of the fee-paying limited partners and if applicable, excludes those interests attributable to the non-fee paying limited partners and/or the general partner which does not pay management fees or carried interest. The net MoIC is after giving effect to management fees and other expenses, carried interest and credit facility interest expense, as applicable. The funds may utilize a short-term credit facility for general cash management purposes, as well as a long-term credit facility as permitted by the respective fund’s governing documentation. The net fund-level MoICs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (5) The gross IRR is an annualized since inception gross internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Gross IRR reflects returns to all partners. If applicable, limiting the gross IRR to exclude interests attributable to the non-fee paying limited partners and/or the general partner who does not pay management fees or carried interest would have no material impact on the result. The cash flow dates used in the gross IRR calculation are based on the actual dates of the cash flows. The gross IRRs are calculated before giving effect to management fees, carried interest, as applicable, and other expenses, but after giving effect to credit facility interest expenses, as applicable. The funds may utilize a short-term credit facility for general cash management purposes, as well as a long-term credit facility as permitted by the respective fund’s governing documents. The gross fund-level IRR would generally have been lower had such fund called capital from its partners instead of utilizing the credit facility. (6) The net IRR is an annualized since inception net internal rate of return of cash flows to and from the fund and the fund’s residual value at the end of the measurement period. Net IRRs reflect returns to the fee-paying limited partners and, if applicable, exclude interests attributable to the non-fee paying limited partners and/or the general partner who does not pay management fees or carried interest. The cash flow dates used in the net IRR calculations are based on the actual dates of the cash flows. The net IRRs are calculated after giving effect to management fees and other expenses, carried interest and credit facility interest expenses, as applicable. The funds may utilize a short-term credit facility for general cash management purposes, as well as a long-term credit facility as permitted by the respective fund’s governing documents. Net fund-level IRRs would generally have been lower had such fund called capital from its limited partners instead of utilizing the credit facility. (7) The results of each fund is presented on a combined basis with the affiliated parallel funds or accounts, given that the investments are substantially the same. 152 Table of Contents Operations Management Group—Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Fee Related Earnings The following table presents the components of the Operations Management Group’s FRE ($ in thousands): Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Other fees $ 23,685 $ 24,529 $ (844) (3)% Compensation and benefits (361,124) (317,396) (43,728) (14) General, administrative and other expenses (200,613) (155,017) (45,596) (29) Fee Related Earnings $ (538,052) $ (447,884) (90,168) (20) Other Fees. The decrease in other fees for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily driven by lower: (i) facilitation fees from the 1031 exchange programs associated with our non-traded REITs of $7.9 million; and (ii) sales-based, net distribution fees associated with our non-traded REITs of $2.4 million. Conversely, asset-based, net distribution fees associated with our non-traded REITs increased by $5.3 million. The year ended December 31, 2023 also included broker-dealer advisory fees of $2.2 million, which were earned in connection with advisory services provided by AMCM for capital markets transactions executed during the period. Compensation and Benefits. The increase in compensation and benefits for the year ended December 31, 2023, compared to the year ended December 31, 2022 was primarily driven by: (i) the expansion of our strategy and relationship management teams to support global fundraising; and (ii) the expansion of our business operations teams to support the growth of our business and other strategic initiatives. Average headcount increased by 19% to 1,492 operations management professionals for the year-to-date period in 2023 from 1,252 professionals in 2022. Separately, compensation and benefits increased by $3.4 million for the nine months ended December 31, 2023 following the SSG Buyout on March 31, 2023, reflecting the costs associated with the 20% change in ownership that were previously not part of our cost structure. Our engagement of a third party subject matter expert to support the reorganization of our income tax compliance function during the third quarter of 2022 reduced salary expense by $5.9 million for the first two quarters of 2023 with a corresponding increase in general, administrative and other expenses. As this reorganization occurred at the end of the second quarter of 2022, we did not have comparable results for the year ended December 31, 2023. Employee commissions are earned in connection with the sale and distribution of fund shares in our non-traded, retail channel products and private placements of our exchange programs. Employee commissions have decreased over the comparative period primarily due to the lower sales volumes from our non-traded REITs and have begun to trend upward with increased sales volumes from ASIF and APMF. General, Administrative and Other Expenses. Travel and marketing collectively increased by $10.5 million for the year ended December 31, 2023 compared to the prior year as we continued to increase our marketing efforts driven by more investor meetings and events. AWMS has contributed $3.7 million to the increase in travel and marketing over the comparative period. As we build out our retail distribution infrastructure and capabilities through AWMS to support our prospective sales and AUM growth, we expect marketing and distribution expenses, including travel, to increase in future periods. Additionally, professional service fees increased by $15.9 million for the year ended December 31, 2023 compared to the prior year primarily due to (i) tax related service fees of $10.5 million from the reorganization of our income tax compliance function during the third quarter of 2022, with a corresponding decrease in compensation and benefits; and (ii) consulting fees to support various ongoing initiatives to enhance our operations. Certain expenses have also increased during the current year to support our growing headcount, the expansion of our business and the build out of our new corporate headquarters. Most notably, occupancy costs, information technology and information services have collectively increased by $9.1 million for the year ended December 31, 2023 compared to the prior year . 153 Table of Contents Realized Income The following table presents the components of the OMG’s RI ($ in thousands): Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Fee Related Earnings $ (538,052) $ (447,884) $ (90,168) (20)% Investment loss—realized — (37) 37 100 Interest and other investment income (loss)—realized 748 (1,588) 2,336 NM Interest expense (156) (684) 528 77 Realized net investment income (loss) 592 (2,309) 2,901 NM Realized Income $ (537,460) $ (450,193) (87,267) (19) Liquidity and Capital Resources Management assesses liquidity in terms of our ability to generate cash to fund operating, investing and financing activities. Management believes that the Company is well-positioned and its liquidity will continue to be sufficient for its foreseeable working capital needs, contractual obligations, dividend payments, pending acquisitions and strategic initiatives. Sources and Uses of Liquidity Our sources of liquidity are: (i) cash on hand; (ii) net working capital; (iii) cash from operations, including management fees and fee related performance revenues, which are collected monthly, quarterly or semi-annually, and net realized performance income, which may be unpredictable as to amount and timing; (iv) fund distributions related to our investments that are unpredictable as to amount and timing; and (v) net borrowing from the Credit Facility. As of December 31, 2023, our cash and cash equivalents were $348.3 million, and we have $430.0 million available under our Credit Facility. Our ability to draw from the Credit Facility is subject to leverage and other covenants. We remain in compliance with all covenants as of December 31, 2023. We believe that these sources of liquidity will be sufficient to fund our working capital requirements and to meet our commitments in the ordinary course of business and under the current market conditions for the foreseeable future. Cash flows from management fees may be impacted by a slowdown or declines in deployment, declines or write downs in valuations, or a slowdown or negatively impacted fundraising. In addition, management fees may be subject to deferral and fee related performance revenues may be subject to hold backs. Declines or delays and transaction activity may impact our fund distributions and net realized performance income which could adversely impact our cash flows and liquidity. Market conditions may make it difficult to extend the maturity or refinance our existing indebtedness or obtain new indebtedness with similar terms. We expect that our primary liquidity needs will continue to be to: (i) provide capital to facilitate the growth of our existing investment management businesses; (ii) fund our investment commitments; (iii) provide capital to facilitate our expansion into businesses that are complementary to our existing investment management businesses as well as other strategic growth initiatives; (iv) pay operating expenses, including cash compensation to our employees; (v) fund capital expenditures; (vi) service our debt; (vii) pay income taxes and make payments under the tax receivable agreement (“TRA”); (viii) make dividend payments to our Class A and non-voting common stockholders in accordance with our dividend policy; and (ix) pay distributions to AOG unitholders. In the normal course of business, we expect to pay dividends to our Class A and non-voting common stockholders that are aligned with our expected fee related earnings after an allocation of current taxes paid. For the purposes of determining this amount, we allocate the current taxes paid to FRE and to realized incentive and investment income in a manner that may be disproportionate to earnings generated by these metrics, and the actual taxes paid on these metrics should they be considered separately. Additionally, our methodology uses the tax benefits from certain expenses that are not included in these non-GAAP metrics, such as equity-based compensation from the vesting of restricted units and the exercise of stock options and from the amortization of intangible assets, among others. We allocate the taxes by multiplying the statutory tax rate currently in effect by our realized performance and net investment income and removing this amount from total current taxes. The remaining current tax paid is the amount that we allocate to FRE. We use this method to allocate the current provision for income taxes to approximate the amount of cash that is available to pay dividends to our stockholders. If cash flows from operations were insufficient to fund dividends over a sustained period of time, we expect that we would suspend or reduce paying such dividends. In addition, there is no assurance that dividends would continue at the current levels or at all. Our ability to obtain debt financing and complete stock offerings provides us with additional sources of liquidity. For 154 Table of Contents further discussion of financing transactions occurring in the current period, see “Cash Flows” within this section and “Note 6. Debt” and “Note 13. Equity and Redeemable Interest” within our consolidated financial statements included in this Annual Report on Form 10-K. Our consolidated financial statements reflect the cash flows of our operating businesses as well as those of our Consolidated Funds. The assets of our Consolidated Funds, on a gross basis, are significantly larger than the assets of our operating businesses and therefore have a substantial effect on the amounts reported within our consolidated statements of cash flows. The primary cash flow activities of our Consolidated Funds include: (i) raising capital from third-party investors, which is reflected as non-controlling interests of our Consolidated Funds; (ii) financing certain investments by issuing debt; (iii) purchasing and selling investment securities; (iv) generating cash through the realization of certain investments; (v) collecting interest and dividend income; and (vi) distributing cash to investors. Our Consolidated Funds are generally accounted for as investment companies under GAAP; therefore, the character and classification of all Consolidated Fund transactions are presented as cash flows from operations. Liquidity available at our Consolidated Funds is not available for corporate liquidity needs, and debt of the Consolidated Funds is non–recourse to the Company except to the extent of the Company’s investment in the fund. Cash Flows The following tables summarize our consolidated statements of cash flows by activities attributable to the Company and Consolidated Funds. For more details on the activity of the Company and Consolidated Funds, refer to “Note 15. Consolidation” within our consolidated financial statements included in this Annual Report on Form 10-K. Year ended December 31, 2023 2022 Net cash provided by operating activities $ 473,107 $ 632,968 Net cash used in the Consolidated Funds’ operating activities, net of eliminations (706,368) (1,367,080) Net cash used in operating activities (233,261) (734,112) Net cash used in the Company’s investing activities (111,079) (337,379) Net cash used in the Company’s financing activities (404,761) (238,500) Net cash provided by the Consolidated Funds’ financing activities, net of eliminations 696,887 1,366,563 Net cash provided by financing activities 292,126 1,128,063 Effect of exchange rate changes 10,501 (10,240) Net change in cash and cash equivalents $ (41,713) $ 46,332 The Consolidated Funds had no effect on cash flows attributable to the Company for the periods presented and are excluded from the discussion below. The following discussion focuses on cash flow by activities attributable to the Company. Operating Activities In the table below cash flows from operations have been summarized to present: (i) cash generated from our core operating activities, primarily consisting of profits generated principally from management fees and fee related performance revenues after covering for operating expenses and fee related performance compensation; (ii) net realized performance income; and (iii) net cash from investment related activities including purchases, sales, net realized investment income and interest payments. We generated meaningful cash flow from operations in each period presented. Year ended December 31, Favorable (Unfavorable) 2023 2022 $ Change % Change Core operating activities $ 981,981 $ 708,039 $ 273,942 39% Net realized performance income 50,119 161,141 (111,022) (69) Net cash used in investment related activities (558,993) (236,212) (322,781) 137 Net cash provided by operating activities $ 473,107 $ 632,968 (159,861) (25) Cash generated from our core operating activities increased as a result of growing fee revenues and sustained profitability. Net realized performance income represents a source of cash and includes incentive fees that are realized annually at the end of the measurement period, which is typically at the end of the calendar year. Cash from these realizations are generally received in the period subsequent to the measurement period. Our incentive fee realizations were higher in the fourth quarter of 2021 compared to the fourth quarter of 2022, which resulted in a decrease in cash payments received over the comparative periods. 155 Table of Contents Net cash used in investment related activities for the year ended December 31, 2023 primarily represents: (i) purchases associated with funding capital commitments and strategic investments in our investment portfolio; (ii) interest payments on our debt obligations; offset by (iii) distributions received from our capital investments; and (iv) sales of our capital investments to employees. Our investment related activities may fluctuate depending on timing of capital investments and distributions of each fund from year to year. For further discussion of our capital commitments, see “Note 8. Commitments and Contingencies,” within our consolidated financial statements included in this Annual Report on Form 10-K. Our working capital needs are generally rising to support the growth of our business, while the capital requirements needed to support fund-related activities vary based upon the specific investment activities being conducted during such period. Investing Activities Year ended December 31, 2023 2022 Purchase of furniture, equipment and leasehold improvements, net of disposals $ (67,183) $ (35,796) Acquisitions, net of cash acquired (43,896) (301,583) Net cash used in investing activities $ (111,079) $ (337,379) Net cash used in the Company’s investing activities was principally composed of cash to purchase furniture, fixtures, equipment and leasehold improvements during both years to support the growth in our staffing levels and to expand our global presence. Net cash used in the Company's investing activities included cash used to complete the Crescent Point Acquisition in the current year and to complete the Infrastructure Debt Acquisition in the prior year. Financing Activities Year ended December 31, 2023 2022 Net borrowings of Credit Facility $ 195,000 $ 285,000 Proceeds from issuance of senior notes 499,010 488,915 Class A and non-voting common stock dividends (599,934) (447,634) AOG unitholder distributions (430,732) (388,730) Stock option exercises 85,959 21,205 Taxes paid related to net share settlement of equity awards (157,007) (201,311) Other financing activities 2,943 4,055 Net cash used in the Company’s financing activities $ (404,761) $ (238,500) As a result of generating higher fee related earnings, we increased the level of dividends paid to a growing shareholder base of Class A and non-voting common stockholders and distributions paid to AOG unitholders, resulting in net cash used in the Company’s financing activities for the years ended December 31, 2023 and 2022. In connection with the vesting of restricted units that are granted to our employees under the 2023 Equity Incentive Plan (the “Equity Incentive Plan”) and the predecessor plan, we withhold shares equal to the fair value of our employees tax withholding liabilities and pay the taxes on their behalf in cash and thus net issue fewer shares. The use of cash decreased from the prior year primarily as a result of fewer restricted units that vested in the current year and that a greater number of restricted units vested in the prior year primarily due to certain non-recurring awards that cliff vested in their entirety on the fifth anniversary of their applicable grant dates. This decrease was partially offset by our higher stock price, which resulted in employees recognizing additional compensation. For the years ended December 31, 2023 and 2022, we net settled and did not issue 1.7 million shares and 2.4 million shares, respectively. The Company’s financing activities also included cash received from stock options exercises with 5.1 million and 1.1 million options exercised for the years ended December 31, 2023 and 2022, respectively. Additionally, the Company’s financing activities for the years ended December 31, 2023 and 2022 included the net proceeds from the issuance of the 2028 Senior Notes and 2052 Senior Notes, respectively. A portion of these proceeds was used to repay borrowings under our Credit Facility and to fund strategic growth initiatives in the current year and to fund the Infrastructure Debt Acquisition in the prior year. 156 Table of Contents Capital Resources We intend to use a portion of our available liquidity to pay cash dividends to our Class A and non-voting common stockholders on a quarterly basis in accordance with our dividend policy. Our ability to make cash dividends is dependent on a myriad of factors, including among others: general economic and business conditions; our strategic plans and prospects; our business and investment opportunities; timing of capital calls by our funds in support of our commitments; our financial condition and operating results; working capital requirements and other anticipated cash needs; contractual restrictions and obligations; legal, tax and regulatory restrictions; restrictions on the payment of distributions by our subsidiaries to us and other relevant factors. We are required to maintain minimum net capital balances for regulatory purposes for our broker-dealer entities. These net capital requirements are met in part by retaining cash, cash equivalents and investment securities. Additionally, certain of our subsidiaries operating outside the U.S. are also subject to capital adequacy requirements in each of the applicable jurisdictions. As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions. As of December 31, 2023, we were required to maintain approximately $64.9 million in net assets within these subsidiaries to meet regulatory net capital and capital adequacy requirements. We remain in compliance with all regulatory requirements. Holders of AOG Units, subject to the terms of the exchange agreement, may exchange their AOG Units for shares of our Class A common stock on a one-for-one basis. These exchanges are expected to result in increases in the tax basis of the tangible and intangible assets of AMC that otherwise would not have been available. These increases in tax basis may increase depreciation and amortization for U.S. income tax purposes and thereby reduce the amount of tax that we would otherwise be required to pay in the future. We entered into the TRA that provides payment to the TRA recipients of 85% of the amount of actual cash savings, if any, in U.S. federal, state, local and foreign income tax or franchise tax that we actually realize as a result of these increases in tax basis and of certain other tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA and interest accrued thereon (“Tax Benefit Payment”). Effective as of May 1, 2023, pursuant to an amendment to the TRA, to the extent Ares Owners Holdings L.P. would have been a recipient of certain Tax Benefit Payments under the TRA for taxable exchanges on or after May 1, 2023, Ares Owners Holdings L.P. will no longer be entitled to any Tax Benefit Payment for such exchanges. Future payments under the TRA in respect of subsequent exchanges are expected to be substantial. The TRA liability balance was $191.3 million and $118.5 million as of December 31, 2023 and 2022, respectively. For a discussion of our debt obligations, including the debt obligations of our consolidated funds, see “Note 6. Debt,” within our consolidated financial statements included in this Annual Report on Form 10-K. Critical Accounting Estimates We prepare our consolidated financial statements in accordance with GAAP. In applying many of these accounting principles, we need to make assumptions, estimates or judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates or judgments, however, are both subjective and subject to change, and actual results may differ from our assumptions and estimates. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known. We believe the following critical accounting policies could potentially produce materially different results if we were to change the underlying assumptions, estimates or judgments. See “—Components of Consolidated Results of Operations” and “Note 2. Summary of Significant Accounting Policies,” within our consolidated financial statements included in this Annual Report on Form 10-K for a summary of our significant accounting policies. Principles of Consolidation We consolidate entities based on either a variable interest model or voting interest model. As such, for entities that are determined to be variable interest entities (“VIEs”), we consolidate those entities where we have both significant economics and the power to direct the activities of the entity that impact economic performance. For limited partnerships and similar entities evaluated under the voting interest model, we do not consolidate those entities for which we act as the general partner unless we hold a majority voting interest. The consolidation guidance requires qualitative and quantitative analysis to determine whether our involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests (e.g., management fees and performance related income), would give us a controlling financial interest. This analysis requires judgment. These 157 Table of Contents judgments include: (i) determining whether the equity investment at risk is sufficient to permit the entity to finance its activities without additional subordinated financial support; (ii) evaluating whether the equity holders, as a group, can make decisions that have a significant effect on the success of the entity; (iii) determining whether two or more parties’ equity interests should be aggregated; (iv) determining whether the equity investors have proportionate voting rights to their obligations to absorb losses or rights to receive returns from an entity; and (v) evaluating the nature of relationships and activities of the parties involved in determining which party within a related-party group is most closely associated with a VIE and hence would be deemed the primary beneficiary. The creditors of the consolidated VIEs do not have recourse to us other than to the assets of the respective consolidated VIEs. The assets and liabilities of the consolidated VIEs are comprised primarily of investments and loans payable, respectively. Fair Value Measurement GAAP establishes a hierarchical disclosure framework prioritizing the inputs used in measuring financial instruments at fair value into three levels based on their market observability. Market price observability is affected by a number of factors, including the type of instrument and the characteristics specific to the instrument. Financial instruments with readily available quoted prices from an active market or where fair value can be measured based on actively quoted prices generally have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value. Financial assets and liabilities measured and reported at fair value are classified as follows: • Level I —Quoted prices in active markets for identical instruments. • Level II —Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in inactive markets; and model-derived valuations with directly or indirectly observable significant inputs. Level II inputs include prices in markets with few transactions, non-current prices, prices for which little public information exists or prices that vary substantially over time or among brokered market makers. Other inputs include interest rate, yield curve, volatility, prepayment risk, loss severity, credit risk and default rate. • Level III —Valuations that rely on one or more significant unobservable inputs. These inputs reflect the Company’s assessment of the assumptions that market participants would use to value the instrument based on the best information available. In some instances, an instrument may fall into multiple levels of the fair value hierarchy. In such instances, the instrument’s level within the fair value hierarchy is based on the lowest of the three levels (with Level III being the lowest) that is significant to the fair value measurement. Our assessment of the significance of an input requires judgment and considers factors specific to the instrument. See “Note 5. Fair Value,” within our consolidated financial statements included in this Annual Report on Form 10-K for a summary of our valuation of investments and other financial instruments by fair value hierarchy levels. Acquisitions Management’s determination of fair value of assets acquired and liabilities assumed at the acquisition date is based on the best information available in the circumstances and may incorporate management’s own assumptions and involve a significant degree of judgment. We use our best estimates and assumptions to accurately assign fair value to the tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date as well as the useful lives of those acquired intangible assets. For business combinations accounted for under the acquisition method, the purchase consideration, including the fair value of certain elements of contingent consideration as of the acquisition date, in excess of the fair value of net assets acquired is recorded as goodwill. Conversely, any excess of the fair value of the net assets acquired over the purchase consideration is recognized as a bargain purchase gain. Examples of critical estimates in valuing certain of the intangible assets we have acquired include, but are not limited to, future expected cash inflows and outflows, future fundraising assumptions, expected useful lives, discount rates and income tax rates. Our estimates for future cash flows are based on historical data, internal estimates and external sources, and are based on assumptions that are consistent with the plans and estimates we are using to manage the underlying assets acquired. We estimate the useful lives of the intangible assets based on the expected period over which we anticipate generating economic benefit from the asset. We base our estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Unanticipated events and circumstances may occur that could affect the accuracy or validity of such assumptions, estimates or actual results. 158 Table of Contents Impairment of Intangible Assets We evaluate intangible assets for impairment annually, or if certain events occur or circumstances change indicating that the carrying amount of the intangible asset may not be recoverable. We evaluate impairment by comparing the estimated undiscounted cash flows attributable to the intangible asset being evaluated with its carrying amount. If an impairment is determined to exist, we accelerate amortization expense so that the carrying amount represents fair value. We estimate fair value using a discounted future cash flow methodology. Inherent in such fair value determinations are certain judgments and estimates relating to future cash flows, including our strategic plans. We base our estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. Additionally, future estimates may differ materially from current estimates and assumptions. Income Taxes The Company is taxed as corporation for U.S. federal and state income tax purposes. We use the liability method of accounting for deferred income taxes pursuant to GAAP. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the carrying value of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the statutory tax rates expected to be applied in the periods in which those temporary differences are settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized during the year the change is enacted. A valuation allowance is recorded on our net deferred tax assets when it is more likely than not that such assets will not be realized or when timing is unknown. When evaluating the realizability of our deferred tax assets, all evidence, both positive and negative, is evaluated. Items considered in this analysis include the ability to carry back losses, the reversal of temporary differences, tax planning strategies and expectations of future earnings. Under GAAP, the amount of tax benefit to be recognized is the amount of benefit that is more likely than not to be sustained upon examination. We analyze our tax filing positions in all of the U.S. federal, state, local and foreign tax jurisdictions where we are required to file income tax returns, as well as for all open tax years in these jurisdictions. If, based on this analysis, we determine that uncertainties in tax positions exist, a liability is established. We recognize accrued interest and penalties related to unrecognized tax positions within interest expense and general, administrative and other expenses, respectively, within the Consolidated Statements of Operations. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties under GAAP. We review our tax positions quarterly and adjust our tax balances as new legislation is passed or new information becomes available. Recent Accounting Pronouncements Information regarding recent accounting pronouncements and their impact on the Company can be found in “Note 2. Summary of Significant Accounting Policies,” within our consolidated financial statements included in this Annual Report on Form 10-K. 159 Table of Contents Contractual Obligations, Commitments and Contingencies and Other Arrangements In the normal course of business, we enter into contractual obligations that may require future cash payments. We may also engage in off-balance sheet arrangements, including guarantees, capital commitments to funds, indemnifications and potential contingent repayment obligations. The following table sets forth our contractual obligations and capital commitments of the Company and of the Consolidated Funds as of December 31, 2023 ($ in thousands): Less than 1 year 1 - 3 years 4 - 5 years Thereafter Total The Company: Operating lease obligations (1) $ 52,911 $ 105,865 $ 70,328 $ 181,823 $ 410,927 Debt obligations payable (2) 249,427 — 1,389,863 1,326,190 2,965,480 Interest obligations on debt (3) 130,259 240,518 168,462 866,069 1,405,308 Other long-term obligations (4) 1,892 1,524 91 — 3,507 Capital commitments (5) 1,030,623 — — — 1,030,623 Subtotal 1,465,112 347,907 1,628,744 2,374,082 5,815,845 Consolidated Funds: Debt obligations payable 125,241 1,057,053 71,025 11,429,585 12,682,904 Interest obligations on debt (3) 781,240 1,538,417 1,483,688 2,682,665 6,486,010 Capital commitments of Consolidated Funds (5) 771,485 — — — 771,485 $ 3,143,078 $ 2,943,377 $ 3,183,457 $ 16,486,332 $ 25,756,244 (1) The table includes future minimum commitments for our operating leases, including leases that have been executed but have not yet commenced. The majority of our operating lease obligations represents office space agreements with expirations through June 2036. Rent expense includes only base contractual rent. (2) Debt obligations include $1,650.0 million of senior notes and $450.0 million of subordinated notes, net of unamortized discount, and outstanding balance under the Credit Facility as of December 31, 2023. (3) Interest obligations reflect future interest payments on outstanding debt obligations with stated interest rates for fixed rate debt and at the prevailing rate in effect as of the reporting date for floating rate debt. (4) Represents payment obligations with respect to long-term service contracts entered into by the Company and future minimum commitments for our finance leases. (5) Represents commitments to fund certain investments or to support certain strategic investments. These amounts are generally due on demand and are therefore presented as obligations payable in less than one-year. We entered into a TRA with the TRA Recipients that requires us to pay them 85% of any cash tax savings, if any, realized by AMC from any step-up in tax basis resulting from an exchange of AOG Units for shares of our Class A common stock or, at our option, for cash. Because the timing of amounts to be paid under the TRA cannot be determined, this contractual commitment has not been presented in the table above. The cash tax savings, if any, achieved may not ensure that we have sufficient cash available to pay this liability, and we may be required to incur additional debt to satisfy this liability. For further discussion of our capital commitments, indemnification arrangements and contingent obligations, see “Note 8. Commitments and Contingencies,” within our consolidated financial statements included in this Annual Report on Form 10-K. 160 Table of Contents