Q4 2021 Ares Management Corp Earnings Call

Speaker 1: Welcome to ARIES Management Corporation's fourth quarter and year-end earnings conference.

Welcome to Ares management Corporation's fourth quarter and year end earnings conference call.

Speaker 1: At this time, all participants are in a listen-only mode. As a reminder, this conference call is being recorded on Friday, February 11, 2022. I will now turn the call over to Carl Drake, Head of Public Markets Investor Relations for Aries Manistra.

At this time all participants are in a listen only mode. As a reminder, this conference call is being recorded on Friday February 11 2022.

I will now turn the call over to Carl Drake head of public markets Investor Relations for Ares management.

Speaker 1: Good afternoon and thank you for joining us today for our fourth quarter and year end 2021 conference call. I'm joined today by Michael Arreghetti, our Chief Executive Officer, and Jared Phillips, our Chief Financial Officer.

Good afternoon, and thank you for joining us today for our fourth quarter and year end 2021 conference call.

I'm joined today by Michael are Getty, our Chief Executive Officer, and Gary Phillips, Our Chief Financial Officer. We also have a number of executives with us today, who will be available during Q&A.

Speaker 1: We also have a number of executives with us today who will be available during Q&A.

Speaker 1: Before we begin, I want to remind you that comments made during this call contain forward looking statements and are subject to risks and uncertainties. Including those identified in our risk factors in our SEC filing.

Before we begin I want to remind you that comments made during this call contain forward looking statements and are subject to risks and uncertainties.

Putting those identified in our risk factors in our SEC filings.

Speaker 1: Our actual results could differ materially, and we undertake no obligation to update any such forward looking statements. Please also note that past performance is not a guarantee of future results.

Our actual results could differ materially and we undertake no obligation to update any such forward looking statements. Please also note that past performance is not a guarantee of future results.

Speaker 1: During this call, we will refer to certain non-GAAP financial measures, which should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles.

During this call we will refer to certain non-GAAP financial measures, which should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles.

Speaker 1: Please refer to our fourth quarter and full year earnings presentation available on the investor resources section of our website for reconciliations of the measures to the most directly comparable gap.

Please refer to our fourth quarter and full year earnings presentation available on the Investor resources section of our website for.

Filiation said the measures to the most directly comparable GAAP measures.

Speaker 1: Please note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any areas.

Please note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any Ares fund.

Speaker 1: This morning we announced we declared our first quarter dividend of 61 cents per share of its Class A and non-voting common stock, representing an increase of 30% over the same quarter a year ago.

This morning, we announced that we declared our first quarter dividend of <unk> 61 cents per share of its class a nonvoting common stock representing an increase of 30% over the same quarter a year ago.

Speaker 1: The dividend will be paid on March 31st, 2022 to holders of record on March 17.

The dividend will be paid on March 31st 2022 to holders of record on March 17th.

Speaker 1: Now I will turn the call over to Michael Arreghetti, who will start with some quarterly and year-end financial and business highlights.

Now I will turn the call over to Mike Leary, Getty, who will start with some quarterly and year end financial and business highlights.

Speaker 1: Thank you, Carl, and good afternoon, everyone. I hope everybody is doing well.

Thank you Carl and good afternoon, everyone hope everybody is doing well.

Speaker 1: Our strong fourth quarter results capped off a transformational year here at Aries. We generated record results across nearly every key financial metric. We saw tremendous growth across our global platform and our best fund performance since we became a public company.

Our strong fourth quarter results capped off a transformational year here at Ares, we generated record results across nearly every key financial metric, we saw tremendous growth across our global platform and our best Fund performance since we became a public company.

Speaker 1: As we outlined at our Investor Day last year, we are operating in expansive and rapidly growing end markets, and we're gaining share through our scale, product and geographic expansion, and new distribution. We believe that our global platform and our unique culture of collaboration and innovation are key drivers of our firm's success.

As we outlined at our Investor Day last year, we are operating an expansive and rapidly growing end markets and we're gaining share through our scale product and geographic expansion and new distribution.

We believe that our global platform and our unique culture of collaboration and innovation are key drivers of our firm's success.

Speaker 1: We ended the year exceeding $300 billion in AUM, 55% higher than the near $200 billion in AUM at the end of 2020.

We ended the year exceeding $300 billion in AUM.

55% higher than the near 200 billion in AUM at the end of 2020.

Speaker 1: The vast majority of this AUM growth was organic and driven by a record $77 billion in gross fundraising, including $25 billion in the fourth quarter alone, well ahead of our expectations.

The vast majority of this AUM growth was organic and driven by a record $77 billion in gross fund raising including 25 billion in the fourth quarter alone well ahead of our expectations.

Speaker 1: Our strong organic growth, which we believe to be among the best in our industry over the past three years, reflects our investors' satisfaction with our fund performance and the continued expansion of our capabilities and strategies.

Our strong organic growth, which we believe to be among the best in our industry over the past three years reflects our investor satisfaction with our fund performance and the continued expansion of our capabilities and strategies.

Speaker 1: On top of the strong organic growth, we added $33 billion in AUM from the strategic acquisitions of Landmark Partners and Black Creek Group.

On top of this strong organic growth, we added $33 billion in AUM from the strategic acquisitions of landmark partners and Black Creek group.

Speaker 1: These businesses are performing very well and have positioned us for significant future growth across an increasingly diversified set of strategies.

These businesses are performing very well and have positioned us for significant future growth across an increasingly diversified set of strategies.

Speaker 1: We're already seeing exciting revenue and earnings synergies with Black Creek and Landmark under our ownership as we collaborate to positively impact fundraising, investing and fund performance.

We're already seeing exciting revenue and earnings synergies with Blackrock and landmark under our ownership as we collaborate to positively impact fund raising investing and fund performance.

Speaker 1: In addition, in December , we agreed to acquire AMP's infrastructure debt platform, which is one of the largest global infrastructure debt platforms with approximately $8 billion of AUM and with a strong and long-term investment track record.

In addition in December we agreed to acquire a M p's infrastructure debt platform, which is one of the largest global infrastructure debt platforms with approximately 8 billion of AUM and with a strong and long term investment track record.

Speaker 1: We were pleased to announce the closing of this transaction last night, and we're excited with the extraordinary support that we received from the Infrastructure Debt Platform's existing LPs.

We were pleased to announce the closing of this transaction last night and we're excited with the extraordinary support that we receive from the infrastructure that platforms existing L piece.

Speaker 1: The addition of the Infradet team will expand our investment capabilities across the digital, utilities, and transportation sectors, and will enhance our existing capabilities in the renewable energy space.

The addition of the inferred that team will expand our investment capabilities across the digital utilities and transportation sectors and will enhance our existing capabilities in the renewable energy space.

Speaker 1: The growing scale and breadth of our investment capabilities were on full display as we invested more than $80 billion for the full year across more than 25 different strategies around the globe.

The growing scale and breadth of our investment capabilities were on full display as we invested more than $80 billion for the full year across more than 25 different strategies around the globe.

Speaker 1: Our deployment, record fundraising, and two strategic acquisitions all helped drive a nearly 50% year-over-year increase in our fee-paying AUM and a 65% increase in our full year fee-related earnings, which accounted for more than 80% of our realized income.

Our deployment record fund raising and two strategic acquisitions, all helped drive a nearly 50% year over year increase in our fee paying AUM and a 65% increase in our full year fee related earnings which accounted for more than 80% of our realized income.

Speaker 1: Our FRE margins continue to expand throughout 21, approaching 40% in the fourth quarter, an improvement of over 250 basis points year on year.

Our FRE margins continued to expand throughout 'twenty, one approaching 40% in the fourth quarter, an improvement of over 250 basis points year on year.

Speaker 1: And over the past five years, our FRE margins have now expanded by more than 1,200 basis points.

And over the past five years, our FRE margins have now expanded by more than 1200 basis points.

Speaker 1: Our prospects for continued growth across all five of our business groups remain bright.

Our prospects for continued growth across all five of our business groups remain bright.

Speaker 1: With $90 billion of available capital to invest and a robust fundraising pipeline, we have strong visibility for continued growth and earnings over the coming years.

With $90 billion of available capital to invest in a robust fundraising pipeline, we have strong visibility for continued growth in earnings over the coming years.

Speaker 1: Given our high conviction on our outlook, we're increasing our quarterly dividend by 30%, as Carl stated.

Given our high conviction on our outlook, we're increasing our quarterly dividend by 30% as Carl stated.

Speaker 1: This conviction is supported by a promising long-term view on the secular growth and alternative investments, as institutional, retail, and insurance investors are all seeking differentiated sources of income with less market volatility.

This conviction is supported by a promising long term view on the secular growth in alternative investments as institutional retail and insurance investors are all seeking differentiated sources of income with less market volatility.

Speaker 1: Each of these channels is expected to support the double-digit annual market growth in the alternative assets sector over the next five years as alternatives continue to take share from the global pool of hundreds of trillions of dollars of investment assets available.

Each of these channels is expected to support the double digit annual market growth in the alternative assets sector over the next five years as alternatives continue to take share from the global pool of hundreds of trillions of dollars of investment assets available.

Speaker 1: Inflation concerns and expectations for higher rates have no doubt generated some recent market volatility.

Inflation concerns and expectations for higher rates of no doubt generated some recent market volatility.

Speaker 1: In the past, we've demonstrated our ability to achieve significant growth even through volatile periods like the global financial crisis and the recent COVID pandemic.

In the past, we've demonstrated our ability to achieve significant growth even through volatile periods like the global financial crisis, and the recent Covid pandemic.

Speaker 1: We've also effectively navigated interest rate volatility in past cycles. And we continue to believe that Aries is well positioned given the generally floating rate nature of our credit assets, the growth orientation of our private equity portfolios, and the inflation protection inherent in our real asset book.

We've also effectively navigated interest rate volatility in past cycles, and we continue to believe that Ares is well positioned given the generally floating rate nature of our credit assets the growth orientation of our private equity portfolios and the inflation protection inherent in our real asset book.

Speaker 1: We continue to see investors consolidating their manager relationships with broader platforms to gain efficiencies and strategic insights.

We continue to see investors consolidating their manager relationships with broader platforms to gain efficiencies and strategic insight.

Speaker 1: To that point, over 80% of our direct institutional fundraising in 2021 was derived from existing investors either re-upping into one of our existing strategies, which accounted for 45% of direct institutional fundraising, or investing in other ARIES strategies across our platform, which accounted for 39% of direct institutional fundraising.

To that point over 80% of our direct institutional fund raising in 2021 was derived from existing investors either re upping into one of our existing strategies, which accounted for 45% of direct institutional fund raising or investing in other areas strategies across our platform, which accounted for 39.

10% of direct institutional fundraising.

Speaker 1: Today, 62% of our institutional direct AUM is from clients that are invested across our platform in two or more investment groups, up from 49% of our clients five years ago. We also continue to

Today, 62% of our institutional direct a U M is from clients. They are invested across our platform in two or more investment groups up from 49% of our clients five years ago.

We also continued to attract new investors onto the platform.

Speaker 1: Out of the total 427 direct institutional investors who committed to new funds in 2021, 41% of them were new to Aries.

Out of the total 427 direct institutional investors, who committed to new funds and 21, 41% of them were new to Ares.

Speaker 1: Our goal is to bring new investors onto the platform, deliver a best-in-class experience and performance, and then earn additional trust and wallet share in subsequent fund offerings.

Our goal is to bring new investors onto the platform deliver a best in class experience and performance and then earn additional trust and wallet share and subsequent fund offerings.

Speaker 1: We saw this play out in 2021 as the average investment size for existing investors increased 35% year over year and was over three times as large as the average investment size for new investors.

We saw this play out in 2020 , one as the average investment size for existing investors increased 35% year over year and was over three times as large as the average investment size for new investors.

Speaker 1: This increasing momentum with our investors culminated in a record fourth quarter of fundraising with more than $25 billion of capital raised.

This increasing momentum with our investors culminated in a record fourth quarter fund raising with more than $25 billion of capital raised.

Speaker 1: This included $3.7 billion for the final close of our second Senior Direct Lending Fund, SDL II, bringing total fund commitments to approximately $14 billion, including leveraged and unleveraged sleeves. We believe this single fund is one of the largest ever private funds raised in the U.S. direct lending market.

This included $3 7 billion for the final close of our second senior direct lending fund SDL, two bringing total fund commitments to approximately $14 billion, including leveraged and Unlevered sleeves.

We believe this single fund is one of the largest ever private funds raised in the U S direct lending market.

Speaker 1: We held a final close for our inaugural Climate Infrastructure Fund, ACIP, raising $1.2 billion in the quarter and bringing total commitments to $2.2 billion, including related vehicles.

We held the final close for our inaugural climate infrastructure fun Ace it raising $1 2 billion in the quarter and bringing total commitments to $2 2 billion, including related vehicles.

Speaker 1: Investing in renewables through the energy transition remains a significant focus and a great opportunity for us in the future.

Investing in renewables through the energy transition remains a significant focus and a great opportunity for us in the future.

Speaker 1: We also closed on commitments for several newly launched vintages of existing funds.

We also closed on commitments for several newly launched vintages of existing funds.

Speaker 1: In our second Special Opportunities Fund, we raised $4.9 billion in the fourth quarter and are well on our way to the hard cap of $6 billion.

Our second special opportunities fund, we raised $4 9 billion in the fourth quarter and are well on our way to the hard cap of 6 billion.

Speaker 1: In our secondaries business, we raised nearly $800 million of initial commitments following the launch of our ninth Landmark Real Estate Secondaries Fund. And in Asia, Ares SSG raised over $800 million of initial commitments following the launch of our sixth Special Situations Fund.

In our secondaries business, we raised nearly 800 million of initial commitments. Following the launch of our ninth landmark real estate Secondaries fund and in Asia areas that says Gee raised over $800 million of initial commitments. Following the launch of our sixth special situations Fund.

Speaker 1: We also continue to experience significant fundraising momentum in our perpetual capital funds with more than $5 billion raised in the fourth quarter, including $3 billion raised in the retail channel and $2 billion in the institutional open-ended channel.

We also continued to experience significant fundraising momentum and our perpetual capital funds with more than $5 billion raised in the fourth quarter, including 3 billion raised in the retail channel and $2 billion in the institutional open ended channel.

Speaker 1: Our two non-traded REITs and the Institutional Open End Industrial Real Estate Fund that we acquired from Black Creek are all running well ahead of our expectations with more than $2 billion raised in Q4.

Our two non traded Reits and the institutional open and industrial real estate fund that we acquired from Black Creek are all running well ahead of our expectations with more than $2 billion raised in Q4.

Speaker 1: So looking back over 2021, our record $77 billion of fundraising far exceeded 2020's record of $41 billion.

So looking back over 2021, a record $77 billion of fundraising far exceeded 2000, Twenty's record of 41 billion.

Speaker 1: During the year, we held final or meaningful closings on over a dozen flagship funds, totaling nearly $35 billion.

During the year, we held final or meaningful closings on over a dozen flagship funds totaling nearly 35 billion.

Speaker 1: Interestingly, our flagship funds that held a final closing in 2021 increased their committed equity by approximately 50% in the aggregate over prior vintages, highlighting the embedded growth potential that we have from scaling existing funds.

Interestingly our flagship funds that held a final closing in 2021 increased their committed equity by approximately 50% in the aggregate over prior vintages, highlighting the embedded growth potential that we have from scaling existing funds.

Speaker 1: But even with an impressive year in flagship fundraising, we raised more funds outside of our flagship commingled products, including $21 billion in our perpetual capital vehicles, which now represent over 25% of total AUM.

But even with an impressive year in flagship fund raising we raised more funds outside of our flagship commingled products, including $21 billion in our perpetual capital vehicles, which now represent over 25% of total AUM.

Speaker 1: We're seeing accelerated growth across our various distribution channels, particularly in retail and insurance.

We're seeing accelerated growth across our various distribution channels, particularly in retail and insurance.

Speaker 1: While aggregate fundraising increased 86% year-over-year, fundraising in our retail channel increased over 150% year-over-year to $14.5 billion.

While aggregate fund raising increased 86% year over year fundraising in our retail channel increased over 150% year over year to $14 5 billion.

Speaker 1: And AUM from our retail and high net worth channel stood at more than $50 billion at year end.

And AUM from our retail and high net worth channel stood at more than $50 billion at year end.

Speaker 1: Fundraising from insurance clients increased over 100% to $11.7 billion as we continue to develop products and expand our client service teams to target these investors.

Raising from insurance clients increased over 100% to $11 7 billion as we continue to develop products and expand our client service teams to target. These investors.

Speaker 1: In the retail channel, the formation of Aries Wealth Management Solutions is enhancing our ability to drive additional flows into our existing funds and has now positioned us to launch new perpetual capital funds.

In the retail channel the formation of areas wealth management solutions is enhancing our ability to drive additional flows into our existing funds and has now positioned us to launch new perpetual capital funds.

Speaker 1: We are rebranding the Black Creek funds, including the Diversified Property Fund, which is now Aries Real Estate Income Trust, or AREIT, and Black Creek Industrial REIT IV, which is in the process of being rebranded as the Aries Industrial Real Estate Income Trust.

We are rebranding the Black Creek funds, including the diversified property fund, which is now Ares real estate income trust or a REIT and Black Creek industrial REIT for which is in the process of being rebranded as the area's industrial real estate income Trust.

Speaker 1: Our Aries Wealth Management Solutions team is also actively working to expand product distribution with wirehouses, regional broker-dealers, and RIAs in the U.S., Europe , and Asia.

Our Aries wealth management solutions team is also actively working to expand product distribution with wire houses regional broker dealers in our I as in the U S Europe and Asia.

Speaker 1: In late 21, our insurance affiliate, ESPITA, completed the acquisition of an additional insurance company, enabling ESPITA to begin writing new annuity and insurance contracts, which is expected to begin late in the second quarter of this year.

In late 'twenty, one our insurance affiliate of speed are completed the acquisition of an additional insurance company, enabling a speed it to begin writing new annuity and insurance contracts, which is expected to begin late in the second quarter of this year.

Speaker 1: While there will be a ramp-up period, we expect to see stronger growth in Aspita over time as our organic sales organization will complement our reinsurance flow arrangements and potential block acquisitions.

While there will be a ramp up period, we expect to see stronger growth in our speed over time as our organic sales organization will complement our reinsurance flow arrangements and potential block acquisitions at.

Speaker 1: At year-end, Aspita had $3.4 billion of assets managed by Aries Insurance Solutions, with more than 40% sub-advised across the Aries platform.

At yearend, our speed of had $3 $4 billion of assets managed by Ares insurance solutions with more than 40% sub advised across the Ares platform.

Speaker 1: Looking forward to 2022, we expect to have more than 25 different funds in the market, including the launch of some new fund strategies.

Looking forward to 2022, we expect to have more than 25 different funds in the market, including the launch of some new fund strategies.

Speaker 1: We now have 23 commingled fund series that have closed on $1 billion or more in their latest fund, Vintage.

We now have 23 Commingled fund series that have closed on 1 billion or more in their latest fund vintage.

Speaker 1: This is up over four and a half times from only five fund series in 2016.

This is up over four five times from only five fun series in 2016.

Speaker 1: And while we expect another strong year of fundraising in 2022, we don't expect to approach our 2021 record, particularly given the record amount of available capital that we have to invest.

And while we expect another strong year of fundraising in 2022, we don't expect to approach our 2021 record, particularly given the record amount of available capital that we have to invest.

Speaker 1: Our global origination footprint and increased scale is enabling us to invest in larger transactions across more geographies and across broader strategies.

Our global origination footprint and increased scale is enabling us to invest in larger transactions across more geographies and across broader strategies.

Speaker 1: In addition, the private markets continue to scale, which has created an opportunity to serve larger companies and sponsors as the global markets expand and evolve across the waterfront in direct lending, alternative credit, real estate credit, infrastructure credit and special situations, among others.

In addition, the private markets continue to scale, which has created an opportunity to serve larger companies and sponsors as the global markets expand and evolve across the waterfront in direct lending alternative credit real estate credit infrastructure credit and special situations among others. It was.

Speaker 1: So as these markets go through transformational change, we feel confident that we're gaining share and addressing investor needs with flexible solutions.

These markets go through transformational change, we feel confident that we're gaining share and addressing investor needs with flexible solutions.

Speaker 1: For the fourth quarter, we had gross capital deployment of $32 billion, another record quarter and nearly double the $17.3 billion of gross deployment in Q4 2020.

For the fourth quarter, we had gross capital deployment of 32 billion another record quarter and nearly double the $17 3 billion of gross deployment in Q4 2020.

Speaker 1: For the full year, we deployed over $80 billion in flexible capital with an emphasis on industries and assets that are cycle resilient like healthcare, software and technology, business services and other service industries on the corporate side, industrial and multifamily properties and real estate, and renewable energy within infrastructure.

For the full year, we deployed over $80 billion in flexible capital with an emphasis on industries and assets that are cycle resilient like health care software and technology business services and other service industries on the corporate side <unk>.

Industrial and multifamily properties in real estate and renewable energy with an infrastructure.

Speaker 1: Of note, we invested more than $48 billion in our U.S. and European direct lending and alternative credit strategies during the year.

Of note, we invested more than $48 billion in our U S and European direct lending and alternative credit strategies during the year.

Speaker 1: Our full year fund performance across every investment group was some of the strongest that we've experienced as a public company.

Our full year fund performance across every investment group with some of the strongest that we've experienced as a public company.

Speaker 1: Private equity returns in both our Ares Corp. Opportunities Fund Series and Special Opportunities Fund were excellent and meaningfully outperformed the broader U.S. equity market indices.

Private equity returns in both our areas corporate opportunities Fund series and special opportunities fund were excellent and meaningfully outperformed the broader U S equity market indices.

Speaker 1: Our ACOF composite generated gross returns of 7.5% in the fourth quarter and 52.6% for the full year, while ARIES Special Opportunities generated gross returns of 4.5% in the quarter and 45.9% for the full year.

Or a cough composite generated gross returns of seven 5% in the fourth quarter and 52, 6% for the full year.

Ares special opportunities generated gross returns of four 5% in the quarter and 45, 9% for the full year.

Speaker 1: Real estate continued its outstanding performance as the U.S. real estate equity composite generated gross returns in the fourth quarter of 10.7% and 62.3% for the full year, and our European real estate equity composite had gross returns of 5.8% in the quarter and 34.2% for the full year.

Real estate continued its outstanding performance as the U S real estate equity composite generated gross returns in the fourth quarter of 10, 7% and 62, 3% for the full year and our European real estate equity composite had gross returns of five 8% in the quarter and 34, 2% for the full year.

Speaker 1: In our non-traded REITs, for the full year, Black Creek Industrial REIT 4 delivered a net return of 29.7% for its class I shares. And A REIT generated a 13.8% net return for class I shares.

And our non traded Reits for the full year Black Creek industrial REIT for delivered a net return of 29, 7% for its class I shares in a REIT generated a 13, 8% net return for class I shares.

Speaker 1: Our secondary strategy kept pace with strong performance across the board. The private equity secondary strategy, which reports results on a one-quarter lag basis, generated gross returns of 13.9% for the quarter and 60% for the trailing 12-month period, while real estate secondaries generated gross returns of 18.7% for the quarter and 49.7% over the trailing 12 months on a one-quarter lag basis.

Our secondary strategy kept pace with strong performance across the board the private equity secondary strategy, which reports results on a one quarter lag basis generated gross returns of 13, 9% for the quarter and 60% for the trailing 12 month period, while real estate secondaries generated gross returns of 18.

7% for the quarter and 49, 7% over the trailing 12 months on a one quarter lag basis.

Speaker 1: Pathfinder, which is our flagship alternative credit fund, has generated a very strong net IRR of 49% since its inception in 2020.

Pathfinder, which is our flagship alternative credit fund has generated a very strong net IRR of 49% since its inception in 2020.

Speaker 1: What makes this performance particularly exciting is that 10% of the incentive fee income from this fund has been donated by the Portfolio Managers and by ARIES to support charitable initiatives such as global poverty, health, and education.

What makes this performance, particularly exciting is that 10% of the incentive fee income from this fund has been donated by the portfolio managers and by Ares to support charitable initiatives, such as global poverty Health and education.

Speaker 1: Our flagship U.S. Direct Lending Fund, Aries Capital Corporation, generated strong net returns of 4.6% in the fourth quarter and 22% for the year.

Our flagship U S direct lending fund Ares Capital Corporation generated strong net returns of four 6% in the fourth quarter and 22% for the year.

Speaker 1: Our European Direct Lending Strategy generated gross returns of 2.5% for the quarter and 14.5% for the year.

Our European direct lending strategy generated gross returns of two 5% for the quarter and 14, 5% for the year.

Speaker 1: In liquid credit, our syndicated loan and high-yield bond composites generated gross returns of 6.3% and 6.9% for the year, respectively, outperforming their respective benchmarks by 16% and 29%.

And liquid credit our syndicated loan and high yield bond composites generated gross returns of six 3% and six 9% for the year, respectively outperforming their respective benchmarks by 16% and 29%.

Speaker 1: Our flagship global multi-asset credit strategy also generated a gross return of 12.8% for the year.

Our flagship global multi asset credit strategy also generated a gross return of 12, 8% for the year and.

Speaker 1: And lastly, in Asia, our Special Situations Fund composite generated a gross return of 6.8% in the quarter and 30.2% for the full year.

And lastly in Asia are special situations fund composite generated a gross return of six 8% in the quarter and 32% for the full year.

Speaker 1: Hopefully these returns illustrate that we have highly talented, motivated people driving differentiated investment outcomes for our clients across all of our strategies and highlight why we continue to enjoy a sticky and growing client base.

Hopefully these returns illustrate that we are highly talented and motivated people driving differentiated investment outcomes for our clients across all of our strategies and highlight why we continue to enjoy a sticky and growing client base.

Speaker 1: And with that, now let me turn the call over to Jared to walk through the fourth quarter and the full year financial results. Jared?

And with that now let me turn the call over to Jared to walk through the fourth quarter and the full year financial results Jack.

Speaker 2: Hello, everyone, and thank you for joining us to discuss yet another great year for ARI.

Thanks, Mike.

Hello, everyone and thank you for joining us to discuss yet another great year for Ares.

Speaker 2: I'll start with a review of the fourth quarter and then full year, and then I'll provide an update on our outlook. As Mike stated, we experienced impressive growth in nearly every financial metric, including management fees, fee-related earnings, realized income, AUM, FPAUM, and net accrued performance income for both the fourth quarter and the full year. In 2021, we demonstrated not only the power of our existing platform, but the ability to execute on acquisitions further adding to our competitive advantage and scope.

I'll start with a review of the fourth quarter and full year, and then I'll provide an update on our outlook as Mike stated, we experienced impressive growth nearly every financial metric, including management fees fee related earnings realized income.

AUM FBA AUM and net accrued performance income for both the fourth quarter and the full year in 2020 . One we demonstrated not only the power of our existing platform, but the ability to execute on acquisitions further adding to our competitive advantage in scope.

Speaker 2: We also began to showcase the earning power of our Perpetual Capital Vehicles, which contributed significantly to our fourth quarter.

We also began to showcase the earning power of our perpetual capital vehicles, which contributed significantly to our fourth quarter.

Speaker 2: On that last point, I would like to highlight that our revenues in FRE now include the addition of Fee-Related Performance Revenues, or FRPR, for the fourth quarter and full year. FRPR refers to recurring performance revenues derived from perpetual capital funds that are not dependent on realizations and typically are measured and crystallized annually in the fourth quarter.

On that last point I would like to highlight that our revenues in FRE. Now include. The addition of fee related performance revenues for Fr PR for the fourth quarter and full year F. Our PR refers to recurring performance revenues derived from perpetual capital funds that are not dependent on realizations and typically are met.

<unk> and crystallize annually in the fourth quarter.

Speaker 2: This better aligns with reporting by our peers who operate funds with similar fees, including non-traded REITs and other evergreen fund structures.

This better aligns with reporting by our peers, who operate bonds with similar fees, including non traded Reits and other evergreen fund structures.

Speaker 2: Starting with our revenues, our management fee increased 44% for the fourth quarter and 38% for the full year, driven primarily by the strong deployment of our invested capital, as Mike highlighted.

Starting with our revenues our management fee increased 44% for the fourth quarter and 38% for the full year driven primarily by the strong deployment of our invested capital as Mike highlighted.

Speaker 2: In addition, another $18 billion of AUM in funds raised during the year became fee pay.

In addition, another $18 billion of AUM in funds raised during the year became fee paying.

Speaker 2: Our management fee stability is a key differentiator for our business model and allows us to better manage market dislocation.

Our management fee stability is a key differentiator for our business model and allows us to better manage market dislocations.

Speaker 2: As of year-end, 95% of our management fees came from either perpetual capital or long-dated funds, greatly reducing the risk of redemptions even during severe market movements.

As of year end, 95% of our management fees came from either perpetual capital or long dated funds greatly reducing the risk of redemptions, even during severe market movements.

Speaker 2: But the point in accelerating as we scale our strategies, we believe that we remain very well positioned to continue this growth.

With deployment accelerating as we scale our strategies, we believe that we remain very well positioned to continue this growth.

Speaker 2: Other fee income increased to approximately $22.4 million for the fourth quarter and $50 million for 2021, up 219% and 150% respectively.

Other fee income increased to approximately $22 4 million for the fourth quarter and $50 million for 2021 up 219% and 150% respectively.

Speaker 2: This sharp increase is primarily due to the Black Creek acquisition, which in addition to management fees, FRPR, and realized performance income, generates development, leasing, and acquisition fees, which are recorded in another fee income.

This sharp increases primarily due to the Black Creek acquisition, which in addition to management fees Fr PR and realized performance income generates development leasing and acquisition fees, which are reported in other fee income.

Speaker 2: Our other fees also include our capital structuring or origination fees and certain of our direct lending perpetual.

Our other fees also include our capital structuring where origination fees and certain of our direct lending perpetual funds.

Speaker 2: For the full year 2021, we had $137.9 million of FRPR, compared to only $23 million for the full year 2020.

For the full year 2021, we had $137 9 million of FRP or compared to only $23 million for the full year 2020.

Speaker 2: Strong contribution from FRPR in 2021, of which about 98% came in the fourth quarter, was primarily driven by a significant ramp and strong performance in our US and European direct lending perpetual managed accounts, which contributed over 85 million, and the addition of two Black Creek non-traded REITs that collectively contributed over 48 million.

Strong contribution from <unk> in 2021 of which about 98% came in the fourth quarter was primarily driven by a significant ramp and strong performance in our U S and European direct lending perpetual managed accounts, which contributed over $85 million and the addition of two Black Creek non traded Reits that collectively contribute.

Did over $48 million.

Speaker 2: Of note, since we closed the acquisition of Black Creek on July 1st of 2021, we only received our proportionate share of the FRPR from the two non-traded REITs during our ownership in 2021, or approximately 50% of the contractual annual performance revenue.

Of note since we closed the acquisition of Blackrock on July one 2021, we only received our proportionate share of the FRP or from the two non traded Reits during our ownership in 2021 or approximately 50% of the contractual annual performance revenues.

Speaker 2: For 2022 and beyond, we would receive the full year payout of such fees.

For 2022 and beyond we would receive the full year payout of such fees.

Speaker 2: Note that our FRPR, net of related compensation, contributed $51 million to our 2021 FRE, compared to only $6.8 million in 2020.

Note that our FRP are net of related compensation contributed $51 million to our 2021 FRE compared to only $6 8 million in 2020.

Speaker 2: Based on the nature of these funds as described, we would not expect to see meaningful FRPR until the fourth quarter of 2022.

Based on the nature of these funds as described we would not expect to see meaningful FRP or until the fourth quarter of 2022.

Speaker 2: For the fourth quarter, FRE totaled $253.3 million, an increase of 85% from the fourth quarter of 2020.

For the fourth quarter FRE totaled $253 3 million.

An increase of 85% from the fourth quarter of 2020.

Speaker 2: For the year ended December 31st, 2021, FRE totaled $712.3 million, an increase of approximately 65% from the prior year, and it accounted for more than 80% of our realized income, up from 74% in 2020.

For the year ended December 31, 2021, FRE totaled $712 3 million, an increase of approximately 65% from the prior year and accounted for more than 80% of our realized income up from 74% in 2020.

Speaker 2: Our F.R.E. margin for the year ended December 31st, 2021 was 39 percent and for the fourth quarter totaled 39.7 percent. This represents a 400 basis point increase in our full year margin as compared to the full year.

Our FRE margin for the year ended December 31, 2021 was 39% and for the fourth quarter totaled 39, 7%. This represents a 400 basis point increase in our full year margin as compared to the full year 2020.

Speaker 2: As expected, our realization activity picked back up in the fourth quarter, particularly within our credit and real estate.

As expected our realization activity picked back up in the fourth quarter, particularly within our credit and real estate groups. Our credit group generated $45 million in net realized performance income, which was nearly two five times the fourth quarter of 2020.

Speaker 2: Our credit group generated $45 million in net realized performance income, which was nearly two and a half times the fourth quarter of 2020.

Speaker 2: This included performance income from our U.S. and European direct lending strategies and $10 million in net ARCC Part 2 capital gains.

This included performance income from our U S and European direct lending strategies, and $10 million and net ARCC part two capital gains fees.

Speaker 2: Real estate net realized performance income also increased over two and a half times fourth quarter 2020 driven by strong results in monetization in US real estate equity funds, including Black Creek's institutional.

Real estate net realized performance income also increased over two five times fourth quarter 2020.

Driven by strong results in monetization and U S real estate equity funds, including Black creeks institutional funds.

Speaker 2: Overall, net realized performance income for the fourth quarter increased 49% year over year and full year results were up 17% versus the prior year.

Overall net realized performance income for the fourth quarter increased 49% year over year and full year results were up 17% versus the prior year.

Speaker 2: Realized income for the fourth quarter totaled a record $340.3 million, up over 80% from the fourth quarter of 2020, and over 60% higher than our previous record. For the full year, realized income totaled $882.9 million, a 52% increase from 2020.

Realized income for the fourth quarter totaled a record $343 million.

Up over 80% from the fourth quarter of 2020 and over 60% higher than our previous record.

For the full year realized income totaled $882 9 million or 52% increase from 2020.

Speaker 2: After-tax realized income per share of Class A common stock was $0.85 for the fourth quarter, up from $0.54 in the fourth quarter of 2020, and full year 2020 after-tax realized income of $2.57 per share of Class A stock was up 38% versus 2020.

After tax realized income per share of class a common stock was <unk> 85 for the fourth quarter up from 54 in the fourth quarter of 2020 and full year 2020. After tax realized income of $2 57 per share of class a stock was up 38% versus 2020.

Speaker 2: At the beginning of each year, we look to set our quarterly dividend at a fixed level for the coming year.

At the beginning of each year, we look to set our quarterly dividend at a fixed level for the coming year.

Speaker 2: Based on the significant outperformance of our fee-related earnings relative to our dividends and our continued strong growth prospects, we've elected to increase our quarterly dividend to $0.61 per share of Class A stock, or $2.44 annually, up 30 percent from the $1.88 per share for 2021. This 30 percent growth for 2022 is ahead of the 20 percent-plus long-term cumulative annual growth rate guidance we gave at our Investor Day last August .

Based on the significant outperformance of our fee related earnings relative to our dividends and our continued strong growth prospects. We've elected to increase our quarterly dividend to <unk> 61 per share of class a stock or $2.44 annually.

Up 30% from $1 88 per share for 2021. This 30% growth for 2022 is ahead of the 20% plus long term cumulative annual growth rate guidance, we gave at our Investor Day last August .

Speaker 2: We believe it is appropriate, given our strong visibility from our significant dry powder for deployment, fundraising pipeline, and full year of accretion from our Black Creek and Landmark acquisitions.

We believe it is appropriate given our strong visibility from our significant dry powder for deployment fundraising pipeline and full year of accretion from our Black Creek and landmark acquisitions.

Speaker 2: As of year-end, our AUM totaled $306 billion, compared to $282 billion for the third quarter and $197 billion as of the year-end of 2020. This represents a 55% increase year over year and our highest annual AUM growth rate as a public company. The main drivers of this increase in 2021 included $77 billion in gross new capital commitments, as well as $33 billion from strategic acquisitions completed in the year.

As of year end, our AUM totaled 306 billion <unk>.

Compared to 282 billion for the third quarter and 197 billion as of the year ended 2020, which represents a 55% increase year over year, and our highest annual AUM growth rate as a public company.

Main drivers of this increase in 2021 included 77 billion in gross new capital commitments as well as 33 billion from strategic acquisitions completed in the year.

Speaker 2: Our fee-paying AUM totaled $188 billion at year-end, an increase of approximately 9% from the third quarter and nearly 50% from year-end 2020.

Our fee paying AUM totaled 188 billion at year end, an increase of approximately 9% from the third quarter and nearly 50% from year end 2020 are.

Speaker 2: Our growth in fee-paying AUM was primarily driven by meaningful deployment in our global direct lending, special opportunities, and alternative credit strategies, which are paid on invested capital along with $30 billion in fee-paying AUM from Landmark and BlackRock.

Our growth in fee paying AUM was primarily driven by meaningful deployment in our global direct lending special opportunities and alternative credit strategies, which are paid on invested capital along with $30 billion and fee paying AUM from landmark and Blackberry.

Speaker 2: With market volatility rising as we enter 2022, we stand ready to take advantage of any opportunities that may arise based on our record levels of available capital and AUM not yet earning fee.

With market volatility rising as we entered 2022.

We stand ready to take advantage of any opportunities that may arise based on our record levels of available capital in AUM, not yet earning fees.

Speaker 2: Our available capital increased to a new record high of $90.4 billion, an increase of over 61% year over year, primarily driven by fundraising and our direct lending and special opportunities strategy.

Our available capital increased to a new record high of 94 billion, an increase of over 61% year over year, primarily driven by fundraising and our direct lending and special opportunity strategies and.

Speaker 2: In addition, we ended the year with $53 billion of AUM, not yet paying fees, available for future deployment. Approximately 75% of this balance is housed in our credit strategies, including over $32 billion in direct lending and $7 billion in alternative credit.

In addition, we ended the year with $53 billion of AUM, not yet paying fees available for future deployment.

<unk>, 75% of this balance is house in our credit strategies, including over $32 billion in direct lending and $7 billion in alternative credit.

Speaker 2: Our incentive-eligible AUM increased by 56% from the year-end of 2020 to $183 billion. Of this amount, $70.4 billion was uninvested at year-end. In the fourth quarter, we continued to experience appreciation in our net accrued performance income balance, which now sits at $808 million.

Our incentive eligible AUM increased by 56% from the year end of 2000 $20 billion to $183 billion.

Of this amount 74 billion was uninvested at year end in the fourth quarter, we continued to experience appreciation and our net accrued performance income balance, which now sits at $808 million.

Speaker 2: represents a 10% increase from the third quarter and 130% increase from the end of 2020.

Represents a 10% increase from the third quarter and 130% increase from the end of 2020.

Speaker 2: Of this $808 million of net accrued performance income at year-end, approximately 60% was in European-style waterfall.

Of this $808 million of net accrued performance income at year end, approximately 60% was in European style waterfall funds.

Speaker 2: As we highlighted at our Investor Day in August , we have a substantial and growing balance of European-style waterfall funds that accrue performance fees but pay most of their performance fees in the final years of the fund life. In 2022 and ramping up thereafter, we expect to see an increase in these realized performance fees from older vintage European-style funds as they mature.

As we highlighted at our Investor day in August we have a substantial and growing balance of European style waterfall funds that accrued performance fees, but pay most of their performance fees in the final years of the fund life in 2022 and ramping up thereafter, we expect to see an increase in these realized performance fees from older vintage European style funds as they are.

Speaker 2: As we continue to raise additional European-style funds, the base of future performance income should continue to increase. In fact, we have raised an additional $20.5 billion of European waterfall-style funds that were not incorporated into our forecast from Investor Day.

Mature as.

As we continue to raise additional European style funds the base of future performance income should continue to increase and in fact, we have raised an additional $25 billion of European waterfall style funds that were not incorporated into our forecast from Investor day.

Speaker 2: From an organizational standpoint, we plan to reorient our reporting segments to better align with our platform expansion.

From an organizational standpoint, we plan to reorient, our reporting segments to better align with our platform expansion.

Speaker 2: Following the closing of our infrastructure debt acquisition, we will combine our real estate group with our newly expanded infrastructure debt and equity platform. This combination will create a new real assets group reporting segment. On an as-adjusted basis, this new group would have total AUM of $53.9 billion and FPAUM of $33.4 billion at year end.

Following the closing of our infrastructure debt acquisition, we will combine our real estate group with our newly expanded infrastructure debt and equity platform. This combination will create a new real assets group reporting segment.

On an as adjusted basis. This new group would have total AUM of $53 9 billion and FPA AUM of $33 4 billion at year end.

Speaker 2: which includes our existing real estate strategies, $4.8 billion in AUM and $4.5 billion in FPAUM from infrastructure and power that currently resides in private equity, and approximately $8 billion of AUM and $5 billion of FPAUM from the infrastructure debt platform acquisition. Before I turn the call back

Which includes our existing real estate strategies, $4 8 billion in AUM and $4 5 billion in <unk>.

AUM from infrastructure and power that currently resides in private equity and approximately $8 billion of AUM and $5 billion of FPA AUM from the infrastructure that platform acquisition.

Before I turn the call back to Mike, Let me touch on our forward outlook.

Speaker 2: As you will recall, we gave investors some longer-term guidance at our Investor Day last August .

As you will recall, we gave investors some longer term guidance at our Investor Day last August .

Speaker 2: We continue to believe we are on track to reach our $500 billion plus AUM target by 2025 and our 20% or more compound annual growth in FRE and our 20% or more compound annual growth in our dividend per share of Class A common stock through 2025.

We continue to believe we are on track to reach our 500 billion plus AUM target by 2025, and our 20% or more compound annual growth in FRE and are 20% or more compound annual growth in our dividend per share of class a common stock through 2025 lakh.

Speaker 2: Lastly, we continue to expect to reach our goal of a 45% plus FRE run rate margin by 2025. With significant headcount growth planned in 2022 to meet our longer term AUM target, we expect our FRE margin expansion will moderate this.

Lastly, we continue to expect to reach our goal of a 45% plus FRE run rate margin by 2025 with.

With significant head count growth planned in 2022 to meet our longer term AUM target, we expect our FRE margin expansion will moderate this year.

Speaker 2: This was truly a momentous year for our firm, with many transformative developments and record results across the board. I'll now turn the call back over to Mike for his thoughts and concluding remarks.

This was truly a momentous year for our firm with many transformative developments and record results across the board I will now turn the call back over to Mike for his thoughts and concluding remarks.

Speaker 1: Thanks, Jared. Based on the foundation that's already been laid with our investment teams, our fundraising pipeline, and our current available capital, we have good visibility that the next several years are going to be quite strong for our business.

Thanks Jared.

Based on the foundation that has already been laid with our investment teams our fundraising pipeline.

And our current available capital we have good visibility that the next several years are going to be quite strong for our business.

Speaker 1: In addition, the synergies and earnings contributions from our recent acquisitions in the aggregate are running ahead of our expectations, and we expect these trends to continue.

In addition, the synergies and earnings contributions from our recent acquisitions in the aggregate are running ahead of our expectations and we expect these trends to continue.

Speaker 1: That said, we will continue to invest to expand and enhance our core businesses, hire investment talent, and grow our business development, investor relations, and non-investment support in order to maintain strong growth in the years ahead.

That said, we will continue to invest to expand and enhance our core businesses higher investment talent and grow our business development Investor relations and non investment support in order to maintain strong growth in the years ahead.

Speaker 1: We'll also be continuing to add to our ESG and DEI team as we continue to focus on our impacted areas and integrate our ESG values across every aspect of our firm.

We'll also be continuing to add to our ESG and DDI team as we continue to focus on our impacted Aries and integrate our ESG values across every aspect of our firm we.

Speaker 1: We believe that this makes us a stronger, more cohesive workforce, better investors, and allows us to strive to make a positive impact for all of our stakeholders.

We believe that this makes us a stronger more cohesive workforce better investors and allows us to strive to make a positive impact for all of our stakeholders.

Speaker 1: As it relates to potential new acquisitions, the strategic transactions announced in 2021 filled specific product gaps in areas that we identified as high growth opportunities.

As it relates to potential new acquisitions, the strategic transactions announced in 2021 field specific product gaps in areas that we identified as high growth opportunities.

Speaker 1: Our product breadth and scaled operations provide us a significant platform from which to build businesses organically, and as a result, the bar for new M&A is higher.

Our product breadth and scaled operations provide us a significant platform from which to build businesses organically and as a result, the bar for new M&A is higher.

Speaker 1: We expect to be active in the organic build-out of products across each of our business lines, including optimizing the synergy opportunities in our recent acquisitions that will hopefully further enhance our growth.

We expect to be active in the organic build out of products across each of our business lines, including optimizing the synergy opportunities and our recent acquisitions that will hopefully further enhance our growth.

Speaker 1: I want to end just by expressing how impressed by, proud of, and grateful for all the hard work and dedication of our team. How grateful I am for everything they're doing every day to deliver for our stakeholders.

I want to end just by expressing how impressed by proud of and grateful for all of the hard work and dedication of our team how grateful I am for everything they're doing every day to deliver for our stakeholders.

Speaker 1: I'm also deeply appreciative of all of our investors' continuing support for our company, and thank you for the time today. And operator, with that, could you please open up the line for questions?

I'm also deeply appreciative of all of our investors continuing support for our company and thank you for the time today.

And operator with that could you. Please open up the line for questions.

Speaker 3: At this time, if you would like to ask a question, please press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the key.

At this time, if you would like to ask a question. Please press Star then one on your touch 10 times.

If youre using a speakerphone please pick up your handset before pressing the keys.

Speaker 3: If you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.

He would like to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.

Speaker 3: Our first question will come from Craig Siegenfeller with Bank of America Securities. Please go ahead. Thanks. Good afternoon, Michael. Hope you and the team are doing

Our first question will come from Craig Siegenthaler with Banc of America Securities. Please go ahead.

Thanks, Good afternoon, Michael Hope you and the team are doing well.

And for you Hi, Craig.

Speaker 4: So I want to start with Black Creek. You know, it was nice to see its third place finish in the fundraising lead table last year, but I wanted to see if you could comment on your ability to get the private read on more distribution platforms and really leverage your larger network effect and cross sell into more intermediary channels and also how this could potentially impact fundraising year over year.

So I wanted to start with Black Creek. It was nice to see its third place finish in the fundraising lead table last year, but I wanted to see if you can comment on your ability to get the private REIT on more distribution platforms and really leverage your larger network effect.

Cross sell into more EMEA aerie channels.

And also how this could potentially impact fund raising year over year.

Yes, it's a good question obviously, that's part of the core investment thesis for the acquisition is to leverage the client service organization that already exists into a broader set of relationships. Both in the U S. But also in Europe and Asia.

Speaker 1: Part of the core investment thesis for the acquisition is to leverage the client service organization that already exists into a broader set of relationships, both in the US, but also in Europe and Asia. We're far along on that. We're having productive conversations with a number of other platforms.

We're far along on that we are having productive conversations with a number of other platforms.

Speaker 1: I think the good news there is our interval fund.

I think the good news there is our interval fund.

Speaker 1: Kadex, which is also enjoying good growth in the channel, is already on multiple platforms. Given our traded vehicles, we have very strong brand awareness within those channels and platforms and relationships with the advisor community. And through our high net worth sales effort, there's great familiarity with the products that are up and down the street. So we're working on it.

<unk>, which is also enjoying good growth in the channel is already on multiple platforms.

Given our traded vehicles, we had very strong brand awareness within those channels and platforms and relationships with the advisor community and through our high net worth sales effort, there's great familiarity with the product set up and down.

The street, so we're working on it.

Speaker 1: I'm optimistic that we'll continue to make headway there and obviously as we add new platforms and build it out It should have a pretty meaningful impact on fundraising

I'm optimistic that we'll continue to make headway there and obviously as we add new platforms and build it out it should have a pretty meaningful impact on fundraising.

Speaker 1: I'd also maybe articulate for those that don't know, if you really look at the growth in the channel, as important as it is to be on the wires and grow, the RIA channel is actually growing at a faster pace and represents as significant as an opportunity. And that's a place where we've already had some pretty meaningful success.

I would also maybe articulate for those that don't know if you really look at the growth in the channel as important is to be on the wires and grow the RIAA channel is actually growing at a faster pace and represents as significant as an opportunity.

And Thats, a place where we've already had some pretty meaningful success.

Speaker 4: And then, Michael, just as my fault, you hit on the traded vehicles, but speaking on ARCC for a moment, you have a huge public BDC, you have a huge private credit origination business. Why not launch a private BDC to supplement the public BDC in your existing business?

And then Michael just as my follow up you hit on the traded vehicles, but speaking on <unk> for a moment.

Have a huge public BDC you have a huge private credit origination business why not launch a private BDC to supplement the public BDC in your existing business.

Speaker 1: Yeah, it's a good, it's a good question. We think that the non-traded BDC product is a really interesting product and as you've seen us do across the platform over time is, you know, we're constantly looking for ways to grow and diversify our funding sources.

Yes, it's a good question, we think that the non traded BDC product is a really interesting product and as you've seen us do across the platform over time is we're constantly looking for ways to grow and diversify our funding sources.

Speaker 1: It's not lost on us just what the appetite for those types of strategies are in the growing non-traded channel.

No. It is not lost on us just what the appetite for those types of strategies are in the growing non traded channel.

Okay.

Thank you Michael.

Thanks.

Okay.

Speaker 3: Our next question will come from Alex Blostein with Goldman Sachs. Please go ahead. Hey, guys.

Our next question will come from Alex Blaustein with Goldman Sachs. Please go ahead.

Hey, guys good afternoon.

Speaker 2: I wanted to start maybe with a question around deployment dynamics for Ares. You guys had a record year in deployment last year.

I wanted to start maybe with the question around deployment dynamics.

Four areas you guys had a record year in deployment last year, obviously, the environment has gotten a little bit more bumpy to start 2022. So how are you thinking about deployment opportunities as a whole.

Speaker 2: Obviously, the environment has gotten a little bit more bumpy to start 2022. So, how are you thinking about deployment opportunities as a whole? Obviously, a lot of the direct lending business is predicated on financial sponsors being active. Are you seeing any signs of that activity slowing down? And if you do, maybe you could expand on what are the things you guys are doing to expand into non-sponsor-based part of the market?

Obviously, a lot of the direct lending business is predicated on the financials. After it's been active.

Seeing signs of that activity slow down and if you do.

You could expand on what are the things you guys are doing to expand into non sponsor base part of the market.

Sure.

Speaker 1: General comment on deployment, obviously a driver of deployment is in our private credit strategy, so I'll make sure that we talk about that.

So <unk>.

General comment on deployment, obviously, a driver of deployment is in our private credit strategy. So I'll make sure that we talk about that specifically, but hopefully it's not lost on people that one of the reasons why we are driving the levels of deployment that we are is just the investments that we continue to make in expanding our global origination.

Speaker 1: But hopefully it's not lost on people that one of the reasons why we are driving the levels of deployment that we are is just the investments that we continue to make in expanding our global origination footprint and broadening out our capability set. So while the private credit markets continue to be a big driver of that, when you look broadly across the platform, there's a very diversified mix.

Print and broadening out our capability set so while the private credit markets continue to be a big driver of that when you look broadly across the platform. There is a very diversified mix to where we are deploying both from an asset class and geographical perspective, and I think importantly, when you look at the mix of products.

Speaker 1: to where we're deploying both from an asset class and geographical perspective. And I think importantly, when you look at the mix of product, we're able to deploy and generate return regardless of the market backdrop.

We're able to deploy and generate return regardless of the market backdrop.

Speaker 1: With regard to private credit specifically, and Kip touched on this a little bit on the ARCC earnings call, 2021 was a very strong year of deployment. Some of that is a function of kind of a, you know, post-COVID rebound and just some pent-up transaction demands.

With regard to private credit, specifically and Kipp touched on this a little bit on the ARCC earnings call.

2021 was a very strong year of deployment.

Some of that is a function of kind of.

Post Covid rebound and just some pent up transaction demand.

Speaker 1: coming out of the lockdown, some of it was probably a little bit tax driven. I think it's too early to tell as we sit here in February as to what 2022 will hold.

Coming out of the Lockdown, so that was probably a little bit tax driven I think it's too early to tell as we sit here in February as to what 2022 will hold.

Speaker 1: I remind people that private credit flows tend to be a little seasonal. You know, if you look over our history, Q4 and Q2 tend to be significant deployment quarters relative to a summer slowdown and a little bit of a lull that we typically see at the beginning of the year.

I would remind people that private credit flows tend to be a little seasonal.

If you look over our history Q4, and Q2 tend to be significant deployment quarter is relative to a summer slowdown and a little bit of a lull that we typically see at the beginning of the year.

Speaker 1: So it's hard to say, you know, if there's a lull now that's seasonal or as Kip articulated on the BDC earnings call, there's just a little bit of a pause as people are price discovering given the, you know, the rate backdrop.

So it's hard to say if there's a lull now that's seasonal or as kipp articulated on the BDC earnings call. There is just a little bit of a pause as people are price discovery given the the rate backdrop.

Speaker 1: I would not, though, discount the power and weight of dry powder that exists in the market across the institutional, corporate, and real assets equity space and what that really means for more consistent transaction volumes.

Not the discount the power and weight of dry powder that exists in the market across the institutional corporate and real assets equity space and what that really means for more consistent transaction volumes.

Speaker 1: You had a question with regard to.

You had a question with regard to.

Speaker 1: There was one last question, Alex, I missed about private. Sorry, yeah, yeah, the non-sponsor fees, right? So the predominant portion of the business is, I think, a sponsor-led, so just curious how you think about expending there.

There was one last question because I missed about private.

Non sponsored piece right. So the predominant portion of the business I think in sponsor led so just curious how yes.

Expanding there.

Speaker 1: Yeah, so we have a very significant non-sponsored business that's geared direct to corporates and organized by industry, where we have teams that are focused on healthcare and life sciences lending, sports media and entertainment lending, consumer and retail, and that's been a growing part of our deployment. You know, when you look at it in dollar terms, it's significant, particularly relative to the.

Yes, so we have a very significant non sponsored business that's geared direct to corporates and organized by industry, where we have teams that are focused on health care and life Sciences lending sports media and entertainment lending consumer retail.

And thats been a growing part of our deployment.

When you look at it in dollar terms, it's significant particularly relative to the peers. When you look at it.

Speaker 1: As percentage terms, it just can't ever really move the needle given the market position that we have in the sponsor side of the business. So we are making investments there on the corporate side. It is bearing significant fruit.

As a percentage terms it just can't ever really move the needle given the market position that we have in the sponsored side of the business. So we are making investments there.

On the corporate side it is bearing significant fruit.

Speaker 1: And I'd expect to see that grow. And then obviously, when you look at where growth is coming away from corporates, our infrastructure debt businesses, our real estate lending businesses, our alternative credit businesses are also a healthy mix of sponsored and non-sponsored. And we're, you know, pretty active.

And I would expect to see that grow and then obviously when you look at where growth is coming away from corporate our infrastructure debt businesses, our real estate lending businesses. Our alternative credit businesses are also a healthy mix of sponsored or non sponsored.

And we're pretty active there as well.

Speaker 2: Great. Thanks for that. Second question, just around the numbers. I wanted to dig in a little bit more into the performance fees that are now sitting within FRE.

Great Thanks for that.

Second question just around the numbers I wanted to dig in a little bit more to the.

<unk> fees that are now sitting within a hurry.

Speaker 2: You guys gave a little bit of color on kind of why you decided to go down the path. That makes sense. I was hoping to maybe get a couple of underlying drivers behind it. So what's kind of the right asset base we should be thinking about within credit in particular that will drive this, I guess, every Q4? What's the hurdle rate that we should be thinking about? And just broadly speaking, kind of how do you think about the consistency of the growth in these perpetual SMA vehicles in credit that will, it sounds like, be a driver of additional fees for you within FRA?

Guys gave a little bit of color on kind of why you decided to go down the path that makes sense I was hoping to maybe get a couple of underlying drivers behind it. So what's kind of the right asset base, we should be thinking about within credit in particular that.

That will drive this I guess every Q4.

What's the hurdle rate that we should be thinking about.

And just broadly speaking how do you think about the consistency of the growth in these perpetual SMA vehicles credit that will it sounds like it'd be a driver of.

Additional between within apart.

Yeah.

Speaker 5: Sure, Alex. Thanks. It's really two pieces that you laid out. It's about two-thirds of what we recorded in the credit side and about one-third over in the real estate side on the non-traded REITs.

Sure.

Thanks.

It's really two pieces as you laid out it's about two thirds of what we recorded in the credit side and about one third over in the real estate side on the on the non traded Reits in terms of the credit where you asked the question.

Speaker 5: terms of the credit where you asked the question, that has been a growing part of our portfolio and the perpetual capital resulting from those SMAs has grown pretty significantly over the last few years, and this is the first time that this really became a material component. And as I mentioned in the prepared remarks, it was something that we wanted to make sure was

That has been a growing part of our portfolio and the perpetual capital, resulting from those SMA has grown pretty significantly over the last few years and this is the first time that this really became a material component.

As I mentioned in the prepared remarks, it was something that we wanted to make sure was.

Speaker 5: was in line with how our peers were reporting. Those are standard incentive fee type.

Was in line with our peers were reporting those are standard.

<unk> of fee type arrangements, where their earned and crystallized on an annual basis based on unrealized and interest income and realizations would be included in there too, but it is not dependent on those realizations like carried interest would be.

Speaker 5: arrangements where they're earned and crystallized on an annual basis.

Speaker 5: based on unrealized and interest income, and realizations would be included in there too, but it is not dependent on those realizations, like carried interest would be. And so every year, as we reach the end of the year, that's the typical time when they're going to crystallize, they'll be measured against that hurdle, which is gonna be in that six to 8% range.

Every year as the as we reached the end of the year. That's the typical time when theyre going to crystallize there'll be measured against that hurdle, which is going to be in that 6% to 8% range.

Speaker 5: You know, we've continued to see growth in those SMAs for that product, both in the U.S. and Europe , and as we continue to have a larger growth.

We've continued to see growth in those SMA for that product both in U S and Europe .

As we continue to have a larger growth.

Speaker 5: that we will hopefully see more in that line item as well. And the other thing I'd add is that these are all primarily illiquid. So these aren't liquid assets that underlie these perpetual capital vehicles. They are illiquid direct lending loans.

We will.

Hopefully see more in that in that.

Line item as well and the other thing I'd add is that these are all primarily illiquid.

Arent liquid assets that underlie these perpetual capital vehicles, they are illiquid direct lending loans.

Great. Thank you very much.

Yeah.

Speaker 3: Our next question will come from Michael Cypress with Morgan Family. Please go ahead.

Our next question will come from Michael Cyprus with Morgan Stanley . Please go ahead.

Speaker 6: Hey, good morning or good afternoon. Thanks for taking the question. Maybe just following up on on Alex's question there on the non sponsor side. You mentioned that it's significant in dollar terms, hoping you could help quantify that. And you mentioned that it can't necessarily move the needle today, given your position on the sponsor side. But I guess as you look out over the next five to 10 years, what are your ambitions and aspirations on the non sponsor side? Where would you like that to be in terms of your ideal mix of the business? And maybe you could talk about some of the initiatives that you have going on there as you think about it.

Oh, Hey, good morning, or good afternoon. Thanks for taking the question maybe just following up on Alex's question. There on the non sponsor side you mentioned that it's significant in dollar terms, just hoping you could help quantify that and you mentioned that it can't necessarily move the needle today given your position on the sponsor side, but I guess as you look out over the next five to 10 years what are your ambitions.

And aspirations on the non sponsor side, where would you like that to be in terms of your ideal mix of the business and maybe you could talk about some of the initiatives that you have going on there as you think about executing on that thank you.

Speaker 7: Thank you.

Sure. Thanks, Michael So.

Speaker 2: Again, not being a needle mover, maybe that's subjective, so I'm glad you kind of asked about the quantification, but just to zoom out quickly.

Yes.

Again.

Nothing a needle mover, maybe thats subjective so I'm glad you asked about the quantification, but just to zoom out quickly.

Speaker 1: We have to make sure that when we're talking about private credit and direct lending that we...

We have to make sure that when we're talking about private credit and direct lending that we include all of our private credit businesses, which are all in growth mode and so when we look at private credit. Yes. There is the corporate piece, that's germane to your question, but meaningful.

Speaker 1: Include all of our private credit businesses which are all in in growth mode. And so when we look

Speaker 1: private credit. Yes, there's the corporate piece that's germane to your question, but you know, meaningful business in real estate lending that's now in expansion mode geographically and for products that infrastructure debt and obviously with the addition of

<unk> and real estate lending that's now in expansion mode geographically and from a product set infrastructure debt and obviously with the addition of our new partners at A&P, new growth opportunity Asian direct lending and special sits so on and so forth. So.

Speaker 1: our new partners at A&P, new growth opportunity, Asian direct lending, and special sits, so on and so forth.

Speaker 1: Those businesses tend to be less sponsor driven and more direct to company. So I want to make sure that as people are thinking about non-sponsored deployment, that that at least factors into the.

Those businesses tend to be less sponsor driven and more direct to company. So I want to make sure that as people are thinking about non sponsored deployment that that at least factors into the conversation. If you were to narrow the focus and just say in the core.

Speaker 1: Conversation if you were to narrow the focus and just say in the core.

Speaker 8: direct lending to corporates' business. Right now, non-sponsored flow represents about 10% of our deployment.

Direct lending to corporates business right now non sponsored flow represents about 10% of our deployment.

Speaker 1: You know, so call it three or four billion dollars, and that has been growing year over year. The types of investments we're making, as I said, and I'll just read.

So call it three or $4 billion and that has been growing.

Year over year, the types of investments, we're making as I said.

I'll just restate.

Speaker 1: you know, restate them, software and technology, life sciences and healthcare, sports media and entertainment, consumer retail. There are dedicated teams that work hand-in-hand with the sponsor groups to originate into the direct-to-corporate, but also to support from a industry and subject matter expertise standpoint. So it's a two-fold benefit in building out those direct-to-company industries.

Restate them software and technology life Sciences, and healthcare sports media and entertainment.

Sumer retail there are dedicated teams that work hand in hand, with the sponsor groups to originate into the direct to corporate but also to support from our industry and subject matter expertise standpoint.

Twofold benefit in building out those direct to company industry teams.

Speaker 6: And just any sense on overall AUM, would you say in the non-sponsor side today? And if you think about the mix, where would you like that to be kind of looking out?

And just any sense on overall AUM would you say in the non sponsor side today and as you think about the mix where would you like that to be kind of looking out longer term for the business.

Speaker 1: I don't actually have access to the number. We can, we can take that offline and find it for you. I don't, and I'll ask you the, if there's something that you'd like to get at in terms of a view on the value of non-sponsored flow versus sponsored flow, I think our teams would generally say they're agnostic.

I don't actually have access to a number we can we can take that offline and find it for you I don't.

I'll ask you. The if there is something that you'd like to get out in terms of a view on the value of non sponsored flow versus sponsored flow I think our teams, we generally say they're agnostic.

Speaker 1: You know, there comes different risk and different return, whether you're making a sponsored back loan or a loan direct to a corporate. And that always gets factored into how we price and structure those investments.

There comes different risks and different return, whether youre, making a sponsored backed loan or alone director of corporate.

And that always gets factored into how we price and structure those investments.

Speaker 1: There's obviously value in developing deep corporate relationships directly and surrounding those relationships with a broader product set across our entire platform. But it's not as though we go into any given year and say, the stated goal is to deploy X into sponsored and X into Y into non-sponsored. So

There's obviously value in developing deep corporate relationships directly and surrounding those relationships with a broader product set across our entire platform, but it's not as though we go into any given year and say the stated goal is to deploy X into sponsored an X into why into non sponsored so.

Okay.

Speaker 1: If there's something that you're trying to get at in terms of some trends you're seeing or value perception of non-sponsored versus sponsored, happy to clarify.

If there's something that you're trying to get at in terms of some trends youre seeing our value perception and non sponsor versus sponsored happy to happy to clarify.

Speaker 6: Sure, maybe it kind of gets to any sort of, I'd be curious your views on perceptions around the cyclicality of the sponsor side relative to the non-sponsor, just given dependence on private equity deployment and trends there and also any sort of views on probability of defaults and recovery values on those two different sides of the private credit.

Sure maybe it kind of gets to any sort of I'd be curious your views on perceptions around the cyclicality of the sponsor side relative to the non sponsor just given dependents on private equity deployment and trends there and also any sort of views on probability of default and recovery values on that.

Those two different sides of the private credit business got it yes. So.

Speaker 1: Got it. Yeah. So I believe personally, and we've been, you know, I'd say at the forefront of the development of the direct lending market now for almost 30 years.

I believe personally and we've been I would say at the forefront of the development of the direct lending market now for almost 30 years.

Speaker 1: I don't, I believe that quote unquote cyclicality in the sponsor lending market is reducing year over year.

Idaho, I believe that Qualcomm cyclicality in the sponsor lending market is reducing year over year.

Speaker 1: That's a function of just the evolution and maturation of that market. There are more sponsors and more.

That is a function of just the evolution of maturation of that market there are more sponsors and more.

Speaker 1: markets with more dry powder that are actively looking for private market solutions.

Markets with more dry powder that are actively looking for private market solutions, and so I think youll see volatility in that market.

Speaker 1: And so I think you'll see volatility in that market.

Speaker 1: reducing over time as the market continues to evolve and mature.

Reducing over time as the market continues to evolve and mature.

Speaker 9: I personally, based on my own experience, would say that the risk of default, or maybe the risk of loss given default.

I personally based on my own experience would say that the risk of default or maybe the risk of loss given default.

Speaker 1: is higher in the non-sponsored space. And one of the big benefits of lending into the institutional equity community, whether it's for real assets or corporates, is the amount of dry powder that's there could be diverted to provide credit support. And we saw that play out in spades across the entire private credit book here through 2020 and 2021 as the equity owners stepped up to support their companies in a way that non-sponsored owners sometimes can't.

It's higher in the non sponsored space and one of the big benefits of lending into the institutional equity community, whether it's for real assets or corporate is the amount of dry powder. That's there could be diverted to provide credit support and we saw that play out in spades across the entire private credit book here through <unk>.

'twenty and 2021 as the equity owners stepped up to support their companies in a way that non sponsored owners sometimes can.

Speaker 1: In terms of volume, if you look at just sheer corporate direct lending volume in the U.S., we looked at $500 billion of transaction volume in 2021 in our U.S. business. So the market's growing. It's increasing. There are more transactions, more line items. And so I don't perceive it to be as cyclical maybe as we would have told you it was 20 years ago. Okay.

In terms of volume.

If you look at just sheer corporate direct lending volume in the U S. We look at <unk> $500 billion of transaction volume in 2021, and our U S business.

So the market is growing its increasing there are more transactions more line items and so.

I don't perceive it to be as cyclical maybe as we would have told you. It was 20 years ago.

Okay, great. Thanks, so much for the color of that really appreciate it.

Alright, Thanks, Mike.

Speaker 3: Our next question will come from Jerry O'Hara with Jeffries. Please go ahead.

Our next question will come from Gerry O'hara with Jefferies. Please go ahead.

Speaker 10: Great. Thanks, Mike. Maybe picking up a little bit on your comments around M&A and focusing on obviously what's at hand, but also appreciating a higher bar. Just curious if you do still see some gaps in the lineup. Clearly a much more diversified business now than you were three, five years ago, but curious to just get your thoughts on what that landscape might look like even with that higher bar.

Great. Thanks, Mike maybe picking up a little bit on your comments around around M&A and kind of focusing on obviously, what's what's at hand.

But also kind of appreciating a higher bar just curious if you do still see some gaps in the lineup clearly a much more diversified business now than your three to five years ago, but curious to sort of get your thoughts on what that landscape might look like.

Even with that higher bar.

Sure.

Speaker 1: Yeah, thanks, Jerry. So, you know, if you go back and look at some of the things we talked about at our investor day, the acquisitions that we're attracted to tend to be in high growth markets.

Yeah, Thanks, Jerry so.

If you go back and look at some of the things we talked about at our Investor day.

The acquisitions that were attracted to.

Tend to be in high growth markets.

Speaker 1: and asset classes where we have a little bit of a sense of urgency that

In asset classes, where we have a little bit of a sense of urgency to par.

Speaker 1: participate in that growth, but making these acquisitions with a very high conviction that we can then organically grow them.

Participate in that that growth, but making these acquisitions with a very high conviction that we can then organically grow them.

Speaker 1: So once these acquisitions come online here and get integrated, they become high growth organic.

So once these acquisitions come online here and get integrated they become high growth organic growth stories for us and you can begin to see that playing out.

Speaker 1: growth stories for us and you can begin to see that playing out in each of our acquired businesses.

In each of our acquired businesses.

Speaker 1: So now, given how active we've been, we now have lots more growth engines organically, not just in our core legacy businesses, but some of the organic businesses as well. And as financially attractive and accretive as these acquisitions have been, given where we're able to buy them, obviously, we can generate very high ROEs through organic expansion.

So now given how active we've been we now have lots more growth engines organically not just in our core legacy businesses, but some of the organic businesses as well.

And as financially attractive and accretive as these acquisitions have been given where we are able to buy them and obviously, we can generate very high Roe through organic expansion.

Speaker 11: As I sit here today, I don't see any what I would call glaring gaps.

As I sit here today, I don't see any what I would call a glaring gaps.

Speaker 12: In the product set or the geographies that we plan or the distribution capability. So the types of things that we would do Opportunistically would be to you know, fill in Adjacent to some of the core businesses so places where you might see us

In the product set or the geographies that we play in or the distribution capability. So the types of things that we would do.

Opportunistically would be to fill in.

Adjacent to some of the core businesses of places, where you might see us.

Speaker 1: you know, active as we continue to build out the product set in Asia, as an example, or as we continue to globalize our infra business as we, you know, integrate AMP and continue to build on the success we're having in our climate business. So there's going to be some places where you may want to do something inorganic versus organic, but I'd say the sense of urgency, just given how much opportunity we have now in the portfolio, is...

Active as we continue to build out the product set in Asia.

As an example, or as we continue to globalize, our infra business as we.

Integrate A&P and continue to build on the success, we're having in our climate business. So theres going to be some places where you may you may want to do something inorganic versus organic but I'd say the sense of urgency just given how much opportunity you have now in the portfolio is.

A lot less than it had been a couple of years ago.

Speaker 10: That's completely fair. And Jared, maybe just one for you, kind of looking over the trailing four quarters here, the tax rate probably a little ebbs and flows, we'll call it, but can you just kind of remind us as to how all things equal, how we should think about that kind of going forward for 22 and 23?

But.

Completely fair.

And Jared maybe maybe just one for you you kind of looking over the trailing four quarters here.

Tax rate probably a little.

Ebbs and flows what we'll call it but can you just kind of remind us as to how all things equal how we should think about that kind of going forward for 'twenty, two and 'twenty three.

Speaker 5: Sure, you know, I'd say it's always important to kind of look at the full year when you're thinking about that because realizations that happen with any

Sure I'd say, it's always important to kind of look at the full year. When you were thinking about that because realizations that happen with any within any given quarter are going to cause increases to the amount of taxes that we ultimately have to pay as we approach more of a statutory rate of about 24%.

Speaker 5: within any given quarter are going to cause increases to the amount of taxes that we ultimately have to pay as we approach more statutory rate of about 24%.

Speaker 5: We look out over future years, you know, our current cash tax experience, I think, will be.

As we look out over future years, our current cash tax experience I think will be pretty consistent in that.

Speaker 13: pretty consistent and that has the ability obviously as we have more of those realizations to approach closer to that statutory rate of 24%. So you kind of look at and take that full year I think it's about 12% is the the current ratio of cash taxes paid and then you know as we get more realization

That has the ability obviously as we have more of those realizations to approach closer to that statutory rate of 24%. So.

Kind of look at and take that full year I think it's about 12.

<unk> percent is the current ratio of cash taxes paid.

And then.

As we get more realizations that would increase.

Okay. Thanks for taking my questions. This morning.

Thanks Jerry.

Speaker 14: Our next question will come from Adam Beatty with UBS. Please go ahead.

Our next question will come from Adam Beatty with UBS. Please go ahead.

Speaker 6: I wanted to ask about kind of the development and evolution of the strategy in Asia-Pacific, which I think, at least partly by intention, was sort of a theme in some of the inorganic

Wanted to ask about kind of a development and evolution of the strategy in Asia Pacific, which I think at least partly by intention was was sort of a theme and some of the inorganic growth that you've had recently.

Speaker 6: growth that you've had recently. Specifically, if you could touch on

Specifically, if you could touch on.

Speaker 6: the geographies of Australia, where you have partnerships in distribution as well as obviously product now. Also in China and how you see the opportunities there versus political risk and any broader comments around Asia-Pac. Thank you.

The geographies of Australia, where you have.

Partnerships and distribution as well as obviously product now.

So in China, and how you see the opportunities there versus political risks and and any broader comments around Asia Pac. Thank you.

Speaker 2: Thanks, Adam. So we have been in.

Sure. Thanks, Adam so.

We have been in.

Speaker 2: Asia for a dozen years.

Asia.

For a dozen years.

Speaker 15: Our early attempts at growth in that market were largely focused around U.S. dollar and R&B growth equity investing in China.

Our early attempts that growth in that market were largely focused around U S dollar and RMB growth equity investing in China.

Speaker 2: and learn through that experience just how important it was to be broader in terms of our product set and geographic positioning, which really led us to the acquisition of SSG and the current strategy for growth there. So we are active today in the private credit markets across the region.

And learned through that experience just how important it was to be broader and.

In terms of our product set and geographic positioning, which really led us to the acquisition of SSG in the current.

Our strategy for growth there.

So we are active today.

The private credit markets across the region.

<unk>.

Speaker 2: Southeast Asia, India, a little bit in China, and to an increasing extent in Australia and New Zealand. And as you are articulating with your question, Asia is a big place with a lot of regulatory complexity, cultural complexity, market differentiation, geography by geography. And so we think it is critical to have people in local markets.

Southeast Asia, India, a little bit in China.

And to an increasing extent in Australia, and New Zealand.

And as you are articulated in your question Asia is a big place with a lot of regulatory complexity.

Cultural complexity market differentiation geography by geography.

So we think it is critical to have people in local markets.

Speaker 2: That has proved to be particularly important through the pandemic. You know, travel restrictions in Asia have really highlighted just how critical it is to have boots on the ground in these markets that are able to both deploy and asset manage actively, and I think that's been a big driver of our performance as we articulated, you know, our special sets composite in excess of 30% returns last year.

That has proved to be particularly important through the pandemic.

Travel restrictions in Asia have really highlighted just how critical it is to have boots on the ground in these markets that are able to bolt deploy and asset manage act.

Actively and I think thats been a big driver of our performance as we articulated our special sits composite in excess of 30% returns last year.

Speaker 2: We do see a growing opportunity in Australia and New Zealand. We've been investing in growth.

We do see a growing opportunity in Australia, and New Zealand, we've been investing in growth.

Speaker 1: They are actively collaborating across our platform, Alternative Credit.

They are actively collaborating across our platform alternative credit special ops and private equity are all actively collaborating with our Australia team.

Speaker 1: Special Ops and Private Equity are all actively collaborating with our Australia team.

Speaker 2: We are building out what I would call a more traditional corporate lending business and sponsor lending business in that part of the market, just given that it is more evolved, more mature, and more developed relative to other parts of the Asia region.

We are.

Building out what I would call a more traditional corporate lending business and sponsor lending business in that part of the market just given that it is more evolved more mature and more developed relative to other parts of.

Of the Asia region.

China, we have folks on.

Speaker 16: on the ground, in the local market.

On the ground in the local market.

Speaker 1: I would say at a very high level, it's a balance. I believe strongly that we need to be there.

I would say at a very high level, it's a balance I believe strongly that we need to be there bill.

Speaker 1: building local relationships and capability, but given some of the capital markets and political slash regulatory risk, you have to be measured about, you know, ambitions in that market, which is kind of how we're approaching it. That said, we have a pretty meaningful advantage just in terms of the longevity of our teams in that market, some of the licenses that we have that position us for opportunity in the region.

Building local relationships and capability, but given some of the capital markets and political less regulatory risk you have to be measured about.

Ambitions in that market, which is kind of how we're approaching it.

That said, we have a pretty meaningful advantage just in terms of the.

Longevity of our teams in that market some of the licenses.

That we have that position us for for opportunity in the region.

Speaker 17: way that others frankly can't access. I personally am pretty excited about some of the volatility that we're beginning to see emerge in that market on the heels of Evergrande and some of the real estate challenges, particularly given the special sits positioning of our business there. You know, my hope is that's going to create a pretty interesting investment backdrop for us in 22 and and beyond.

In a way that others frankly can't access.

Personally and pretty excited about some of the volatility that we're beginning to see.

And that market on the heels of ever granted some of the real estate challenges.

Particularly given the special sits positioning of our business there and my hope is that that's going to create a pretty interesting investment backdrop for us in 'twenty two and.

And beyond.

Speaker 2: But I'd say cautious in that market appropriately. Got it. Thank you for hitting on all aspects of that. One quick follow-up. Do you feel the high net worth channel in Asia-Pac is a good opportunity for Ares right now, or is it still mainly institutional?

But I'd say cost cautious in that market appropriately.

Got it thank you for hitting on all aspects of that one quick follow up.

Do you feel the high net worth channel in Asia Pac is a good opportunity for Ares right now or is it still mainly institutional.

Yes, I do.

Great. Thank you that's all I had today.

Speaker 3: Our next question will come from Finian O'Shea with Wells Fargo Securities. Please go ahead.

Our next question will come from Finian O'shea with Wells Fargo Securities. Please go ahead.

Speaker 18: Hi, everyone. Good afternoon. Can you touch on, within the recently proposed private fund rules, the focus on advisor-led secondaries and if the proposals on fairness opinions, as described, would have any impact on that market?

Hi, everyone. Good afternoon.

Can you touch on within the recently proposed.

Proposed private fund rules.

Our focus on advisor led secondaries.

If the proposals on fairness opinions as described.

Have any impact on that market.

Speaker 2: It's too early to say, and again, these are proposals, not, you know, there's a long way to go from proposals to actual rulemaking. The way that that market functions, I'm going to oversimplify this, is those transactions are already getting validated through third-party valuations. So I don't anticipate that if that ever found its way into the market, and I'm not suggesting that it will, that would meaningfully change the functioning of it or the attractiveness of the product.

It's too early to say and again these are proposals not.

There's a long way to go from proposals to actual rule, making the way that that market functions I'm going to oversimplify. This is those transactions are already getting validated through third party valuations.

So I don't I don't anticipate that if that ever found its way into the market and I'm not suggesting that it will that would meaningfully change the <unk>.

Functioning of it or the attractiveness of the product.

Speaker 18: Sure, that's helpful, and a follow-up sort of same topic, do you see the growth of core private equity as absorbing some of that obvious demand for continuation vehicles, and do you think the core private equity asset class is a major competitor there?

Sure that's helpful.

As a follow up sort of same topic do you see.

The growth.

Core private equity.

Yes.

Absorbing some of that that obvious demand for pork continuation vehicles and do you think the core private equity asset class.

The major competitor there.

Speaker 2: It's a good question, Finn, you know, core private equity or longer dated private equity, you know, has been a topic of conversation now for, you know, a decade and hasn't really emerged as a significant growth area the way that folks expected, I think.

It's a good question fin.

Core private equity or longer dated private equity has been a topic of conversation now for a.

A decade and it hasnt really.

Emerged as a significant growth area of the way that folks expected.

As expected I think some of that.

Speaker 1: Demand is finding its way into the secondary market. And so my own personal view is, I think that the secondary market will probably

Demand is finding its way into the secondary market.

And so my own personal view is I think that the secondary market will probably.

Speaker 1: capture that growth more so than quote unquote core private equity.

Capture that growth more so than core private equity.

Great. Thanks, so much.

Yes.

Speaker 3: Our next question will come from Sumit Modi with Piper Sandler. Please go ahead.

Our next question will come from Sumit <unk> with Piper Sandler. Please go ahead.

Speaker 19: Hey, thanks. Good morning or afternoon at this point, following up on the commentary around the fundraising outlook, you know, after the record year, you just experienced. Can you size the aggregate fundraising potential for the 25 funds expected to be raised this year, you know, citing some of the larger funds to help frame out that portion of fundraising and then maybe some color around how you think that trend extends through,

Hey, Thanks, good morning.

Sure afternoon at this point following up on the commentary around the fund raising outlook.

After the record here you just experience can you size the aggregate fundraising potential for the 25 funds expected to be raised this year, citing some of the larger funds to help frame out the debt portion of fundraising and then maybe some color around how you think that trends extends through maybe 'twenty, two and 'twenty 'twenty three 'twenty four.

Okay.

Speaker 2: So, unfortunately, I can't do that because we don't actually talk about funds in the market, but I'll mention two things to think about. One.

Unfortunately, I can't do that because we don't actually talk about funds in the market, but ill.

Mentioned two things to do.

To think about one <unk>.

Speaker 20: 2022, you know, 21, you know, we went into the year talking about that $41 billion record and an expectation that we would beat it. But the 77 exceeded our expectations. So I'm not saying that they will be exceeded again, but There's a lot of momentum on the fundraising side and there could be things that occur that are not currently in our, you know, our line of sight or peripheral vision.

<unk> 'twenty to 'twenty one.

We went into the year talking about that $41 billion record and an expectation that we would beat it but the 77 exceeded our expectations. So I am not saying that they will be exceeded again, but.

There's a lot of momentum on the fundraising side and there could be things that occur that are not currently in our our line of sight of our peripheral vision.

Speaker 1: Two, when you look at the fundraising, we've been trying to...

Two when you look at the fundraising we've been trying to.

Speaker 21: You make this clear, two things are happening. One, we have more strategies. So there's a broader set of funds that are available, which kind of de-risks the trajectory. But as importantly, the non-commingled fundraising engine, that's a combination of the perpetual capital vehicles, CLOs, SMAs are taking a greater share. And so one way I would think about it is the floor.

To make this clear two things are happening one we have more strategies. So there is there is a broader set of funds that are available, which kind of derisked the trajectory, but as importantly, the non co mingled fund raising engine. That's a combination of the perpetual capital vehicles CLO.

<unk> SMA are taking a greater share and so one way I would think about it as the floor.

Speaker 1: In any given year is just significantly higher because we're going in with other non commingled fund levers that we're pulling in the form of perpetual vehicles and an open ended funds.

In any given year is just significantly higher because we're going in with other non commingled fund levers that we're pulling in the form of perpetual vehicles and.

And open ended funds.

Speaker 22: When you think about the trajectory of the business and the guidance that we've laid out, the good news is the bulk of 22, I think, is really less about fundraising and more about deployment and just monetizing the deployment that we saw towards the end of 21.

When you think about the trajectory of the business and the guidance that we've laid out the good news is the bulk of 'twenty. Two I think is really less about fundraising and more about deployment and just monetizing the deployment that we saw towards the end of 'twenty one.

Speaker 1: And when you look at the significant amount of capital that's on the platform today, that's not earning fees, coupled with the, you know, kind of full quarter and then annual impact of the deployment from Q4.

When you look at the significant amount of capital that's on the platform today, that's not earning fees coupled with the kind of full quarter and then annual impact of that deployment from Q4.

Speaker 23: you already have a nice glide path from a profit standpoint in 2022.

You already have a nice glidepath from them.

Profit standpoint in 2022.

Speaker 1: So fundraising, obviously, is an important part of it. We expect to have a pretty significant year, so I don't want the message to be that we don't have a lot of fundraising momentum, but $80 billion is a lot. But the good news is the P&L development, obviously, is going to be as much a function at this point on the deployment than the fundraising.

So fund raising obviously is an important part of it we expect to have a pretty significant year.

So I don't want the message to be that we don't have a lot of fundraising momentum, but $80 billion is a lot, but the good news is the P&L development.

Obviously, it's going to be as much a function at this point on the deployment.

Then in fundraising.

Speaker 19: Great, that's really helpful. And then just one follow up here for maybe Jared on capital allocation. I know you guys haven't been buying back stock last few quarters, just wondering how active you're looking to get kind of around

Okay, Great. That's really helpful. And then just one follow up here for maybe Jared on capital allocation I know you guys haven't been buying back stock last few quarters. Just wondering how active you are looking to get kind of around.

Speaker 19: market action that we've been seeing recently and expectation here for the share count going forward.

Market action that we've been seeing recently in your expectation here for the for the share count going forward, you've seen up 15%, 20% increases year over year recently, just something you expect to kind of manage going forward or what's the strategy there.

Speaker 19: year-over-year recently, just something you expect to kind of manage going forward or

Speaker 24: We do have a stock buyback plan in place, but I don't expect to be particularly active on that side. In terms of our share count increase, a lot of that has been a result of our recent acquisitions and with multiple in the last several years.

We do have a stock buyback plan in place, but I don't expect to be particularly active on that side.

In terms of our share count increase a lot of that has been a result of our recent acquisitions with multiple in the last few years in each of those has been pretty accretive and then I'll remind you when we talk about stock based compensation were typically targeting about one 5% to 2% dilution per year on a gross basis, which typically ends up.

Speaker 25: few years, and each of those has been pretty accretive. And then I'll remind you when we talk about stock-based compensation, we're typically targeting about 1.5% to 2% dilution per year on a gross basis, which typically ends up around 1% on a net basis. So absent acquisitions, I'd say that that's the number you'd focus on.

Around 1% on a net basis, so absent acquisitions I would say that thats. The number you would focus on.

Okay, great. Thanks for taking my questions.

Yes.

Thank you.

Speaker 26: Our next question will come from Chris Katowski with Oppenheimer. Please go ahead.

Our next question will come from Chris Kotowski with Oppenheimer. Please go ahead.

Speaker 18: Yeah. Good afternoon. Thank you. I wanted to go back to the FRPR, the fee-related performance revenues, and I guess three-part question. One is, in response to the earlier question, you didn't specify the

Yes. Good afternoon. Thank you I wanted to go back to the FRP or the fee related performance revenues and I guess three part question. One is in response to the earlier question you didn't specify the.

Speaker 27: asset base for both the credit and the real estate side that's subject to these kinds of incentive arrangements. And maybe that was deliberate, you're not willing to share it, or if you are, then we'd love to know that.

Set base for both the credit and the real estate side, that's subject to these kinds of.

Incentive arrangements and maybe that was deliberate youre not willing to share it but.

<unk> talked to know that secondly, I was wondering if you could give the same kind of detail on the real estate side in terms of hurdle in performance right on the real estate side that you gave us on the credit side, and then thirdly, I guess, what we're trying to get at is just some sense of what would a normalized level be in.

Speaker 28: Secondly, I was wondering if you could give the same kind of detail on the real estate side in terms of hurdle and performance rate on the real estate side that you gave us on the credit side. Thirdly, I guess what we're trying to get at is just some sense of what would a normalized level be. I guess let me define that as if you just started with the current asset base and you

I guess, let me define that is if you just started with.

With the current asset base and you had say a 10% let's call. It a normalized return say 10% ish.

Speaker 18: 10%, let's call it a normalized return, say 10%-ish, what would one then expect as kind of a full year level of performance, FRPR from that?

It wasn't one that expect as kind of a full year level of performance fr PR from that.

Speaker 5: Sure. So I'll try and address those one at a time. In terms of the asset bases in the real estate bucket there, it is primarily our two non-traded REITs.

Sure.

I'll try and address those one at a time in terms of the asset basis in the real estate.

Bucket there it is primarily our two non traded Reits. So you can get a sense of that balance through the the <unk> of those entities and then for the direct lending that's typically going to be coming from our U S. Direct lending separately managed accounts and perpetual capital. So right now those amounts are about 27.

Speaker 29: So you can get a sense of that balance through the NAVs of those entities. And then for the direct lending, that's typically going to be coming from our U.S. and direct lending separately managed accounts in Perpetual Capital. So right now, those amounts are about 27% of that $77 billion that we laid out in our Perpetual Capital table that you see in the earnings presentation. That's really the underlying assets that's driving that.

Percent of that $77 million or 1 billion, sorry that we laid out in our perpetual capital table that you see in the earnings presentation.

So thats really the underlying assets that's driving that.

Speaker 5: And the next part of your question was in terms of the Black Creek hurdles, very similar, a very similar base, except for those hurdles are slightly over there at 5%.

The next part of your question was in terms of the Black Creek hurdles are very similar very similar base, except for those hurdles are slightly over 5%.

Speaker 30: And one thing I would add, if it wasn't clear in the prepared remarks, there's some interesting

And one thing I would add Chris.

It wasn't if it wasn't clear in the prepared remarks, there is some interesting.

Speaker 1: Dynamics within the non-traded REIT piece of that which is for 2021, we only captured 50% of the FRPR.

Dynamics within the non traded REIT piece of that which is for 2021, we only captured 50% of the fr PR.

Speaker 1: because we bought it in June and part of the transaction structure was to radically share the economics with the selling shareholders.

Because we bought it in June and part of the transaction structure was to Ratably share the economics with the selling shareholders.

Speaker 31: So, going forward in 2022 and beyond, 100% of the FRPR from those vehicles is for the account of Ares. Now, 2021 was a very significant performance year.

So going forward in 2022, and beyond 100% of VFR PR from those vehicles as for the account of.

Ares now 2021 was a very significant performance year.

Speaker 1: So you'll probably give up a little bit on performance, but you'll make that up on owning 100% versus 50 and hopefully a growing pie. So when you look at the fundraising in those vehicles in Q4, as we articulated, that was about $3 billion of capital raised into those two non-traded REITs in the fourth quarter alone. So you're gonna be capturing 100% versus 50% of a growing pie. Okay.

So youll, probably give up a little bit on performance, but you will make that up on.

Owning a 100% versus 50 and hopefully a growing pie. So when you look at the fund raising in those vehicles in Q4 as we articulate that was about $3 billion of capital raised into those two non traded Reits in the fourth quarter alone, so youre going to be capturing 100% versus 50% of a growing pie.

Okay.

Thank you that's it for me.

Okay. Thank you.

Speaker 3: Our last question will come from Robert Lee with KBW, please go ahead.

Our last question will come from Robert Lee with <unk>. Please go ahead.

Speaker 6: Great, thanks for your patience and thanks for taking my questions. And I apologize, this was asked, you know, parts of it were asked already, but I want to go back to capital management. So maybe, Jared, could you remind us, I know you just raised, you know, $500 million of very long-duration debt, so maybe just...

Great. Thanks for your patience and thanks for taking my questions.

And I apologize. If this was asked you know parts of it were asked already but I wanted to go back to capital management. So maybe Jared could you remind us.

I know you just raised 500.

$500 million of very long duration debt, so maybe just number.

Speaker 6: Number one, remind us on how you're thinking of, you know, the balance sheet and leverage on the balance sheet and, you know, given the

Number one remind us on how youre thinking of the balance sheet and leverage on the balance sheet.

And given the I guess I'll call it more moderate appetite for M&A given that.

Speaker 32: I guess I'll call it more moderate appetite for M&A given they have so much going on. How should we think of, and as you have performance fees presumably accelerating in the next couple of years with the European war falls come through, how are you thinking about that incremental capital deployment? Is it just funding the commitments of existing funds as they've grown so much in scale or scope? How should we just be thinking about that going forward?

But you have so much going on how.

How should we think of and as you have performance fees, presumably accelerating in the next couple of years with the.

The European waterfalls come through how are you thinking about that incremental capital deployment is it just funding the commitments of existing funds as they've grown so much in scale or scope or.

How should we just be thinking about that going forward.

Speaker 5: I think you're thinking about it right. Ultimately, we're very happy with terming out some of the line and preparing for the purchase of AMP's infrastructure debt business, which we just closed.

I think youre thinking about it right.

Ultimately, we were very happy with the terming out some of the <unk>.

Line and you're preparing for the purchase of <unk> infrastructure debt business, which we just closed.

Speaker 5: And as we look forward, we really like the liquidity position we're in, and we like our current leverage levels. So, really, you're right. We try and maintain that capital light balance sheet model. That's still our intention, and really our use of capital going forward will be opportunistically and any time that we're doing those GP stakes.

And as we look forward, we really like the liquidity position, we're in and we like our current leverage level. So really youre right, we try and maintain that capital light balance sheet model, that's still our intention and really our use of capital going forward will be opportunistically and anytime that we're doing those those GP Stakes.

In our funds and Rob I would just highlight you've heard me say this before but there is an interesting dynamic that's happening at our company I don't know if its happening at others, but.

Speaker 1: And Rob, I would just highlight, you've heard me say this before, but there's an interesting dynamic that's happening at our company, I don't know if it's happening at others, but...

Speaker 33: The reliance on the management company balance sheet to fund GP commits on new funds is lower than it's ever been because what we're seeing is that the employees here are taking up

The reliance on the on the management company balance sheet to fund GP commits on new funds is lower than it's ever been.

Because what we're seeing is that the employees here are taking up.

Speaker 34: you know, a growing percentage of that commitment, and so the balance

<unk> percentage of that commitment.

So the balance sheet.

Speaker 35: requirement to support new fundraisers lower than it's been. Now we have more strategies.

Requirement to support New fund raise is lower than it has been now we have more strategies. So the aggregate dollars may not be slowing but the percentage in each fund.

Speaker 1: So the aggregate dollars may not be slowing, but the percentage in each fund is continuously coming down. We love that because it provides better alignment of the teams to the performance of the funds. The LPs would prefer to see that.

Is continuously coming down we love that because it provides better alignment of the teams to the performance of the funds. The Lps would prefer to see that at this point. So while we will continue to make sure that we're.

Speaker 1: at this point. So while we'll continue to make sure that we're there to backstop those, our experience has been most of that is getting syndicated to the employees.

There to backstop those our experience has been most of that is getting syndicated employees, which then gives to jarrett point us the ability to use that capital much more opportunistically.

Speaker 1: which then gives, to Jared's point, us the ability to use that capital much more opportunistically.

Speaker 1: on new fund strategies, team lift outs, and things like that.

<unk>, New fund strategies team lift outs and things like that.

Speaker 6: I'm just curious, I don't think it's something I've seen quantified, but if you had to aggregate employee investments, commitments across the platform, I mean, I don't know if it's a number you've put in the K or the Q before, but what would that be in aggregate?

I'm just curious I don't think it's something I've seen quantify but if you had to aggregate employee.

Investments commitments across the platform.

I don't know if its a number you've put in the K or the Q before but what would that be in aggregate.

Speaker 2: I'm going to guess, Rob, that it's well in excess of a billion. It's probably close to a billion and a half and growing.

I'm going to guess, Rob that it's well in excess of $1 billion, it's probably closer to $1 billion of <unk> and.

And growing.

Great. Thanks, so much guys. Thanks for taking my questions.

Okay excuse me.

Speaker 3: This concludes our question and answer session. I would like to turn the conference back over to Michael Arrogate for any closing remarks.

This concludes our question and answer session I would like to turn the conference back over to Michael <unk> for any closing remarks.

Speaker 2: Operator, we don't have any again. I just want to thank everybody for their continued support and for the time today. We're thrilled with where we are. It was a great year and look forward to speaking again next quarter.

Operator, we don't have any I guess I just wanted to thank everybody for their continued support and for the time today we're.

We're thrilled with where we are it was a great year in.

I look forward to speaking again next quarter.

Ladies and gentlemen.

Speaker 36: This concludes our conference call for today. If you missed any part of today's call, an archived replay of the conference call will be available through March 11th, 2022 by dialing 877-344-7529 and to international callers by dialing 1-412-317-0088.

This concludes our conference call for today, if you missed any part of today's call an archived replay of the conference call will be available through March 11, 2022 by dialing 870 724 for 75 to nine and two international callers by dialing 141 to 317.

0088.

Speaker 3: For all replays, please reference the conference number 101-621-50. An archived replay will also be available on a webcast link located on the home page of the investor resources section of our website.

For all replays. Please reference the conference number 1016 to 150, an archived replay will also be available on a webcast link located on the homepage of the Investor resources section of our website.