8-KRegulation FD

Ares Management Corp 8-K Report, Regulation FD Disclosure (Feb 16, 2016)

Filed February 16, 2016For Securities:ARESARES-PB

Summary

This Form 8-K filed by Ares Management, L.P. on February 16, 2016, provides an update on its assets under management (AUM) as of December 31, 2015, and announces a strategic organizational change. The company reported total AUM of approximately $93.6 billion and fee-earning AUM of $68.3 billion. This filing clarifies the impact of General Electric's exit from certain corporate lending sectors, which reduced AUM by $5.7 billion in Q4 2015, but notes this reduction was more than offset by $9.9 billion in net new commitments during the same period. Importantly for investors, Ares Management is combining its Tradable Credit Group and Direct Lending Group into a new, single segment called the Ares Credit Group, effective in the first quarter of 2016. This consolidation, which will result in a combined AUM of $62.2 billion and fee-earning AUM of $50.1 billion for the new segment, is intended to enhance operational efficiency and capitalize on future growth opportunities within its credit offerings. The company expects no material changes to existing strategies or teams due to this reorganization.

Key Highlights

  • 1Total Assets Under Management (AUM) reached approximately $93.6 billion as of December 31, 2015.
  • 2Fee-earning AUM stood at approximately $68.3 billion as of December 31, 2015.
  • 3A $5.7 billion reduction in AUM in Q4 2015 was primarily due to GE's exit from U.S. and European corporate lending sectors.
  • 4This reduction was more than offset by $9.9 billion in net new equity and debt commitments during Q4 2015.
  • 5Ares Management is combining its Tradable Credit and Direct Lending groups into a new 'Ares Credit Group' segment.
  • 6The new Ares Credit Group will have combined AUM of $62.2 billion and fee-earning AUM of $50.1 billion as of December 31, 2015.
  • 7The organizational change is aimed at improving management of credit products and capturing growth opportunities, with no expected material changes to strategies or teams.

Frequently Asked Questions

The $5.7 billion reduction in AUM was a direct consequence of General Electric Capital Corporation and GE Global Sponsor Finance LLC exiting U.S. and European corporate lending sectors. While this impacted the total AUM, it did not affect fee-earning AUM and was more than offset by significant new capital commitments.

The Ares Credit Group is a newly formed segment resulting from the combination of Ares' Tradable Credit Group and Direct Lending Group. This consolidation aims to streamline the management of the company's broad range of credit products, improve operational efficiency, and better position Ares to capitalize on future growth opportunities in the credit markets. The combination is not expected to alter existing strategies or teams.

Ares Management will begin reporting the Ares Credit Group as a distinct operating segment starting with the financial results for the quarter ending March 31, 2016. Investors should look for reporting under this new segment structure in future filings.

Ares Management defines AUM as the total assets they manage, which for most funds includes net asset value, drawn and undrawn debt, and uncalled committed capital. For CLOs, AUM includes subordinated notes plus debt tranches. Fee-earning AUM is specifically the portion of AUM on which the company directly or indirectly earns management fees.