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1. ORGANIZATION AND BASIS OF PRESENTATION
Ares Management, L.P. is a leading global alternative asset management firm that operates four distinct but complementary investment groups: the Tradable Credit Group, the Direct Lending Group, the Private Equity Group and the Real Estate Group. Information about segments should be read together with Note 18, "Segment Reporting." Subsidiaries of Ares Management LLC ("AM LLC"), a subsidiary of the Company, serve as the general partners and/or investment managers to various investment funds and managed accounts within each investment group (the "Ares Funds"), which are generally organized as pass-through entities for income tax purposes. Such subsidiaries provide investment advisory services to the Ares Funds in exchange for management fees. Ares Management, L.P. is a Delaware limited partnership formed on November 15, 2013. Ares is managed and operated by its general partner, Ares Management GP LLC. Unless the context requires otherwise, references to "Ares" or the "Company" refer to Ares Management, L.P. together with its subsidiaries.
The accompanying financial statements include (1) the results of the Company subsequent to the Reorganization (as described below) and (2) prior to the Reorganization, the consolidated results of two affiliated entities, Ares Holdings Inc. ("AHI") and Ares Investments LLC ("AI"), which directly or indirectly hold controlling interests in AM LLC and Ares Investments Holdings LLC ("AIH LLC"), as well as their wholly owned subsidiaries (collectively, the "Predecessor"). Prior to the Reorganization, Ares Partners Management Company LLC ("APMC") directed the operations of AHI and AI through its controlling ownership interest of approximately 50.1% and 70.3%, respectively, in each entity. The remaining ownership of AHI and AI was shared among various minority, non-controlling strategic investment partners.
In addition, certain Ares-affiliated funds, related co-investment entities and collateralized loan obligations ("CLOs") (collectively, the "Consolidated Funds") managed by AM LLC and its wholly owned subsidiaries have been consolidated in the accompanying financial statements for the periods presented pursuant to generally accepted accounting principles in the United States ("GAAP") as described in Note 2, "Summary of Significant Accounting Policies." Including the results of the Consolidated Funds significantly increases the reported amounts of the assets, liabilities, revenues, expenses and cash flows in the accompanying consolidated financial statements; however, the Consolidated Funds results included herein have no direct effect on the net income attributable to controlling interests or on total controlling equity. Instead, economic ownership interests of the investors in the Consolidated Funds are reflected as non-controlling interests in Consolidated Funds and as equity appropriated for Consolidated Funds in the accompanying consolidated financial statements. Further, cash flows allocable to noncontrolling interest in Consolidated Funds are specifically identifiable in the Consolidated Statement of Cash Flows.
Reorganization
Pursuant to a reorganization effectuated in connection with the initial public offering of the Company's common units ("IPO"), on May 1, 2014 the Company became a holding partnership, and the Company's sole assets became equity interests in AHI, Ares Domestic Holdings, Inc. ("Domestic Holdings"), Ares Offshore Holdings, Ltd., AI and Ares Real Estate Holdings LLC. The Company, either directly or through its direct subsidiaries, is the general partner of each of the Ares Operating Group (as defined below) entities, and operates and controls all of the businesses and affairs of the Ares Operating Group.
Additionally, on May 1, 2014, in connection with the IPO, Ares Holdings LLC was converted into a limited partnership, Ares Holdings L.P. ("Ares Holdings"), and AI was converted into a limited partnership, Ares Investments L.P. ("Ares Investments"). In addition, the Company formed Ares Domestic Holdings L.P. ("Ares Domestic"), Ares Offshore Holdings L.P. ("Ares Offshore") and Ares Real Estate Holdings L.P. ("Ares Real Estate"). Ares Holdings, Ares Domestic, Ares Offshore, Ares Investments and Ares Real Estate are collectively referred to as the "Ares Operating Group."
In exchange for its interest in the Company, prior to the consummation of the IPO, Ares Owners Holdings L.P. transferred to the Company its interests in each of AHI, Domestic Holdings, Ares Offshore Holdings, Ltd., Ares Real Estate Holdings LLC and a portion of its interest in Ares Investments. Similarly, Abu Dhabi Investment Authority ("ADIA") contributed its direct interest in AHI to its affiliate, AREC Holdings Ltd., a Cayman Islands exempted company ("AREC"). AREC then transferred to the Company its interest in each of AHI, Ares Domestic, Ares Offshore, Ares Investments and Ares Real Estate. As a result of the foregoing, Ares Owners Holdings L.P. held 34,540,079 common units in the Company and AREC held 34,538,155 common units in the Company. Following the foregoing exchanges, Ares Owners Holding L.P. retained a 59.21% direct interest, or 118,421,766 partnership units, in each of the Ares Operating Group entities (collectively, the "Ares Operating Group Units" or "AOG Units"). AREC has no direct interest in the Ares Operating Group entities. An affiliate of Alleghany Corporation ("Alleghany") retained a 6.25% direct interest, or 12,500,000 AOG Units, in each of the Ares Operating Group entities.
These actions are referred to herein collectively as the "Reorganization".
Initial Public Offering
On May 7, 2014, the Company issued 11,363,636 common units in the IPO at a price of $19.00 per common unit. In addition, on June 4, 2014, the Company issued an additional 225,794 common units at $19.00 per common unit pursuant to the partial exercise by the underwriters of their overallotment option. Total proceeds from the IPO, including from the partial exercise by the underwriters of their overallotment option, net of underwriting discounts, were $209.2 million. The holders of AOG Units, subject to any applicable transfer restrictions and other provisions, may up to four times each year from and after the second anniversary of the closing of the IPO exchange their AOG Units for common units on a one-for-one basis provided that Alleghany may exchange up to half of its Ares Operating Group Units from and after May 7, 2015 (the first anniversary of our initial public offering). A holder of Ares Operating Group Units must exchange one Ares Operating Group Unit in each of the five Ares Operating Group entities to effect an exchange for a common unit of the Company.
Following the consummation of the IPO, including the partial exercise by the underwriters of their overallotment option, assuming no exchange of AOG Units for common units, Ares Owners Holdings L.P. held a 42.82% direct interest in the Company, AREC held a 42.82% direct interest in the Company and the public held a 14.37% direct interest in the Company.
Following the consummation of the IPO, including the partial exercise by the underwriters of their overallotment option, Ares Owners Holdings L.P. held a 72.29% direct and indirect interest in the Ares Operating Group, an affiliate of Alleghany held a 5.91% direct interest in the Ares Operating Group, AREC held a 16.32% indirect interest in the Ares Operating Group and the public held a 5.48% indirect interest in the Ares Operating Group.
At December 31, 2014, the direct and indirect ownership percentages of Ares Owners Holdings L.P, Alleghany, AREC and the public in the Ares Operating Group had changed due to the forfeiture of AOG Units at Ares Owners Holdings L.P. Please refer to Note 17 for further detail.
The Company conducts all of its material business activities through the Ares Operating Group. Following the IPO, the Company consolidates the financial results of the Ares Operating Group entities, their consolidated subsidiaries and certain Consolidated Funds.
As of December 31, 2014, the structure and ownership interests of the Company are reflected below:
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The Company consolidates those entities in which it has a direct and indirect controlling financial interest based on either a variable interest model or voting interest model. As such, the Company consolidates (a) entities in which it holds a majority voting interest or has majority ownership and control over the operational, financial and investing decisions of that entity, including Ares affiliates and affiliated funds and co-investment entities for which the Company is the general partner and is presumed to have control and (b) entities that the Company concludes are variable interest entities ("VIEs"), including limited partnerships in which the Company has a nominal economic interest and CLOs for which the Company is deemed to be the primary beneficiary.
With respect to the Consolidated Funds, which typically represent limited partnerships and single member limited liability companies, the Company earns a fixed management fee based on invested capital or a derivation thereof, and a performance fee based upon the investment returns in excess of a stated benchmark or hurdle rate. The Company, as the general partner of various funds, generally has operational discretion and control, and limited partners have no substantive rights to impact ongoing governance and operating activities of the fund. Such a fund is required to be consolidated unless the Company has a less than significant level of equity at risk. The fund is typically considered a VIE, as described below, to the extent that the Company's equity at risk is less than significant in a given fund and it has no obligation to fund any future losses. In these cases, the fund investors are generally deemed to be the primary beneficiaries, and the Company does not consolidate the fund. In cases where the Company's equity at risk is deemed to be significant, the fund is generally not considered to be a VIE, and the Company will generally consolidate the fund unless the limited partners are granted substantive rights to remove the general partner or liquidate the fund. These rights are known as kick-out rights.
Variable Interest Model
The Company consolidates entities that are determined to be VIEs where the Company is deemed to be the primary beneficiary. An entity is determined to be the primary beneficiary if it holds a controlling financial interest. A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly impact the entity's business and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The consolidation rules require an analysis to determine whether (i) an entity in which the Company holds a variable interest is a VIE and (ii) the Company's involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests (e.g., management and performance related fees), would give the Company a controlling financial interest. The consolidation rules may be deferred for VIEs if the VIE and the reporting entity's interest in VIE meet deferral conditions set forth in FASB Accounting Standards Codification ("ASC") 810-10-65-2. Certain limited partnerships meet the deferral conditions if: (a) the limited partnerships generally have all the attributes of an investment company, (b) the Company does not have the obligation to fund losses of the limited partnership and (c) the limited partnership is not a securitization, asset-backed financing entity or qualifying special purpose vehicle. Where a VIE qualifies for the deferral of the consolidation rules, the analysis is based on consolidation rules prior to January 1, 2010. These rules require an analysis to determine (i) whether an entity in which the Company holds a variable interest is a VIE and (ii) whether the Company's involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests (e.g., management and performance related fees) would be expected to absorb a majority of the variability of the entity. Under either guideline, the Company determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders the conclusion at each reporting date. In evaluating whether the Company is the primary beneficiary, the Company evaluates its direct and indirect economic interests in the entity. The consolidation analysis is generally performed qualitatively; however, if the primary beneficiary is not readily determinable, a quantitative assessment may also be performed. This analysis requires judgment. These judgments include: (1) determining whether the equity investment at risk is sufficient to permit the entity to finance its activities without additional subordinated financial support, (2) evaluating whether the equity holders, as a group, can make decisions that have a significant effect on the success of the entity, (3) determining whether two or more parties' equity interests should be aggregated, (4) determining whether the equity investors have proportionate voting rights to their obligations to absorb losses or rights to receive returns from an entity, (5) evaluating the nature of relationships and activities of the parties involved in determining which party within a related-party group is most closely associated with a VIE and (6) estimating cash flows in evaluating which member within the equity group absorbs a majority of the expected losses and hence would be deemed the primary beneficiary.
As of December 31, 2014 and 2013, assets of consolidated VIEs reflected in the Consolidated Statements of Financial Condition were $14.2 billion and $14.2 billion, respectively, and are presented within "Assets of Consolidated Funds." As of December 31, 2014 and 2013, liabilities of consolidated VIEs reflected in the Consolidated Statements of Financial Condition were $13.2 billion and $13.1 billion, respectively, and are presented within "Liabilities of Consolidated Funds." The holders of the consolidated VIEs' liabilities do not have recourse to the Company other than to the assets of the consolidated VIEs. The assets and liabilities of the consolidated VIEs are comprised primarily of investment securities and loan obligations, respectively. All significant intercompany transactions and balances have been eliminated in consolidation.
As of December 31, 2014 and 2013, the Company held $193.0 million and $162.7 million of investments in these consolidated VIEs, respectively, which represents its maximum exposure to loss. The maximum exposure to loss represents the Company's total investment in these entities.
Certain funds that have historically been consolidated in the financial statements are no longer consolidated because, as of the reporting period: (a) they were liquidated or dissolved, including three and one for the years ended December 31, 2014 and 2013, respectively, (b) the Company no longer holds a majority voting interest, including four and none for the years ended December 31, 2014 and 2013, respectively, or (c) the Company is no longer deemed to be the primary beneficiary of the VIEs as it has no economic interest, no obligation to absorb losses and no significant rights to receive benefits from the VIEs, including eleven and none for the years ended December 31, 2014 and 2013, respectively. For deconsolidated funds, the Company continues as the general partner and/or investment manager until such funds are fully liquidated.
Equity Appropriated for Consolidated Funds
As of December 31, 2014 and 2013, the Company consolidated 31 and 35 CLOs, respectively. CLOs are investment vehicles created for the sole purpose of issuing collateralized loan obligations. Upon consolidation, the Company elected the fair value option for eligible liabilities to mitigate accounting mismatches between the carrying value of the assets and liabilities. The Company accounts for the excess in fair value of assets over liabilities upon initial consolidation of funds as an increase in equity appropriated for Consolidated Funds.
The loan obligations issued by the CLOs are backed by diversified collateral asset portfolios and by structured debt or equity. In exchange for managing the collateral for the CLOs, the Company earns management fees, including, in some cases, senior and subordinated management fees, and in some cases, contingent performance fees. In cases where the Company earns fees from a fund that it consolidates with the CLOs, those fees have been eliminated as intercompany transactions. The Company's holdings in these CLOs are generally subordinated to other interests in the entities and entitle the Company to receive a pro rata portion of the residual cash flows, if any, from the entities. Additionally, the Company may invest in other senior secured notes, which are repaid based on available cash flows subject to priority of payments under each Consolidated CLO's governing documents. Investors in the CLOs generally have no recourse against the Company for any losses sustained in the capital structure of each CLO.
Investments in Non-Consolidated Variable Interest Entities
The Company holds interests in certain VIEs that are not consolidated because the Company is not deemed the primary beneficiary. The Company's interest in such entities generally is in the form of direct equity interests and fixed fee arrangements. The maximum exposure to loss represents the potential loss of assets by the Company relating to these non-consolidated entities. There is no difference between the carrying value and fair value as investments in the non-consolidated VIEs are carried at fair value. The Company's interests and the Consolidated Funds' interests in these non-consolidated VIEs and their respective maximum exposure to loss relating to non-consolidated VIEs are as follows:
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As of December 31, |
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2014 |
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2013 |
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Maximum exposure to loss attributable to the Company's investment in non-consolidated VIEs |
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$ |
14,851 |
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$ |
12,366 |
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Maximum exposure to loss attributable to Consolidated Funds' investments in non-consolidated VIEs |
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$ |
2,519 |
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$ |
96,223 |
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Basis of Accounting
The accompanying consolidated financial statements are prepared in accordance with GAAP. Certain comparative amounts for prior periods have been reclassified to conform to the current year's presentation. Management has determined that the Company's Consolidated Funds are investment companies under GAAP for the purposes of financial reporting based on the following characteristics: the Consolidated Funds obtain funds from one or more investors and provide investment management services and the Consolidated Funds' business purpose and substantive activities are investing funds for returns from capital appreciation and/or investment income. Therefore, investments of Consolidated Funds are recorded at fair value and the unrealized appreciation (depreciation) in an investment's fair value is recognized on a current basis in the Consolidated Statements of Operations. Additionally, the Consolidated Funds do not consolidate their majority-owned and controlled investments in portfolio companies. In the preparation of these consolidated financial statements, the Company has retained the specialized accounting guidance for the Consolidated Funds under GAAP.
All of the investments held and CLO loan obligations issued by the Consolidated Funds are presented at their estimated fair values in the Company's Consolidated Statements of Financial Condition. The excess of the CLO assets over the CLO liabilities upon consolidation is reflected in the Company's Consolidated Statements of Financial Condition as equity appropriated for Consolidated Funds. Net income attributable to the investors in the CLOs is included in net income (loss) attributable to non-controlling interests in Consolidated Funds in the Consolidated Statements of Operations and equity appropriated for Consolidated Funds in the Consolidated Statements of Financial Condition.
Risks and Uncertainties
In the normal course of business, the Company encounters significant credit and market risk. Credit risk is the risk of default on investments in debt securities, loans and derivatives that result from a borrower's or derivative counterparty's inability or unwillingness to make required or expected payments. Credit risk is enhanced in situations where the Company or a Consolidated Fund is investing in distressed assets or unsecured or subordinate loans or in securities that are a material part of its respective business. Market risk reflects changes in the value of investments due to changes in interest rates, credit spreads or other market factors.
The Company also makes investments outside of the United States. These non-U.S. investments are subject to the same risks associated with U.S. investments as well as additional risks, such as fluctuations in foreign currency exchange rates, unexpected changes in regulatory requirements, heightened risk of political and economic instability, difficulties in managing the investments, potentially adverse tax consequences and the burden of complying with a wide variety of foreign laws.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management's estimates are based on historical experiences and other factors, including expectations of future events that management believes to be reasonable under the circumstances. These assumptions and estimates require management to exercise judgment in the process of applying the Company's accounting policies. Assumptions and estimates regarding the valuation of investments and their resulting impact on performance fee revenue and performance fee compensation involve a high degree of judgment and complexity, and these assumptions and estimates may be significant to the consolidated financial statements. Actual results could differ from these estimates and such differences could be material.
Investments
Investments include (a) fair value investments held by the Company and Consolidated Funds and (b) loans held as investments by Consolidated Funds.
The Company has retained the specialized investment company accounting guidance under GAAP with respect to substantially all of its investments. Thus, the consolidated investments are reflected in the Consolidated Statements of Financial Condition at fair value, with unrealized appreciation (depreciation) resulting from changes in fair value reflected as a component of net change in unrealized appreciation (depreciation) on investments in the Consolidated Statements of Operations. Fair value is the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date (i.e. the exit price).
Loans held as investments are recorded at the outstanding unpaid principal balance less any allowance for loan losses. Loans receivable that the Company has the intent and ability to hold for the foreseeable future are classified as held-for-investment. Interest income is recognized in the period earned to the extent that such amounts are expected to be collected. In general, interest is accrued on loans held as investments upon the earlier of the occurrence of a payment default and there being reasonable doubt that principal and interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management's judgment regarding collectability. Non-accrual loans are restored to accrual status when, in management's judgment, the loan is no longer in payment default and principal and interest is likely to be collected in full for the remainder of the term of the loan. The Company may make exceptions to this if the loan has sufficient collateral value and the conditions of the loan are improving. As of December 31, 2014, the Company had $0.8 million of loans receivable that were on non-accrual status.
Loan origination fees received for loans held as investments are deferred and recognized as income over the life of the related loan. The amortization of deferred loan origination fees is included in interest income and other investment income of Consolidated Funds. The Company also receives other various fees including fees for commitments, amendments and other services rendered by the Company to borrowers. Such fees are recognized as income when earned or the services are rendered. Any costs incurred related to such services rendered are expensed as incurred.
The Company records an allowance for loan losses based on management's judgment of the estimated potential credit impairment in the portfolio of loans held as investments individually as well as at an aggregate level. The Company monitors the performance of each borrower using a number of factors including the estimated value of any underlying collateral, compliance with financial covenants, the operating capabilities and financial trends of the borrowers, as well as overall current economic conditions affecting specific borrowers. As a result, the Company records an allowance specific to individual loans held as investments when it is probable that the Company will be unable to collect all amounts (including both contractual principal and interest) according to the contract terms of the individual loan agreement. Additionally, the Company records a general allowance for overall credit exposure related to aggregate portfolio of loans held as investments representing the Company's best estimate of credit losses inherent in the portfolio. Various inputs are used in determining the general allowance for loan losses including, but not limited to, external loss factors, internal historical loss rates as well as environmental factors such as certain industry, geographical, economic and political factors.
Goodwill and Intangible Assets
The Company's finite-lived intangible assets consist of contractual rights to earn future management fees and performance fees from investment funds it acquires. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives, ranging from approximately 1 to 10 years. Finite-lived intangible assets arise from the Company's acquisition of management contracts, which provide the right to receive future fee income. The purchase price is treated as an intangible asset and is amortized over the life of the contract. Amortization is included as part of general, administrative and other expenses in the Consolidated Statements of Operations.
The Company tests finite-lived intangible assets for impairment if certain events occur or circumstances change indicating that the carrying amount of the intangible asset may not be recoverable. The Company uses a two-step process to evaluate impairment. The first step compares the estimated undiscounted future cash flow attributable to the intangible asset being evaluated with its carrying amount. The second step, used to measure the amount of potential impairment, compares the fair value of the intangible asset with its carrying amount. If an impairment is determined to exist by management, the Company accelerates amortization expense so that the carrying value represents fair value.
Goodwill represents the excess cost over identifiable net assets of an acquired business. The Company tests goodwill annually for impairment. If, after assessing qualitative factors, the Company believes that it is more likely than not that the fair value of the reporting unit is less than its carrying value, the Company will use a two-step process to evaluate impairment. The first step compares the fair value of the reporting unit with its carrying amount, including goodwill. The second step, used to measure the amount of any potential impairment, compares the implied fair value of the reporting unit with the carrying amount of goodwill.
The Company also tests goodwill for impairment in other periods if an event occurs or circumstances change such that is more likely than not to reduce the fair value of the reporting unit below its carrying amounts. Inherent in such fair value determinations are certain judgments and estimates relating to future cash flows, including the Company's interpretation of current economic indicators and market valuations, and assumptions about the Company's strategic plans with regard to its operations. Due to the uncertainties associated with such estimates, actual results could differ from such estimates.
Goodwill is not amortized and is not deductible for income tax purposes. There have been no impairments of goodwill recorded as of December 31, 2014.
Business Combinations
The Company applies the provisions of ASC 805, Business Combinations ("ASC 805"), in the accounting for acquisitions. ASC 805 requires separate recognition of goodwill from the assets acquired and the liabilities assumed, at the acquisition date fair values. The Company accounts for business combinations using the acquisition method of accounting, under which the purchase price of the acquisition is allocated to the fair value of each asset acquired and liability assumed as of the acquisition date. Contingent consideration obligations are recognized as of the acquisition date at fair value based on the probability that contingency will be realized. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. Acquisition-related costs in connection with a business combination are expensed as incurred.
Management's determination of fair value of assets acquired and liabilities assumed at the acquisition date as well as contingent consideration are based on the best information available in the circumstances, and may incorporate management's own assumptions and involve a significant degree of judgment and estimates that are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations.
For a given acquisition, management may identify certain pre-acquisition contingencies as of the acquisition date and may extend the review and evaluation of these pre-acquisition contingencies throughout the measurement period in order to obtain sufficient information to assess whether management includes these contingencies as a part of the fair value estimates of assets acquired and liabilities assumed and, if so, to determine their estimated amounts. If management cannot reasonably determine the fair value of a pre-acquisition contingency by the end of the measurement period, which is generally the case given the nature of such matters, the Company will recognize an asset or a liability for such pre-acquisition contingency if: (i) it is probable that an asset existed or a liability had been incurred at the acquisition date and (ii) the amount of the asset or liability can be reasonably estimated. Subsequent to the measurement period, changes in the estimates of such contingencies would affect earnings and could have a material effect on the consolidated statements of operations and financial condition.
Cash and Cash Equivalents
Cash and cash equivalents for the Company includes liquid investments in money market funds and demand deposits. Cash and cash equivalents held at Consolidated Funds represents cash that, although not legally restricted, is not available to support the general liquidity needs of the Company, as the use of such amounts is generally limited to the investment activities of the Consolidated Funds.
As the servicer to certain real estate investments, certain subsidiaries of the Company collect escrow deposits from borrowers to ensure the borrowers' obligations are met. These escrow deposits are represented as restricted cash and cash equivalents for the Company and are offset by escrow cash liability within accounts payable and accrued expenses in the Consolidated Statements of Financial Condition. Restricted cash for the Consolidated Funds represents cash that is legally segregated according to the underlying fund agreements. At December 31, 2014 and 2013, the Company had cash balances with financial institutions in excess of Federal Deposit Insurance Corporation insured limits. The Company monitors the credit standing of these financial institutions.
Derivative Instruments
The Company recognizes all derivatives as either assets or liabilities in the Consolidated Statements of Financial Condition and reports them at fair value.
Fixed Assets
Fixed assets, consisting of furniture, fixtures and equipment, leasehold improvements, and computer hardware and internal use software, are recorded at cost, less accumulated depreciation and amortization.
Financial Instruments
The Company considered cash and cash equivalents, receivables, equity-method investments, accounts payable, accrued expenses, other liabilities, debt obligations and assets and liabilities of the Consolidated Funds to be financial instruments. The carrying amounts reported in the Consolidated Statements of Financial Condition for these financial instruments equal or closely approximate their fair values.
Non-Controlling Interests in Ares Operating Group Entities
Following the Reorganization, non-controlling interests in Ares Operating Group entities represent a component of equity and net income attributable to the owners of AOG Units that are not held directly or indirectly by Ares Management, L.P. These interests are adjusted for contributions to and distributions from Ares Operating Group entities during the reporting period and are allocated income from the Ares Operating Group entities based on their historical ownership percentage for the proportional number of days in the reporting period.
For the periods presented prior to the Reorganization, non-controlling interests in Ares Operating Group entities represent equity interests and net income attributable to various minority non-control oriented strategic investment partners, which were reflected as non-controlling interests in the Predecessor's historical results, as well as net income attributable to controlling interest in the Predecessor. The net income attributable to controlling interests in the Predecessor, from January 1, 2014 to April 30, 2014, is presented as net income attributable to non-controlling interests in Ares Operating Group entities within the Consolidated Statements of Operations.
Redeemable Interest in Ares Operating Group Entities
Redeemable interests in Ares Operating Group entities represent a portion of the collective ownership interest in Ares Operating Group Units granted to professionals of the Company in connection with the Company's acquisition of Indicus Advisors, LLP ("Indicus") during 2011. This ownership interest may be redeemed for a cash payment of $20.0 million provided that a portion of such interests are subject to certain conditions relating to continued employment. Income is allocated in proportion to the redeemable interests ownership percentage in Ares Operating Group Units.
Management Fees
Management fees are generally based on a defined percentage of fair value of assets, total commitments, invested capital, net asset value ("NAV"), net investment income, total assets or par value of the investment portfolios managed by the Company. Principally all management fees are earned from affiliated funds of the Company. The contractual terms of management fees vary by fund structure and investment strategy. Management fees are recognized as revenue in the period advisory services are rendered, subject to the Company's assessment of collectability.
Management fees also include a quarterly performance fee on the investment income ("ARCC Part I Fees") from Ares Capital Corporation (NASDAQ: ARCC) ("ARCC"), a publicly traded business development company registered under the Investment Company Act and managed by a subsidiary of the Company. ARCC Part I Fees are equal to 20.0% of its net investment income (before ARCC Part I Fees and incentive fees payable based on capital gains), subject to a fixed "hurdle rate" of 1.75% per quarter, or 7.0% per annum. No fee is recognized until ARCC's net investment income exceeds a 1.75% hurdle rate, with a "catch-up" provision such that the Company receives 20% of ARCC's net investment income from the first dollar earned. Such fees from ARCC are classified as management fees as they are paid quarterly, predictable and recurring in nature, not subject to repayment (or clawback) and cash settled each quarter.
Tradable Credit Group long-only credit funds: Management fees generally range from 0.45% to 0.65% of principal par plus cash or NAV. The funds in the leveraged loan funds strategy have an average management contract term of 12.6 years as of December 31, 2014 and the fee ranges generally remain unchanged at the close of the re-investment period. The funds in the high-yield strategy generally represent open-ended managed accounts, which typically do not include investment period termination or management contract expiration dates.
Tradable Credit Group alternative credit funds: Management fees generally range from 0.50% to 1.75% of NAV, gross asset value, committed capital or invested capital. The funds in the credit opportunities strategy generally include open-ended or managed account structures, which typically do not include investment period termination or management contract expiration dates. The funds in the dynamic credit strategy are comprised of publicly traded closed-end funds, which typically do not include investment period termination or management contract termination dates. The funds in the special situations strategy are comprised of closed-end funds, with investment period termination or management contract termination dates and managed accounts, which do not include investment period termination or management contract termination dates. For certain closed-end funds in these strategies, following the expiration or termination of the investment period the management fees step down to 1.00% of the aggregate adjusted cost of unrealized portfolio investments. The funds in these strategies, excluding Ares Dynamic Credit Allocation Fund, Inc. (NYSE:ARDC) ("ARDC") and Ares Multi-Strategy Credit Fund, Inc. (NYSE:ARMF) ("ARMF") which have no investment periods, have an average management contract term of 10.1 years as of December 31, 2014.
Direct Lending Group funds: Management fees generally range from 0.75% to 2.00% of invested capital, NAV or total assets. Following the expiration or termination of the investment period the management fees for certain closed end funds and managed accounts in this strategy generally step down to between 0.50% and 1.50% of the aggregate cost or market value of the portfolio investments. In addition, management fees include the ARCC Part I Fees. The funds in this strategy, excluding ARCC which has no investment period termination, have an average management contract term of 8.8 years as of December 31, 2014.
Private Equity Group funds: As of December 31, 2014, management fees generally range from 1.50% to 2.00% of total capital commitments during the investment period. The management fees for such funds generally step down to between 0.75% and 1.125% of the aggregate adjusted cost of unrealized portfolio investments following the earlier to occur of: (i) the expiration or termination of the investment period or (ii) the launch of a successor fund. The funds in this strategy have an average management contract term of 12.5 years as of December 31, 2014.
Real Estate Group funds: Management fees generally range from 0.50% to 1.50% of invested capital, stockholders' equity or total capital commitments. Following the expiration or termination of the investment period, the basis on which management fees are earned for certain closed-end funds, managed accounts and co-investment vehicles in this strategy changes from committed capital to invested capital with no change in the management fee rate. The funds in this strategy, excluding Ares Commercial Real Estate Corporation (NYSE:ACRE) ("ACRE") which has no investment period termination, have an average management contract term of 10.8 years as of December 31, 2014.
Performance Fees
Performance fees are based on certain specific hurdle rates as defined in the applicable investment management agreements or governing documents. Substantially all performance fees are earned from affiliated funds of the Company. Performance fees are recorded on an accrual basis to the extent such amounts are contractually due.
The Company has elected to adopt Method 2 of ASC 605-20, Revenue Recognition ("ASC 605") for revenue based on a formula. Under this method, the Company records revenue when it is entitled to performance-based fees, subject to certain hurdles or benchmarks. Performance-based fees are assessed as a percentage of the investment performance of the fund. The performance fees for any period are based upon an assumed liquidation of the fund's net assets on the reporting date, and distribution of the net proceeds in accordance with the fund's income allocation provisions. The performance fees may be subject to reversal to the extent that the performance fees recorded exceed the amount due to the general partner or investment manager based on a fund's cumulative investment returns. As presented below, the terms of performance fees vary by fund structure and investment strategy; furthermore, the Company is not eligible to receive performance fees from every fund that it manages.
Tradable Credit Group long-only credit funds: Performance fees generally represent 10% to 20% of each incentive eligible fund's profits, subject to a preferred return of approximately 7% to 12% per annum.
Tradable Credit Group alternative credit funds: Performance fees generally represent 10% to 20% of each incentive eligible fund's profits, subject to a preferred return of approximately 5% to 9% per annum.
Direct Lending Group funds: Performance fees generally represent 10% to 20% of each incentive eligible fund's profits or cumulative realized capital gains (net of realized capital losses and unrealized capital depreciation). Some funds are also subject to a preferred return of approximately 5% to 8% per annum.
Private Equity Group funds: Performance fees represent 20% of each incentive eligible fund's profits, subject to a preferred return of approximately 8% per annum.
Real Estate Group funds: Performance fees generally represent 10% to 25% of each incentive eligible fund's profits, subject to a preferred return of approximately 8% to 10% per annum.
Performance fees receivable is presented separately in the Consolidated Statements of Financial Condition and represents performance fees recognized but not yet collected. The timing of the payment of performance fees due to the general partner or investment manager varies depending on the terms of the applicable fund agreements. As of December 31, 2014, the Company had no accrued clawback obligations that would need to be paid if the funds were liquidated at their current fair values at that date.
Other Fees
The Company also provides administrative services to certain of its affiliated funds that are reported within other fees. These fees are recognized as revenue in the period administrative services are rendered. These fees are generally based on expense reimbursements that represent the portion of overhead and other expenses incurred by certain Operations Management Group professionals directly attributable to the fund, but may also be based on a fund's NAV for certain funds domiciled outside the U.S. Other fees also includes revenues associated primarily with Real Estate Group activities such as development and construction.
Equity-Based Compensation
The Company recognizes expense related to equity-based compensation transactions in which it receives employee services in exchange for (a) equity instruments of the Company, (b) derivatives based on the Company's common units or (c) liabilities that are based on the fair value of the Company's equity instruments.
Equity-based compensation expense represents expenses associated with the following:
|
(a) |
granting of: (i) direct and indirect profit interests; (ii) put options to sell certain interests at a minimum value; (iii) purchase (or call) options to acquire additional membership interests; and (iv) restricted units, options and phantom units granted under the Ares Management, L.P. 2014 Equity Incentive Plan ("Equity Incentive Plan"); and |
|
(b) |
conversion of and acceleration in vesting of certain existing interests. |
Equity-based compensation expense is determined based on the fair value of the respective equity award on the grant date and is recognized on a straight-line basis over the requisite service period, with a corresponding increase in partners' capital. Fair value of the restricted units and phantom units was determined to be the most recent closing price of common units. Certain restricted units are subject to a lock up provision that expires on the fifth anniversary of the IPO. The Company used Finnerty's average strike-price put option model to estimate the discount associated with this lack of marketability. The Company estimated the fair value of the options as of the grant date using Black-Scholes option pricing model.
The Company is required to estimate the equity-based awards that management ultimately expects to vest and to reduce equity-based compensation expense for the effects of estimated forfeitures of awards over the expense recognition period. The rate of future forfeitures is estimated based upon historical experience. Actual forfeitures may differ from management's estimate. Equity-based compensation expense is adjusted, as necessary, for actual forfeitures so as to reflect expenses only for the portion of the award that ultimately vests. Management considers on a quarterly basis whether there have been any significant changes in facts and circumstances that would affect the expected forfeiture rate.
The Company records deferred tax assets or liabilities for equity compensation plan awards based on deductions for income tax purposes of equity- based compensation recognized at the statutory tax rate in the jurisdiction in which the Company is expected to receive a tax deduction. In addition, differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on the Company's income tax returns are recorded as adjustments to partners' capital. If the tax deduction is less than the deferred tax asset, the calculated shortfall reduces the pool of excess tax benefits. If the pool of excess tax benefits is reduced to zero, then subsequent shortfalls would increase the income tax expense.
Equity-based compensation expense is presented within compensation and benefits in the Consolidated Statements of Operations.
Performance Fee Compensation
The Company has agreed to pay a portion of the performance fees earned from certain funds, including income from Consolidated Funds that is eliminated in consolidation, to investment and non-investment professionals. Depending on the nature of each fund, the performance fee allocation may be structured as a fixed percentage subject to vesting based on continued employment or service (generally over a period of five years) or as an annual award that is fully vested for the particular year. Other limitations may apply to performance fee allocation as set forth in the applicable governing documents of the fund or award documentation. Performance fee compensation is recognized in the same period that the related performance fee is recognized. Performance fee compensation can be reversed during periods when there is a decline in performance fees that were previously recognized.
Performance fee compensation payable represents the amounts payable to professionals who are entitled to a proportionate share of performance fees in one or more funds. The liability is calculated based upon the changes to realized and unrealized performance fees but not payable until the performance fee itself is realized.
Depreciation and Amortization
Depreciation and amortization expense is recognized on a straight-line method over an asset's estimated useful life, which for leasehold improvements is the lesser of the lease terms and the life of the asset, and for other fixed assets is generally between three and seven years. Fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Internal Use Software
Direct costs associated with developing, purchasing or otherwise acquiring software for internal use ("Internal Use Software") are capitalized and amortized on a straight-line basis over the expected useful life of the software, beginning when the software is implemented. Costs incurred for upgrades and enhancements that will not result in additional functionality are expensed as incurred. Useful lives of Internal Use Software generally vary from three to seven years.
Interest Income
Interest income is recognized on an accrual basis to the extent that such amounts are expected to be collected and includes interest, dividend, and investment income. Interest income earned by the Company was $3.3 million, $0.4 million and $2.6 million for the years ended December 31, 2014, 2013 and 2012, respectively, and is included in interest and other investment income in the accompanying Consolidated Statements of Operations. For the three years ended December 31, 2014, 2013 and 2012, interest income of the Consolidated Funds was $0.7 billion, $1.1 billion and $1.3 billion, respectively, and is included in interest and other investment income of Consolidated Funds in the accompanying Consolidated Statements of Operations.
Investment Income (Loss)
Investment income (loss) represents the unrealized and realized appreciation (depreciation) resulting from the investments of the Company and the Consolidated Funds. Investment income (loss) is realized when the Company redeems all or a portion of its investment or when the Company receives cash income, such as dividends or distributions. Realized investment income (loss) is presented within other investment income and within net realized gain (loss) on investments in the Consolidated Statements of Operations. Unrealized investment income (loss) results from changes in the fair value of the underlying investment as well as the reversal of unrealized appreciation (depreciation) at the time an investment is realized and is presented within net change in unrealized appreciation (depreciation) on investments in the Consolidated Statements of Operations.
Foreign Currency
The U.S. dollar is the Company's functional currency; however, certain transactions of the Company may not be denominated in U.S. dollars. Foreign exchange appreciation (depreciation) arising from these transactions are recognized within interest and other investment income in the Consolidated Statements of Operations. For the years ended December 31, 2014, 2013 and 2012, the Company recognized $0.3 million, $(0.6) million and $0.1 million, respectively, in transaction gains (losses) related to foreign currencies revaluation.
In addition, the combined and consolidated results include certain foreign subsidiaries and Consolidated Funds that use functional currencies other than the U.S. dollar. Assets and liabilities of these foreign subsidiaries are translated to U.S. dollars at the prevailing exchange rates as of the reporting date. Income and expense and gain and loss transactions denominated in foreign currencies are generally translated into U.S. dollars monthly using the average exchange rates during the respective transaction period. Translation adjustments resulting from this process are recorded to foreign currency translation adjustment in accumulated other comprehensive income.
Income Taxes
A substantial portion of the Company's earnings flow through to owners of the Company without being subject to entity level income taxes. Consequently, a significant portion of the Company's earnings reflects no provision for income taxes except those for foreign, city and local income taxes incurred at the entity level. A portion of the Company's operations is held through AHI and Domestic Holdings, which are U.S. corporations for tax purposes. Their income is subject to U.S. federal, state and local income taxes and certain of their foreign subsidiaries are subject to foreign income taxes (for which a foreign tax credit can generally offset U.S. corporate taxes imposed on the same income). A provision for corporate level income taxes imposed on AHI's and Domestic Holdings' earnings is included in the Company's tax provision. The Company's tax provision also includes entity level income taxes incurred by certain affiliated funds and co-investment entities that are consolidated in these financial statements.
Income taxes are accounted for using the liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis, using tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred assets and liabilities of a change in tax rates is recognized as income in the period when the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current and deferred tax liabilities are reflected on a net basis in the Consolidated Statements of Financial Condition.
The Company analyzes its tax filing positions in all U.S. federal, state, local and foreign tax jurisdictions where it is required to file income tax returns for all open tax years in these jurisdictions. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position. The tax benefit recognized in the financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized. The amount of unrecognized tax benefits ("UTBs") is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by the taxing authorities, new information obtained during a tax examination, or resolution of an examination. The Company recognizes both accrued interest and penalties, where appropriate, related to UTBs in general, administrative and other expenses in the Consolidated Statements of Operations.
Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties under GAAP. The Company reviews its tax positions quarterly and adjusts its tax balances as new information becomes available.
Income Allocation
Income (loss) before taxes is allocated based on each partner's average daily ownership of the Ares Operating Group entities for each year presented. The net income attributable to Ares Management, L.P. for the year ended December 31, 2014 represents its average daily ownership of 38.02% from May 1, 2014, the effective date of the Reorganization, to December 31, 2014.
Earnings Per Common Unit
Basic earnings per common unit are computed by dividing income available to common unitholders by the weighted-average number of common units outstanding during the period. Income available to common unitholders represents net income applicable to Ares Management, L.P.
Diluted earnings per unit is computed by dividing income available to common unitholders by the weighted-average number of common units outstanding during the period, increased to include the number of additional common units that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding options to acquire units, unvested restricted units and AOG Units exchangeable for common units. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per unit by application of the treasury stock method and the two-class method. Unvested share-based payment awards that contain non-forfeitable rights to distribution or distribution equivalents (whether paid or unpaid) are participating securities and shall be considered in the computation of earnings per unit pursuant to the two-class method. Unvested restricted units that pay distribution equivalents are deemed participating securities and are included in basic and diluted earnings per unit calculation under the two-class method.
Under the treasury stock method, if the average market price of a common unit increases above the option's exercise price, the proceeds that would be assumed to be realized from the exercise of the option would be used to acquire outstanding common units. The dilutive effect of awards is directly correlated with the fair value of the common units. However, the awards may be antidilutive when the market price of the underlying unit exceeds the option's exercise price. This result is possible because the compensation expense attributed to future services, but not yet recognized, is included as a component of the assumed proceeds upon exercise.
Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income (loss) and other appreciation (depreciation) affecting partners' capital that, under U.S. GAAP, are excluded from net income (loss). The Company's other comprehensive income (loss) includes foreign currency translation adjustments.
Recent Accounting Pronouncements
In June 2013, FASB issued guidance to clarify the characteristics of an investment company and to provide guidance for assessing whether an entity is an investment company. Consistent with existing guidance for investment companies, all investments are to be measured at fair value including non-controlling ownership interests in other investment companies. There are no changes to the current requirements relating to the retention of specialized accounting in the consolidated financial statements of a non-investment company parent. The guidance is effective for interim and annual periods beginning after December 15, 2013 and early application is prohibited. The adoption of this guidance did not have a material impact on the Company's financial statements.
The Company primarily invests in certain partnerships, or funds, managed by its affiliates. These fund investments are based on contractual capital commitments and, in accordance with the terms of the underlying partnership agreements, require the Company to provide capital upon written notice. In connection with these capital commitments, during the year ended December 31, 2014, the Company provided capital of approximately $75.2 million to Consolidated Funds. As of December 31, 2014, the Company had unfunded contractual commitments to various Consolidated Funds of $38.3 million. The Company maintains sufficient liquidity to fund such commitments when the need arises.
In July 2013, FASB issued guidance to eliminate the diversity in practice on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. Under the new guidance, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carry forward, with exceptions as defined. The guidance does not require new recurring disclosures. The guidance applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists at the reporting date. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The guidance should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of this guidance did not have a material impact on the Company's financial statements.
In January 2014, FASB amended its guidance to allow the use of the simplified hedge accounting approach to account for swaps that are entered into for the purpose of economically converting a variable-rate borrowing into a fixed-rate borrowing. Alternatively, that entity may continue to follow the current guidance in ASC Topic 815: Derivatives and Hedging. The amendments in this update allow the swap to be measured at its settlement value instead of fair value when applying the simplified hedge accounting approach. The guidance is effective for interim and annual periods beginning after December 15, 2014. The Company does not expect the adoption of this guidance to have a material impact on its financial statements.
In May 2014, the FASB issued guidance for recognizing revenue from contracts with customers. The guidance in this update supersedes the revenue recognition requirements in Topic 605, "Revenue Recognition." Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The Company continues to evaluate the impact this guidance will have on its financial statements.
In June 2014, FASB issued guidance to bring clarification to the accounting for share-based payment awards that require a specific performance target to be achieved in order for the award to vest even after the requisite service period. Under the new guidance, performance targets that could affect vesting and be achieved after the requisite service period will be treated as a performance condition and should not be reflected in estimating the fair value of the award at grant date. Compensation expense should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation expense attributable to the period(s) for which the requisite service has already been rendered. The guidance is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. Early application is permitted. The Company does not believe this guidance will have a material impact on its financial statements.
In August 2014, the FASB issued guidance to provide an alternative to fair value measurement for measuring the financial assets and the financial liabilities of a collateralized financing entity that is consolidated under Topic 810, "Consolidation." The guidance in this update was issued to address the fact that the fair value of a collateralized financing entity's financial assets may differ from the fair value of its financial liabilities even though the financial liabilities have recourse only to the financial assets. Under the new guidance, a reporting entity can elect to measure both the financial assets and the financial liabilities of that collateralized financing entity in its consolidated financial statements using the more observable of the fair value of the financial assets and the fair value of the financial liabilities. The amendments are effective for annual reporting periods, including interim periods within those reporting periods, beginning after December 15, 2015. Early adoption is permitted as of the beginning of an annual period. The Company continues to evaluate the impact this guidance will have on its consolidated financial statements.
In August 2014, the FASB issued guidance on management's responsibility in evaluating whether there is substantial doubt about a company's ability to continue as a going concern. For each reporting period, management will be required to evaluate whether conditions or events exist that raise substantial doubt about a company's ability to continue as a going concern within one year from the date the financial statements are issued. The amendments are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early application is permitted. The Company does not believe this guidance will have a material impact on its consolidated financial statements.
In November 2014, the FASB issued guidance for determining whether the host contract in a hybrid financial instrument issued in the form of a share is more akin to debt or to equity. There are currently two methods predominately used in practice in evaluating whether the nature of the host contract within a hybrid financial instrument is more akin to debt or equity. The guidance was issued to address the fact that use of different methods can result in different accounting outcomes for economically similar hybrid financial instruments and provides for elimination of the use of different methods in practice. The amendments are effective for public companies for annual reporting periods, and interim periods within those reporting periods, beginning after December 15, 2015. The Company continues to evaluate the impact this guidance will have on its consolidated financial statements.
In January 2015, the FASB issued guidance simplifying the income statement presentation by eliminating the concept of extraordinary items. Extraordinary items are events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. Eliminating the extraordinary classification simplifies income statement presentation by altogether removing the concept of extraordinary items from consideration. The amendments are effective for annual reporting periods, including interim periods within those reporting periods, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the annual reporting period. The Company does not believe this guidance will have a material impact on its consolidated financial statements.
In February 2015, the FASB amended the consolidation standards for reporting entities that are required to evaluate whether they should consolidate certain legal entities. Under the new guidance, all legal entities are subject to reevaluation under the revised consolidation model. Specifically, the guidance (i) modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities; (ii) eliminates the presumption that a general partner should consolidate a limited partnership; (iii) affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; and (iv) provides a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act for registered money market funds. The amendments are effective for annual reporting periods, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
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3. GOODWILL AND INTANGIBLE ASSETS
Business Combinations
In June 2014, AM LLC acquired for $60.0 million in cash and $2.0 million of contingent consideration i) Keltic Financial Services LLC ("Keltic"), a commercial finance company headquartered in New York that provides asset based loans to small and middle market companies; and ii) the net assets of Keltic Financial Partners II, of which Keltic was the general partner. The Company allocated $38.0 million of the purchase price to the fair value of the acquired net assets, which were effectively contributed to ACF Finco I L.P., a limited partnership managed by a subsidiary of the Company. The remaining $24.0 million of the purchase price was recorded as goodwill, which may be modified for the first twelve months following the acquisition date, subject to evaluating all provisions of the agreement. The financial results of ACF Finco I L.P. are included within the consolidated financial statements presented herein.
On July 1, 2013, the Company purchased a 35.0% ownership interest in AREA Sponsor Holdings, LLC and a 100.0% ownership interest in AREA Management Holdings, LLC, a global real estate investment and asset manager headquartered in New York, for approximately $130.1 million, comprised of cash, notes, the assumption of debt and membership interests in AI and AHI, which were converted to AOG Units in connection with the Reorganization. The acquisition resulted in an increase in goodwill of $50.0 million and an increase in finite-lived intangible assets of $35.1 million, primarily comprising contractual rights to earn future fee income, with the remaining $44.6 million of the purchase price allocated to the identifiable assets and liabilities.
The following table summarizes the carrying value for the Company's intangible assets:
|
|
|
As of December 31, |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Finite-lived intangible assets |
|
$ |
114,102 |
|
$ |
114,855 |
|
||||||||
|
Less accumulated amortization |
|
|
(73,154 |
) |
|
(46,113 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Finite-lived intangible assets, net |
|
|
40,948 |
|
|
68,742 |
|
||||||||
|
Goodwill |
|
|
85,582 |
|
|
58,159 |
|
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|
|
|
|
|
|
|
|
|
||||||||
|
Total intangible assets and goodwill, net |
|
$ |
126,530 |
|
$ |
126,901 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Finite-Lived Intangible Assets, Net
Intangible assets, net represents the fair value in excess of carrying value related to the acquisition of management contracts and the future benefits of managing new assets for existing clients.
The following table summarizes the carrying value, net of accumulated amortization, for the Company's intangible assets:
|
|
|
As of December 31, |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Previously acquired management contracts(1) |
|
$ |
79,002 |
|
$ |
79,755 |
|
||||||||
|
AREA acquired management contracts |
|
|
35,100 |
|
|
35,100 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total intangible assets acquired |
|
$ |
114,102 |
|
$ |
114,855 |
|
||||||||
|
Less: accumulated amortization |
|
$ |
(73,154 |
) |
$ |
(46,113 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Intangible assets, net |
|
$ |
40,948 |
|
$ |
68,742 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
(1) |
Intangibles relating to London based asset manager are recorded in Pounds Sterling and are translated at spot rate at each reporting date. |
Amortization expense associated with intangible assets was $27.6 million, $34.4 million and $8.7 million for the years ended December 31, 2014, 2013 and 2012, respectively, and is presented within general, administrative and other expenses within the Consolidated Statements of Operations.
At December 31, 2014, future annual amortization of finite-lived intangible assets for the years ending 2015 through 2019 and thereafter is estimated to be:
|
Year |
|
Amortization |
|
||||||
|
2015 |
|
$ |
19,943 |
|
|||||
|
2016 |
|
|
9,896 |
|
|||||
|
2017 |
|
|
6,530 |
|
|||||
|
2018 |
|
|
1,802 |
|
|||||
|
2019 |
|
|
1,172 |
|
|||||
|
Thereafter |
|
|
1,605 |
|
|||||
|
|
|
|
|
|
|||||
|
Total |
|
$ |
40,948 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|||||
During 2013, the Company evaluated for impairment certain intangible assets associated with acquired contractual rights to earn future management fees and performance fees in its Tradable Credit Group. The Company determined the fair value of these intangibles based on expected future cash flow of the contracts. In 2013, the reduction in useful lives of the contracts, as well as the change in the discount rate, reduced expected future cash flow. As a result, the Company recognized an impairment of $17.6 million for the year ended December 31, 2013, to reduce the carrying value of the intangibles to their estimated fair value by recording additional amortization expense. For the year ended December 31, 2014, the Company accelerated amortization expense by $4.2 million to remove the remaining carrying value of certain management contracts within the Tradable Credit and Real Estate Groups that had terminated.
Goodwill
During the year ended December 31, 2014, the Company evaluated three leases assumed in connection with its acquisition of AREA Management Holdings, LLC. Based upon the existing terms of the acquired leases, the Company determined that the contractual lease payments exceeded current market conditions. The Company recorded an unfavorable lease liability of $3.4 million with a corresponding increase to goodwill. The unfavorable lease liability represents the discounted cash flows associated with the difference between the contractual lease payments and market-based lease payments.
|
|||
4. INVESTMENTS
Investments are accounted for at fair value in accordance with the investment company guidance.
The Company's investments are presented below:
|
|
|
Fair value at |
|
Fair value as a percentage |
|
||||||||||||||||||||||
|
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
|
||||||||||||||||||
|
Private Investment Partnership Interests: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
AREA European Property Enhancement Program L.P. |
|
$ |
1,760 |
|
$ |
1,735 |
|
|
1.0 |
% |
|
1.9 |
% |
||||||||||||||
|
AREA Sponsor Holdings LLC |
|
|
40,296 |
|
|
31,560 |
|
|
23.6 |
% |
|
35.4 |
% |
||||||||||||||
|
Ares Capital Europe II (D), L.P. |
|
|
15,592 |
|
|
— |
|
|
9.2 |
% |
|
— |
|
||||||||||||||
|
Ares Capital Europe II (E), L.P.(2) |
|
|
31 |
|
|
— |
|
|
0.0 |
% |
|
— |
|
||||||||||||||
|
Ares Centre Street Partnership, L.P. |
|
|
256 |
|
|
— |
|
|
0.2 |
% |
|
— |
|
||||||||||||||
|
Ares Corporate Opportunities Fund, L.P.(1) |
|
|
777 |
|
|
1,009 |
|
|
0.5 |
% |
|
1.1 |
% |
||||||||||||||
|
Ares Corporate Opportunities Fund IV, L.P. |
|
|
21,836 |
|
|
— |
|
|
12.8 |
% |
|
— |
|
||||||||||||||
|
Ares Credit Strategies Fund II, L.P. |
|
|
627 |
|
|
1,998 |
|
|
0.4 |
% |
|
2.2 |
% |
||||||||||||||
|
Ares Credit Strategies Fund III, L.P. |
|
|
19 |
|
|
— |
|
|
0.0 |
% |
|
— |
|
||||||||||||||
|
Ares Enhanced Loan Investment Strategy IX, L.P. |
|
|
— |
|
|
512 |
|
|
— |
|
|
0.6 |
% |
||||||||||||||
|
Ares European Credit Strategies Fund (C) L.P(2). |
|
|
497 |
|
|
301 |
|
|
0.3 |
% |
|
0.3 |
% |
||||||||||||||
|
Ares European Real Estate Fund IV L.P. |
|
|
2,455 |
|
|
— |
|
|
1.4 |
% |
|
— |
|
||||||||||||||
|
Ares Multi-Strategy Credit Fund V (H), L.P. |
|
|
1,068 |
|
|
1,022 |
|
|
0.6 |
% |
|
1.1 |
% |
||||||||||||||
|
Ares Special Situations Fund I-B, L.P. |
|
|
2 |
|
|
— |
|
|
0.0 |
% |
|
— |
|
||||||||||||||
|
Ares Special Situations Fund III, L.P. |
|
|
26,867 |
|
|
24,253 |
|
|
15.8 |
% |
|
27.2 |
% |
||||||||||||||
|
Ares SSF Riopelle, L.P. |
|
|
4,211 |
|
|
— |
|
|
2.5 |
% |
|
— |
|
||||||||||||||
|
Ares Strategic Investment Partners, L.P. |
|
|
75 |
|
|
— |
|
|
0.0 |
% |
|
— |
|
||||||||||||||
|
Ares Strategic Investment Partners III, L.P. |
|
|
2,672 |
|
|
2,714 |
|
|
1.6 |
% |
|
3.0 |
% |
||||||||||||||
|
Ares Strategic Real Estate Program—HHC, LLC |
|
|
3,094 |
|
|
1,227 |
|
|
1.8 |
% |
|
1.4 |
% |
||||||||||||||
|
Ares US Real Estate Fund VIII, L.P. |
|
|
1,574 |
|
|
— |
|
|
0.9 |
% |
|
— |
|
||||||||||||||
|
Resolution Life L.P. |
|
|
45,348 |
|
|
21,846 |
|
|
26.6 |
% |
|
24.4 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total private investment partnership interests (cost: $128,756 and $68,580 at December 31, 2014 and 2013, respectively) |
|
|
169,057 |
|
|
88,177 |
|
|
99.2 |
% |
|
98.6 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Ares Multi-Strategy Credit Fund, Inc. |
|
|
89 |
|
|
89 |
|
|
0.1 |
% |
|
0.1 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total common stock (cost: $108 and $100 at December 31, 2014 and 2013, respectively) |
|
|
89 |
|
|
89 |
|
|
0.1 |
% |
|
0.1 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Corporate Bonds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Ares Commercial Real Estate Corporation Convertible Senior Notes |
|
|
1,178 |
|
|
1,172 |
|
|
0.7 |
% |
|
1.3 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total corporate bond (cost: $1,150 and $1,150, at December 31, 2014 and 2013, respectively) |
|
|
1,178 |
|
|
1,172 |
|
|
0.7 |
% |
|
1.3 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total fair value investments (cost: $130,014 and $69,830 at December 31, 2014 and 2013, respectively) |
|
$ |
170,324 |
|
$ |
89,438 |
|
|
100.0 |
% |
|
100.0 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
(1) |
Security represents the sole investment held by ACOF Co-Investors LLC |
|
(2) |
Denominated in foreign currency; fair value is translated into U.S. Dollars |
Investments held in the Consolidated Funds are summarized below:
|
|
|
Fair value at |
|
Fair value as a |
|
||||||||
|
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
|
||||
|
United States: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer discretionary |
|
$ |
3,136,899 |
|
$ |
4,146,611 |
|
|
16.3 |
% |
|
20.0 |
% |
|
Consumer staples |
|
|
221,708 |
|
|
338,735 |
|
|
1.2 |
% |
|
1.6 |
% |
|
Energy |
|
|
416,861 |
|
|
535,857 |
|
|
2.2 |
% |
|
2.6 |
% |
|
Financials |
|
|
401,673 |
|
|
544,879 |
|
|
2.1 |
% |
|
2.6 |
% |
|
Healthcare, education and childcare |
|
|
1,191,619 |
|
|
1,176,418 |
|
|
6.2 |
% |
|
5.6 |
% |
|
Industrials |
|
|
1,717,523 |
|
|
2,038,390 |
|
|
9.0 |
% |
|
9.8 |
% |
|
Information technology |
|
|
745,920 |
|
|
542,377 |
|
|
3.9 |
% |
|
2.6 |
% |
|
Materials |
|
|
393,569 |
|
|
463,864 |
|
|
2.1 |
% |
|
2.2 |
% |
|
Partnership and LLC interests |
|
|
16,256 |
|
|
— |
|
|
0.1 |
% |
|
0.0 |
% |
|
Telecommunication services |
|
|
1,287,688 |
|
|
1,153,691 |
|
|
6.7 |
% |
|
5.5 |
% |
|
Utilities |
|
|
223,553 |
|
|
222,410 |
|
|
1.2 |
% |
|
1.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed income securities (cost: $9,928,006 and $11,071,982, at December 31, 2014 and 2013, respectively) |
|
|
9,753,269 |
|
|
11,163,232 |
|
|
51.0 |
% |
|
53.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer discretionary |
|
|
2,852,369 |
|
|
2,464,520 |
|
|
14.9 |
% |
|
11.9 |
% |
|
Consumer staples |
|
|
443,711 |
|
|
201,059 |
|
|
2.3 |
% |
|
1.0 |
% |
|
Energy |
|
|
150,755 |
|
|
193,946 |
|
|
0.8 |
% |
|
1.0 |
% |
|
Financials |
|
|
8,272 |
|
|
6,172 |
|
|
0.0 |
% |
|
0.0 |
% |
|
Healthcare, education and childcare |
|
|
464,159 |
|
|
296,817 |
|
|
2.4 |
% |
|
1.5 |
% |
|
Industrials |
|
|
128,247 |
|
|
134,544 |
|
|
0.7 |
% |
|
0.6 |
% |
|
Materials |
|
|
— |
|
|
31 |
|
|
— |
|
|
0.0 |
% |
|
Partnership and LLC interests |
|
|
89,105 |
|
|
41,001 |
|
|
0.5 |
% |
|
0.2 |
% |
|
Telecommunication services |
|
|
16,576 |
|
|
51,921 |
|
|
0.1 |
% |
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities (cost: $2,964,900 and $2,733,448 at December 31, 2014 and 2013, respectively) |
|
|
4,153,194 |
|
|
3,390,011 |
|
|
21.7 |
% |
|
16.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value at |
|
Fair value as a |
|
||||||||
|
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
|
||||
|
Europe: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer discretionary |
|
|
1,080,270 |
|
|
1,858,364 |
|
|
5.6 |
% |
|
8.9 |
% |
|
Consumer staples |
|
|
126,766 |
|
|
175,440 |
|
|
0.7 |
% |
|
0.8 |
% |
|
Energy |
|
|
16,509 |
|
|
4,906 |
|
|
0.1 |
% |
|
0.0 |
% |
|
Financials |
|
|
345,811 |
|
|
322,355 |
|
|
1.8 |
% |
|
1.5 |
% |
|
Healthcare, education and childcare |
|
|
303,116 |
|
|
410,726 |
|
|
1.6 |
% |
|
2.0 |
% |
|
Industrials |
|
|
526,214 |
|
|
485,243 |
|
|
2.8 |
% |
|
2.3 |
% |
|
Information technology |
|
|
130,504 |
|
|
140,976 |
|
|
0.7 |
% |
|
0.7 |
% |
|
Materials |
|
|
326,659 |
|
|
328,867 |
|
|
1.7 |
% |
|
1.6 |
% |
|
Telecommunication services |
|
|
833,015 |
|
|
944,800 |
|
|
4.4 |
% |
|
4.5 |
% |
|
Utilities |
|
|
2,516 |
|
|
37,001 |
|
|
0.0 |
% |
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed income securities (cost: $3,813,343 and $4,747,808 at December 31, 2014 and 2013, respectively) |
|
|
3,691,380 |
|
|
4,708,678 |
|
|
19.4 |
% |
|
22.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer discretionary |
|
|
2,940 |
|
|
10,686 |
|
|
0.0 |
% |
|
0.1 |
% |
|
Consumer staples |
|
|
862 |
|
|
668 |
|
|
0.0 |
% |
|
0.0 |
% |
|
Healthcare, education and childcare |
|
|
27,774 |
|
|
28,607 |
|
|
0.1 |
% |
|
0.1 |
% |
|
Industrials |
|
|
76 |
|
|
8,595 |
|
|
0.0 |
% |
|
0.0 |
% |
|
Materials |
|
|
— |
|
|
773 |
|
|
— |
|
|
0.0 |
% |
|
Partnership and LLC interests |
|
|
17,107 |
|
|
— |
|
|
0.1 |
% |
|
— |
|
|
Telecommunication services |
|
|
4,686 |
|
|
1,524 |
|
|
0.0 |
% |
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities (cost: $98,913 and $83,277 at December 31, 2014 and 2013, respectively) |
|
|
53,445 |
|
|
50,853 |
|
|
0.2 |
% |
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia and other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer discretionary |
|
|
73,250 |
|
|
43,538 |
|
|
0.4 |
% |
|
0.2 |
% |
|
Financials |
|
|
493,618 |
|
|
456,463 |
|
|
2.6 |
% |
|
2.2 |
% |
|
Healthcare, education and childcare |
|
|
41,536 |
|
|
14,556 |
|
|
0.2 |
% |
|
0.1 |
% |
|
Information technology |
|
|
— |
|
|
22,012 |
|
|
— |
|
|
0.1 |
% |
|
Materials |
|
|
— |
|
|
15,885 |
|
|
— |
|
|
0.1 |
% |
|
Telecommunication services |
|
|
30,777 |
|
|
81,978 |
|
|
0.2 |
% |
|
0.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed income securities (cost: $579,436 and $593,188, at December 31, 2014 and 2013, respectively) |
|
|
639,181 |
|
|
634,432 |
|
|
3.4 |
% |
|
3.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer discretionary |
|
|
89,897 |
|
|
— |
|
|
0.5 |
% |
|
— |
|
|
Consumer staples |
|
|
62,467 |
|
|
77,572 |
|
|
0.3 |
% |
|
0.4 |
% |
|
Healthcare, education and childcare |
|
|
33,610 |
|
|
23,493 |
|
|
0.2 |
% |
|
0.1 |
% |
|
Materials |
|
|
52,947 |
|
|
52,947 |
|
|
0.3 |
% |
|
0.3 |
% |
|
Partnership and LLC interests |
|
|
13,478 |
|
|
— |
|
|
0.1 |
% |
|
— |
|
|
Utilities |
|
|
8,994 |
|
|
4,724 |
|
|
0.0 |
% |
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities (cost: $184,022 and $135,631 at December 31, 2014 and 2013, respectively) |
|
|
261,393 |
|
|
158,736 |
|
|
1.4 |
% |
|
0.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value at |
|
Fair value as a |
|
||||||||||||||||||||||
|
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
|
||||||||||||||||||
|
Canada: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Consumer discretionary |
|
|
71,379 |
|
|
121,132 |
|
|
0.4 |
% |
|
0.6 |
% |
||||||||||||||
|
Energy |
|
|
60,605 |
|
|
87,469 |
|
|
0.3 |
% |
|
0.4 |
% |
||||||||||||||
|
Healthcare, education and childcare |
|
|
84,470 |
|
|
104,464 |
|
|
0.4 |
% |
|
0.5 |
% |
||||||||||||||
|
Industrials |
|
|
30,009 |
|
|
16,331 |
|
|
0.2 |
% |
|
0.1 |
% |
||||||||||||||
|
Materials |
|
|
5,625 |
|
|
— |
|
|
0.0 |
% |
|
— |
|
||||||||||||||
|
Partnership and LLC interests |
|
|
1,327 |
|
|
— |
|
|
0.0 |
% |
|
— |
|
||||||||||||||
|
Telecommunication services |
|
|
109,805 |
|
|
142,374 |
|
|
0.6 |
% |
|
0.7 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total fixed income securities (cost: $396,108 and $480,231at December 31, 2014 and 2013, respectively) |
|
|
363,220 |
|
|
471,770 |
|
|
1.9 |
% |
|
2.3 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Consumer discretionary |
|
|
— |
|
|
892 |
|
|
— |
|
|
0.0 |
% |
||||||||||||||
|
Energy |
|
|
— |
|
|
51,187 |
|
|
— |
|
|
0.2 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total equity securities (cost: $68,249 and $75,256 at December 31, 2014 and 2013, respectively) |
|
|
— |
|
|
52,079 |
|
|
— |
|
|
0.2 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Australia: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Consumer discretionary |
|
|
— |
|
|
203 |
|
|
— |
|
|
0.0 |
% |
||||||||||||||
|
Energy |
|
|
66,150 |
|
|
— |
|
|
0.3 |
% |
|
— |
|
||||||||||||||
|
Industrials |
|
|
32,146 |
|
|
99,376 |
|
|
0.2 |
% |
|
0.5 |
% |
||||||||||||||
|
Utilities |
|
|
94,738 |
|
|
68,513 |
|
|
0.5 |
% |
|
0.3 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total fixed income securities (cost: $213,759 and $169,831 at December 31, 2014 and 2013, respectively) |
|
|
193,034 |
|
|
168,092 |
|
|
1.0 |
% |
|
0.8 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Equity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Telecommunication services |
|
|
7,547 |
|
|
16,102 |
|
|
0.0 |
% |
|
0.1 |
% |
||||||||||||||
|
Utilities |
|
|
8,287 |
|
|
9,353 |
|
|
0.0 |
% |
|
0.0 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total equity securities (cost: $22,233 and $30,140 at December 31, 2014 and 2013, respectively) |
|
|
15,834 |
|
|
25,455 |
|
|
0.0 |
% |
|
0.1 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total fixed income securities |
|
|
14,640,084 |
|
|
17,146,204 |
|
|
76.7 |
% |
|
82.3 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total equity securities |
|
|
4,483,866 |
|
|
3,677,134 |
|
|
23.3 |
% |
|
17.7 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total investments, at fair value |
|
$ |
19,123,950 |
|
$ |
20,823,338 |
|
|
100.0 |
% |
|
100.0 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Securities sold short, at fair value |
|
$ |
(3,763 |
) |
$ |
(1,633 |
) |
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
At December 31, 2014 and 2013, no single issuer or investment, including derivative instruments and underlying portfolio investments of the Consolidated Funds, had a fair value that exceeded 5.0% of the Company's total consolidated net assets.
|
|||
5. FAIR VALUE
GAAP establishes a hierarchal disclosure framework which prioritizes the inputs used in measuring financial instruments at fair value into three levels based on their market observability. Market price observability is affected by a number of factors, including the type of instrument and the characteristics specific to the instrument. Financial instruments with readily available quoted prices from an active market or for which fair value can be measured based on actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value.
Financial assets and liabilities measured and reported at fair value are classified as follows:
|
• |
Level I—Quoted unadjusted prices for identical instruments in active markets to which the Company has access at the date of measurement. |
|
• |
Level II—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are directly or indirectly observable. Level II inputs include prices in markets for which there are few transactions, prices that are not current, prices for which little public information exists or prices that vary substantially over time or among brokered market makers. Other inputs include interest rates, yield curves, volatilities, prepayment risks, loss severities, credit risks and default rates. |
|
• |
Level III—Model-derived valuations for which one or more significant inputs are unobservable. These inputs reflect the Company's assessment of the assumptions that market participants use to value the investment based on the best available information. |
In some instances, an instrument may fall into different levels of the fair value hierarchy. In such instances, the instrument's level within the fair value hierarchy is based on the lowest of the three levels (with Level III being the lowest) that is significant to the fair value measurement. The Company's assessment of the significance of an input requires judgment and considers factors specific to the instrument. The Company accounts for the transfer of assets into or out of each fair value hierarchy level as of the beginning of the reporting period.
Investment / Liability Valuations
The valuation techniques used by the Company to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The valuation techniques applied to investments held by the Company and by the Consolidated Funds vary depending on the nature of the investment.
CLO loan obligations: The Company has elected the fair value option to measure the CLO loan obligations at fair value as the Company has determined that measurement of the loan obligations issued by the CLOs at fair value better correlates with the value of the assets held by the CLOs, which are held to provide the cash flows for the note obligations.
The fair value of CLO liabilities is estimated based on various valuation models of third-party pricing services as well as internal models. The valuation models generally utilize discounted cash flows and take into consideration prepayment and loss assumptions, based on historical experience and projected performance, economic factors, the characteristics and condition of the underlying collateral, comparable yields for similar securities and recent trading activity. These securities are classified as Level III.
Corporate debt, bonds, bank loans, securities sold short and derivative instruments: The fair value of corporate debt, bonds, bank loans, securities sold short and derivative instruments is estimated based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs. These investments are generally classified within Level II. The Company obtains prices from independent pricing services that generally utilize broker quotes and may use various other pricing techniques, which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data. If the pricing services are only able to obtain a single broker quote or utilize a pricing model, such securities will be classified as Level III. If the pricing services are unable to provide prices, the Company will attempt to obtain one or more broker quotes directly from a dealer, price such securities at the last bid price obtained and classify such securities as Level III.
Equity and equity-related securities: Securities traded on a national securities exchange are stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified as Level I. Securities that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs obtained by the Company from independent pricing services are classified as Level II.
Partnership interests: In accordance with ASU 2009-12, Investments in Certain Entities that Calculate Net Asset Value per Share (or its Equivalent), the Company generally values its investments using the NAV per share equivalent calculated by the investment manager as a practical expedient to determining an independent fair value or estimates based on various valuation models of third-party pricing services, as well as internal models. Such valuations are classified as Level II to the extent the investments are currently redeemable; if the investments are subject to a lock-up period, they are classified as Level III.
Certain investments of the Company and the Consolidated Funds are valued at NAV per share of the fund. In limited circumstances, the Company may determine, based on its own due diligence and investment procedures, that NAV per share does not represent fair value. In such circumstances, the Company will estimate the fair value in good faith and in a manner that it reasonably chooses, in accordance with the requirements of GAAP. However, as of December 31, 2014 and 2013, the Company believes that NAV per share represents the fair value of the investments.
The substantial majority of the Company's private commingled funds are closed-ended, and accordingly, do not permit investors to redeem their interests other than in limited circumstances that are beyond the control of the Company, such as instances in which retaining the interest could cause the investor to violate a law, regulation or rule. Investors in open-ended and evergreen funds generally have the right to withdraw their capital, subject to the terms of the respective constituent documents, over periods ranging from one month to three years. In addition, separately managed investment vehicles for a single fund investor may allow such investors to terminate the fund at the discretion of the investor pursuant to the terms of the applicable constituent documents of such vehicle.
In the absence of observable market prices, the Company values Level III investments using consistent valuation methodologies, typically market- or income-based approaches. The main inputs into the Company's valuation model for Level III securities include earnings multiples (based on the historical earnings of the issuer) and discounted cash flows. The Company may also consider original transaction price, recent transactions in the same or similar instruments, completed third-party transactions in comparable instruments and other liquidity, credit and market risk factors. The quarterly valuation process for Level III investments begins with each investment or loan being valued by the investment or valuation teams. The valuations are then reviewed and approved by the valuation committee, which consists of senior members of the investment team and other senior managers. All Level III investment values are ultimately approved by the valuation committees and designated investment professionals. For certain investments, the valuation process also includes a review by independent valuation parties, at least annually, to determine whether the fair values determined by management are reasonable. Results of the valuation process are evaluated each quarter, including an assessment of whether the underlying calculations should be adjusted. In connection with this process, the Company evaluates changes in fair value measurements from period to period for reasonableness, considering items such as industry trends, general economic and market conditions and factors specific to the investment.
Certain Level III assets are valued using prices obtained from brokers or pricing vendors. The Company obtains an average of one to two non-binding broker quotes. The Company seeks to obtain at least one quote directly from a broker making a market for the asset and one price from a pricing vendor for each security or similar securities. For investments where more than one quote is received, the investments are classified as Level II. For investments where only one quote is received, the investments are classified as Level III as the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities or may require adjustment for investment-specific factors or restrictions. Generally, the Company does not adjust any of the prices received from these sources but material prices are reviewed against the Company's valuation models with a limited exception for securities that are deemed to have no value. The Company evaluates the prices obtained from brokers and pricing vendors based on available market information, including trading activity of the subject or similar securities or by performing a comparable security analysis to ensure that fair values are reasonably estimated. The Company may also perform back-testing of valuation information obtained from brokers and pricing vendors against actual prices received in transactions to validate pricing discrepancies. In addition to on-going monitoring and back-testing, the Company performs due diligence procedures over pricing vendors to understand their methodology and controls to support their use in the valuation process and to ensure compliance with required accounting disclosures.
Fair Value of Financial Instruments Held by the Company and Consolidated Funds
The tables below summarize the valuation of investments and other financial instruments by fair value hierarchy levels for the Company and Consolidated Funds as of December 31, 2014:
Investments of the Company
|
|
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||||||||||||||||
|
Investments, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Equity securities |
|
$ |
89 |
|
$ |
— |
|
$ |
— |
|
$ |
89 |
|
||||||||||||||
|
Bonds |
|
|
— |
|
|
1,178 |
|
|
— |
|
|
1,178 |
|
||||||||||||||
|
Partnership interests |
|
|
— |
|
|
— |
|
|
169,057 |
|
|
169,057 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total investments, at fair value |
|
|
89 |
|
|
1,178 |
|
|
169,057 |
|
|
170,324 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Derivative assets, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Forward foreign currency contracts |
|
|
— |
|
|
5,721 |
|
|
— |
|
|
5,721 |
|
||||||||||||||
|
Purchased option contracts |
|
|
— |
|
|
1,902 |
|
|
— |
|
|
1,902 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivative assets, at fair value |
|
|
— |
|
|
7,623 |
|
|
— |
|
|
7,623 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total |
|
$ |
89 |
|
$ |
8,801 |
|
$ |
169,057 |
|
$ |
177,947 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Derivative liabilities, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Forward foreign currency contracts |
|
|
— |
|
|
(2,003 |
) |
|
— |
|
|
(2,003 |
) |
||||||||||||||
|
Interest rate contracts |
|
|
— |
|
|
(847 |
) |
|
— |
|
|
(847 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivative liabilities, at fair value |
|
$ |
— |
|
$ |
(2,850 |
) |
$ |
— |
|
$ |
(2,850 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Investments of Consolidated Funds
|
|
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||||||||||||||||
|
Investments, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Equity securities |
|
$ |
590,095 |
|
$ |
513,771 |
|
$ |
3,263,311 |
|
$ |
4,367,177 |
|
||||||||||||||
|
Bonds |
|
|
— |
|
|
1,113,103 |
|
|
565,634 |
|
|
1,678,737 |
|
||||||||||||||
|
Loans |
|
|
— |
|
|
11,312,518 |
|
|
1,070,494 |
|
|
12,383,012 |
|
||||||||||||||
|
Collateralized loan obligations |
|
|
— |
|
|
— |
|
|
556,267 |
|
|
556,267 |
|
||||||||||||||
|
Partnership interests |
|
|
— |
|
|
— |
|
|
137,272 |
|
|
137,272 |
|
||||||||||||||
|
Other |
|
|
— |
|
|
336 |
|
|
1,149 |
|
|
1,485 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total investments, at fair value |
|
$ |
590,095 |
|
$ |
12,939,728 |
|
$ |
5,594,127 |
|
$ |
19,123,950 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Derivative assets, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Credit contracts |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
||||||||||||||
|
Foreign exchange contracts |
|
|
— |
|
|
2,070 |
|
|
— |
|
|
2,070 |
|
||||||||||||||
|
Other |
|
|
— |
|
|
1,056 |
|
|
— |
|
|
1,056 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivative assets, at fair value |
|
|
— |
|
|
3,126 |
|
|
— |
|
|
3,126 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total |
|
$ |
590,095 |
|
$ |
12,942,854 |
|
$ |
5,594,127 |
|
$ |
19,127,076 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Derivative liabilities, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Forward foreign currency contracts |
|
$ |
— |
|
$ |
(6,906 |
) |
|
— |
|
$ |
(6,906 |
) |
||||||||||||||
|
Credit contracts |
|
|
— |
|
|
(13,263 |
) |
|
— |
|
|
(13,263 |
) |
||||||||||||||
|
Interest rate swaps |
|
|
— |
|
|
(21 |
) |
|
— |
|
|
(21 |
) |
||||||||||||||
|
Other |
|
|
— |
|
|
— |
|
|
(22,142 |
) |
|
(22,142 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivative liabilities, at fair value |
|
|
— |
|
|
(20,190 |
) |
|
(22,142 |
) |
|
(42,332 |
) |
||||||||||||||
|
Loan obligations of CLOs(1) |
|
|
— |
|
|
— |
|
|
(12,049,019 |
) |
|
(12,049,019 |
) |
||||||||||||||
|
Securities sold short, at fair value |
|
|
— |
|
|
(3,763 |
) |
|
— |
|
|
(3,763 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total |
|
$ |
— |
|
$ |
(23,953 |
) |
$ |
(12,071,161 |
) |
$ |
(12,095,114 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
(1) |
Ares Enhanced Loan Investment Strategy II, Ltd. has not elected to fair value its loan obligation and is therefore carried at cost of $151. |
The tables below summarize the valuation of investments and other financial instruments by fair value hierarchy levels for the Company and Consolidated Funds as of December 31, 2013:
Investments of the Company
|
|
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||||||||||||||||
|
Investments, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Equity securities |
|
$ |
89 |
|
$ |
— |
|
$ |
— |
|
$ |
89 |
|
||||||||||||||
|
Bonds |
|
|
— |
|
|
1,172 |
|
|
— |
|
|
1,172 |
|
||||||||||||||
|
Partnership interests |
|
|
— |
|
|
— |
|
|
88,177 |
|
|
88,177 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total investments, at fair value |
|
|
89 |
|
|
1,172 |
|
|
88,177 |
|
|
89,438 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Derivative assets, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Forward foreign currency contracts |
|
|
— |
|
|
247 |
|
|
— |
|
|
247 |
|
||||||||||||||
|
Purchased option contracts |
|
|
— |
|
|
917 |
|
|
— |
|
|
917 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivative assets, at fair value |
|
|
— |
|
|
1,164 |
|
|
— |
|
|
1,164 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total |
|
$ |
89 |
|
$ |
2,336 |
|
$ |
88,177 |
|
$ |
90,602 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Derivative liabilities, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Forward foreign currency contracts |
|
$ |
— |
|
$ |
(1,653 |
) |
$ |
— |
|
$ |
(1,653 |
) |
||||||||||||||
|
Interest rate contracts |
|
|
— |
|
|
(1,254 |
) |
|
— |
|
|
(1,254 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivative liabilities, at fair value |
|
$ |
— |
|
$ |
(2,907 |
) |
$ |
— |
|
$ |
(2,907 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Investments of Consolidated Funds
|
|
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||||||||||||||||
|
Investments, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Equity securities |
|
$ |
166,535 |
|
$ |
482,568 |
|
$ |
2,958,232 |
|
$ |
3,607,335 |
|
||||||||||||||
|
Bonds |
|
|
— |
|
|
1,576,942 |
|
|
2,052,984 |
|
|
3,629,926 |
|
||||||||||||||
|
Loans |
|
|
— |
|
|
11,868,584 |
|
|
1,058,635 |
|
|
12,927,219 |
|
||||||||||||||
|
Collateralized loan obligations |
|
|
— |
|
|
65,405 |
|
|
515,534 |
|
|
580,939 |
|
||||||||||||||
|
Partnership interests |
|
|
— |
|
|
— |
|
|
41,001 |
|
|
41,001 |
|
||||||||||||||
|
Other |
|
|
— |
|
|
34,546 |
|
|
2,372 |
|
|
36,918 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total investments, at fair value |
|
|
166,535 |
|
|
14,028,045 |
|
|
6,628,758 |
|
|
20,823,338 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Derivative assets, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Interest rate contracts |
|
|
— |
|
|
8 |
|
|
— |
|
|
8 |
|
||||||||||||||
|
Credit contracts |
|
|
— |
|
|
2,651 |
|
|
— |
|
|
2,651 |
|
||||||||||||||
|
Equity contracts |
|
|
— |
|
|
179 |
|
|
— |
|
|
179 |
|
||||||||||||||
|
Foreign exchange contracts |
|
|
— |
|
|
8,652 |
|
|
— |
|
|
8,652 |
|
||||||||||||||
|
Other financial instruments |
|
|
— |
|
|
— |
|
|
3,135 |
|
|
3,135 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivative assets, at fair value |
|
|
— |
|
|
11,490 |
|
|
3,135 |
|
|
14,625 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total |
|
$ |
166,535 |
|
$ |
14,039,535 |
|
$ |
6,631,893 |
|
$ |
20,837,963 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Derivative liabilities, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Forward foreign currency contracts |
|
$ |
— |
|
$ |
(38,594 |
) |
$ |
(899 |
) |
$ |
(39,493 |
) |
||||||||||||||
|
Written options |
|
|
— |
|
|
(34 |
) |
|
— |
|
|
(34 |
) |
||||||||||||||
|
Credit contracts |
|
|
— |
|
|
(25,754 |
) |
|
(1,633 |
) |
|
(27,387 |
) |
||||||||||||||
|
Interest rate swaps |
|
|
— |
|
|
(3,703 |
) |
|
(371 |
) |
|
(4,074 |
) |
||||||||||||||
|
Other financial instruments |
|
|
— |
|
|
(175 |
) |
|
(3,952 |
) |
|
(4,127 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivative liabilities, at fair value |
|
|
— |
|
|
(68,260 |
) |
|
(6,855 |
) |
|
(75,115 |
) |
||||||||||||||
|
Loan obligations of CLOs(1) |
|
|
— |
|
|
— |
|
|
(11,534,956 |
) |
|
(11,534,956 |
) |
||||||||||||||
|
Securities sold short, at fair value |
|
|
— |
|
|
(1,633 |
) |
|
— |
|
|
(1,633 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total |
|
$ |
— |
|
$ |
(69,893 |
) |
$ |
(11,541,811 |
) |
$ |
(11,611,704 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
(1) |
Ares Enhanced Loan Investment Strategy II, Ltd. has not elected to fair value its loan obligation and is therefore carried at cost of $239,201. |
The following tables set forth a summary of changes in the fair value of the Level III investments for the year ended December 31, 2014:
Investments of the Company
|
|
|
Partnership |
|
||||||
|
Balance, beginning of period |
|
$ |
88,177 |
|
|||||
|
Investment in deconsolidated fund(3) |
|
|
9,951 |
|
|||||
|
Transfer in |
|
|
8,326 |
|
|||||
|
Purchases(1) |
|
|
91,646 |
|
|||||
|
Sales(2) |
|
|
(74,964 |
) |
|||||
|
Realized and unrealized appreciation (depreciation), net |
|
|
45,921 |
|
|||||
|
|
|
|
|
|
|||||
|
Balance, end of period |
|
$ |
169,057 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|||||
|
Changes in unrealized appreciation (depreciation) included in earnings related to financial assets still held at the reporting date |
|
$ |
15,448 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|||||
Investments of Consolidated Funds
|
|
|
Equity |
|
Fixed Income |
|
Partnership |
|
Other |
|
Total |
|
||||||||||||||||||||||
|
Balance, beginning of period |
|
$ |
2,958,232 |
|
$ |
3,627,153 |
|
$ |
41,001 |
|
$ |
(1,348 |
) |
$ |
6,625,038 |
|
|||||||||||||||||
|
Deconsolidation of funds(3) |
|
|
(140 |
) |
|
(378,397 |
) |
|
8,292 |
|
|
— |
|
|
(370,245 |
) |
|||||||||||||||||
|
Transfer in |
|
|
— |
|
|
334,015 |
|
|
— |
|
|
— |
|
|
334,015 |
|
|||||||||||||||||
|
Transfer out |
|
|
(226,897 |
) |
|
(300,930 |
) |
|
(8,326 |
) |
|
— |
|
|
(536,153 |
) |
|||||||||||||||||
|
Purchases(1) |
|
|
544,994 |
|
|
503,948 |
|
|
87,221 |
|
|
254 |
|
|
1,136,417 |
|
|||||||||||||||||
|
Sales(2) |
|
|
(240,596 |
) |
|
(1,492,608 |
) |
|
(1,251 |
) |
|
(3,733 |
) |
|
(1,738,188 |
) |
|||||||||||||||||
|
Accrued discounts/premiums |
|
|
12,370 |
|
|
16,630 |
|
|
— |
|
|
— |
|
|
29,000 |
|
|||||||||||||||||
|
Realized and unrealized appreciation (depreciation), net |
|
|
215,348 |
|
|
(117,416 |
) |
|
10,335 |
|
|
(16,166 |
) |
|
92,101 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Balance, end of period |
|
$ |
3,263,311 |
|
$ |
2,192,395 |
|
$ |
137,272 |
|
$ |
(20,993 |
) |
$ |
5,571,985 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Changes in unrealized appreciation (depreciation) included in earnings related to financial assets still held at the reporting date |
|
$ |
284,280 |
|
|
(48,456 |
) |
$ |
9,657 |
|
|
(19,861 |
) |
$ |
225,620 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
(1) |
Purchases include paid-in-kind interest and securities received in connection with restructurings. |
|
(2) |
Sales include paid-in-kind interest, principal redemptions and securities disposed of in connection with restructurings. |
|
(3) |
Represents investment in Consolidated Fund that was deconsolidated during the period. Balance was previously eliminated upon consolidation and not reported as Level III investment. |
The following tables set forth a summary of changes in the fair value of the Level III investments for the year ended December 31, 2013:
Investments of the Company
|
|
|
Fixed Income |
|
Partnership Interests |
|
Total |
|
||||||||||||||
|
Balance, beginning of period |
|
$ |
1,170 |
|
$ |
21,695 |
|
$ |
22,865 |
|
|||||||||||
|
Transfer out |
|
|
(1,170 |
) |
|
— |
|
|
(1,170 |
) |
|||||||||||
|
Purchases |
|
|
— |
|
|
51,329 |
|
|
51,329 |
|
|||||||||||
|
Sales |
|
|
— |
|
|
(2,447 |
) |
|
(2,447 |
) |
|||||||||||
|
Realized and unrealized appreciation (depreciation), net |
|
|
— |
|
|
17,600 |
|
|
17,600 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Balance, end of period |
|
$ |
— |
|
$ |
88,177 |
|
$ |
88,177 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Changes in unrealized appreciation (depreciation) included in earnings related to financial assets still held at the reporting date |
|
$ |
— |
|
$ |
16,816 |
|
$ |
16,816 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Investments of Consolidated Funds
|
|
|
Equity Securities |
|
Fixed Income |
|
Partnership |
|
Other |
|
Total |
|
||||||||||||||||||||||
|
Balance, beginning of period |
|
$ |
1,978,138 |
|
$ |
3,920,451 |
|
$ |
6,177 |
|
$ |
5,202 |
|
$ |
5,909,968 |
|
|||||||||||||||||
|
Initial consolidation of new funds |
|
|
— |
|
|
29,570 |
|
|
— |
|
|
— |
|
|
29,570 |
|
|||||||||||||||||
|
Transfer in |
|
|
74,438 |
|
|
237,312 |
|
|
— |
|
|
(29 |
) |
|
311,721 |
|
|||||||||||||||||
|
Transfer out |
|
|
(52,573 |
) |
|
(249,763 |
) |
|
— |
|
|
— |
|
|
(302,336 |
) |
|||||||||||||||||
|
Purchases |
|
|
555,589 |
|
|
1,313,850 |
|
|
34,369 |
|
|
1,135 |
|
|
1,904,943 |
|
|||||||||||||||||
|
Sales |
|
|
(43,695 |
) |
|
(1,704,939 |
) |
|
(851 |
) |
|
(23,743 |
) |
|
(1,773,228 |
) |
|||||||||||||||||
|
Accrued discounts/premiums |
|
|
— |
|
|
27,149 |
|
|
— |
|
|
88 |
|
|
27,237 |
|
|||||||||||||||||
|
Realized and unrealized appreciation (depreciation), net |
|
|
446,335 |
|
|
53,523 |
|
|
1,306 |
|
|
15,999 |
|
|
517,163 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Balance, end of period |
|
$ |
2,958,232 |
|
$ |
3,627,153 |
|
$ |
41,001 |
|
$ |
(1,348 |
) |
$ |
6,625,038 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Changes in unrealized appreciation (depreciation) included in earnings related to financial assets still held at the reporting date |
|
$ |
417,659 |
|
$ |
(26,038 |
) |
$ |
1,306 |
|
$ |
(4,896 |
) |
$ |
388,031 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total realized and unrealized appreciation (depreciation) recorded for the Company's Level III investments are included in net realized gain (loss) on investments and net change in unrealized appreciation (depreciation) on investments in the Consolidated Statements of Operations, respectively.
Total realized and unrealized appreciation (depreciation) recorded for the Consolidated Funds' Level III investments are included in net realized gain (loss) on investments of Consolidated Funds and net change in unrealized appreciation (depreciation) on investments of Consolidated Funds in the Consolidated Statements of Operations, respectively.
The Company recognizes transfers between the levels as of the beginning of the period. Transfers out of Level III were generally attributable to certain investments that experienced a more significant level of market activity during the period and thus were valued using observable inputs either from independent pricing services or multiple brokers. Transfers into Level III were generally attributable to certain investments that experienced a less significant level of market activity during the period and thus were only able to obtain one or fewer quotes from a broker or independent pricing service. For the year ended December 31, 2014, transfers from Level I to Level II included $15.4 million of restricted common stock received in exchange for an exchange-traded common equity investment upon the exercise of warrants. Transfers from Level II to Level I included $13.7 million due to the removal of a restriction on the same security and $3.3 million of common stock due to change in the qualitative valuation method used.
The following table sets forth a summary of changes in the fair value of the Level III investments for the CLO loan obligations for the years ended December 31, 2014 and 2013:
|
|
|
For the year ended |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Balance, beginning of period |
|
$ |
11,534,956 |
|
$ |
9,422,570 |
|
||||||||
|
Borrowings |
|
|
2,964,522 |
|
|
2,757,493 |
|
||||||||
|
Paydowns |
|
|
(1,825,322 |
) |
|
(934,620 |
) |
||||||||
|
Realized and unrealized gains, net |
|
|
(625,137 |
) |
|
289,513 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Balance, end of period |
|
$ |
12,049,019 |
|
$ |
11,534,956 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
The following tables summarize the quantitative inputs and assumptions used for the Company's Level III inputs as of December 31, 2014:
|
Investments |
|
Fair |
|
Valuation Technique(s) |
|
Unobservable |
|
Range |
|||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
||||||||||
|
Partnership interests |
|
$ |
123,709 |
|
NAV |
|
N/A |
|
N/A |
||||||||||
|
Partnership interests |
|
|
45,348 |
|
Recent Transaction Price(1) |
|
N/A |
|
N/A |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Total |
|
$ |
169,057 |
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(1) |
Recent transaction price consists of securities purchased or restructured within six months. The Company has determined that there has been no change to the valuation based on the underlying assumptions used at the closing of such transactions. |
The following tables summarize the quantitative inputs and assumptions used for the Consolidated Funds' Level III inputs as of December 31, 2014:
|
Investments |
|
Fair Value |
|
Valuation Technique(s) |
|
Unobservable Input(s) |
|
Range |
|
Weighted |
|||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Consumer discretionary |
|
$ |
2,940 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
9.4x |
|
9.4x |
||||||||||||
|
|
|
|
208,498 |
|
Market approach (comparable companies) |
|
Book value multiple |
|
1.7x - 2.0x |
|
1.9x |
||||||||||||
|
|
|
|
2,121,864 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
7.0x - 15.0x |
|
10.7x |
||||||||||||
|
|
|
|
979 |
|
Other |
|
Future distribution estimates |
|
18.7x |
|
18.7x |
||||||||||||
|
|
|
|
5,140 |
|
Other |
|
Illiquidity discount |
|
15.0% |
|
15.0% |
||||||||||||
|
Consumer staples |
|
|
862 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
7.9x |
|
7.9x |
||||||||||||
|
|
|
|
10,349 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
7.0x |
|
7.0x |
||||||||||||
|
|
|
|
44,553 |
|
Market approach (comparable companies)(2) |
|
Net income multiple |
|
11.0x |
|
11.0x |
||||||||||||
|
Energy |
|
|
136,045 |
|
Discounted Cash Flow |
|
Discount rate |
|
9.0% |
|
9.0% |
||||||||||||
|
|
|
|
|
|
|
|
EBITDA multiple |
|
7.5x |
|
7.5x |
||||||||||||
|
Financials |
|
|
8,272 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
10.5x |
|
10.5x |
||||||||||||
|
Healthcare, education, and childcare |
|
|
27,774 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
1.6x - 7.1x |
|
5.4x |
||||||||||||
|
|
|
|
463,075 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
8.0x - 13.0x |
|
11.2x |
||||||||||||
|
|
|
|
33,610 |
|
Market approach (comparable companies) |
|
Net income multiple |
|
35.0x |
|
35.0x |
||||||||||||
|
Industrials |
|
|
76 |
|
Recent transaction price(1) |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
128,182 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
8.0x - 12.0x |
|
9.8x |
||||||||||||
|
Materials |
|
|
52,947 |
|
Market approach (comparable companies) |
|
Net income multiple |
|
9.0x |
|
9.0x |
||||||||||||
|
Telecommunication services |
|
|
331 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
533 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
10.0x |
|
10.0x |
||||||||||||
|
Utilities |
|
|
17,281 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Fixed Income securities |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Consumer discretionary |
|
|
256,994 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
18,205 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
9.0x - 11.0x |
|
9.3x |
||||||||||||
|
|
|
|
69,418 |
|
Income approach (other) |
|
Yield |
|
2.5% - 18.7% |
|
12.8% |
||||||||||||
|
|
|
|
120,658 |
|
Market approach (comparable companies) |
|
Book value multiple |
|
1.7x - 2.0x |
|
1.9x |
||||||||||||
|
|
|
|
15,400 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
7.5x |
|
7.5x |
||||||||||||
|
|
|
|
5,923 |
|
Recent transaction price(1) |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Consumer staples |
|
|
540 |
|
Discounted cash flow |
|
Discount Rate |
|
20.0% |
|
20.0% |
||||||||||||
|
|
|
|
776 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
6.5x |
|
6.5x |
||||||||||||
|
|
|
|
28,965 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Energy |
|
|
33,687 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Financials |
|
|
470,417 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
8,551 |
|
Discounted cash flow |
|
Discount rate and Cumulative loss rate |
|
13.3% / 10.0% |
|
13.3% / 10.0% |
||||||||||||
|
|
|
|
85,851 |
|
Discounted cash flow |
|
Discount rate |
|
11.5% |
|
11.5% |
||||||||||||
|
|
|
|
|
|
|
|
Constant prepayment rate |
|
0.0% - 50.0% |
|
21.5% |
||||||||||||
|
|
|
|
|
|
|
|
Constant default rate |
|
2.0% - 10.0% |
|
2.2% |
||||||||||||
|
|
|
|
|
|
|
|
Recovery rate |
|
10.0% - 80.0% |
|
73.8% |
||||||||||||
|
|
|
|
2,541 |
|
Income Approach (Other) |
|
Cash flow % of book value |
|
8.7% |
|
8.7% |
||||||||||||
|
|
|
|
224,245 |
|
Income Approach (Other) |
|
Yield |
|
9.5% - 11.5% |
|
10.5% |
||||||||||||
|
Healthcare, education, and childcare |
|
|
168,371 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
20,104 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
1.6x - 7.1x |
|
5.6x |
||||||||||||
|
|
|
|
25,549 |
|
Income approach (Other) |
|
Yield |
|
6.0% |
|
6.0% |
||||||||||||
|
Industrials |
|
|
196,725 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
43,614 |
|
Income approach (other) |
|
Yield |
|
2.5% - 13.5% |
|
12.1% |
||||||||||||
|
|
|
|
32,315 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
9.0x - 12.0x |
|
10.5x |
||||||||||||
|
Information technology |
|
|
137,042 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Materials |
|
|
212,022 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Telecommunication services |
|
|
14,482 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Partnership and LLC interests |
|
|
119,690 |
|
NAV |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Financials |
|
|
17,582 |
|
Recent transaction price(1) |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Other |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Healthcare, education, and childcare |
|
|
1,084 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
8.8x |
|
8.8x |
||||||||||||
|
Industrials |
|
|
65 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Total assets |
|
$ |
5,594,127 |
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Investments |
|
Fair Value |
|
Valuation Technique(s) |
|
Unobservable Input(s) |
|
Range |
|
Weighted |
|||||||||||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Loans payable of Consolidated Funds: |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Fixed income |
|
$ |
11,273,923 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
499,305 |
|
Recent transaction price(1) |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
258,096 |
|
Discounted cash flow |
|
Discount rate |
|
11.5% |
|
11.5% |
||||||||||||
|
|
|
|
|
|
|
|
Constant prepayment rate |
|
0.0% - 50.0% |
|
20.4% |
||||||||||||
|
|
|
|
|
|
|
|
Constant default rate |
|
2.0% - 10.0% |
|
2.1% |
||||||||||||
|
|
|
|
|
|
|
|
Recovery rate |
|
10.0% - 80.0% |
|
74.6% |
||||||||||||
|
|
|
|
17,079 |
|
Discounted cash flow |
|
Discount margin |
|
300 - 800 |
|
482.5 |
||||||||||||
|
|
|
|
|
|
|
|
Constant prepayment rate |
|
0% - 50.0% |
|
23.0% |
||||||||||||
|
|
|
|
|
|
|
|
Constant default rate |
|
2.0% - 10.0% |
|
2.0% |
||||||||||||
|
|
|
|
|
|
|
|
Recovery rate |
|
10.0% - 80.0% |
|
75.0% |
||||||||||||
|
|
|
|
616 |
|
Market approach (other) |
|
Other |
|
N/A |
|
N/A |
||||||||||||
|
Derivatives instruments of Consolidated Funds |
|
|
22,142 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Total liabilities |
|
$ |
12,071,161 |
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
(1) |
Recent transaction price consists of securities purchased or restructured within the last six months. The Company has determined that there has been no change to the valuation based on the underlying assumptions used at the closing of such transactions. |
|
(2) |
Valuation technique above includes a 30% liquidity discount on an investment held by a fund within the Private Equity Group. |
The following tables summarize the quantitative inputs and assumptions used for the Company's Level III inputs as of December 31, 2013:
|
Investments |
|
Fair |
|
Valuation Technique(s) |
|
Unobservable |
|
Range |
|||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
||||||||||
|
Partnership interests |
|
$ |
66,331 |
|
NAV |
|
N/A |
|
N/A |
||||||||||
|
Partnership interests |
|
|
21,846 |
|
Recent Transaction Price(1) |
|
N/A |
|
N/A |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Total |
|
$ |
88,177 |
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(1) |
Recent transaction price consists of securities purchased or restructured within six months. The Company has determined that there has been no change to the valuation based on the underlying assumptions used at the closing of such transactions. |
The following tables summarize the quantitative inputs and assumptions used for the Consolidated Funds' Level III inputs as of December 31, 2013:
|
Investments |
|
Fair Value |
|
Valuation Technique(s) |
|
Unobservable Input(s) |
|
Range |
|
Weighted |
|||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Consumer discretionary |
|
$ |
13,044 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
6,146 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
6.2x - 18.0x |
|
9.3x |
||||||||||||
|
|
|
|
246,227 |
|
Market approach (comparable companies) |
|
Book value multiple |
|
1.5x - 1.8x |
|
1.6x |
||||||||||||
|
|
|
|
1,162,641 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
7.5x - 15.0x |
|
10.6x |
||||||||||||
|
|
|
|
42,080 |
|
Market approach (comparable companies) |
|
Net income multiple |
|
9.6x |
|
9.6x |
||||||||||||
|
|
|
|
1,114 |
|
Market approach (comparable companies) |
|
Yield to worst |
|
5.0% |
|
5.0% |
||||||||||||
|
|
|
|
1,557 |
|
Market approach (other) |
|
Other |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
1,729 |
|
Other |
|
Other |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
8,466 |
|
Other |
|
Volume weighted average price |
|
25.2x |
|
25.2x |
||||||||||||
|
|
|
|
1,418 |
|
Other |
|
Volume weighted average price / illiquidity discount |
|
25.2x / 15% |
|
25.2x / 15% |
||||||||||||
|
|
|
|
505,270 |
|
Recent transaction price(1) |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Consumer staples |
|
|
668 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
7.9x |
|
7.9x |
||||||||||||
|
|
|
|
201,059 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
6.0x - 8.5x |
|
7.5x |
||||||||||||
|
|
|
|
25,000 |
|
Recent transaction price(1) |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Energy |
|
|
119,344 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
1.0x - 1.4x |
|
1.2x |
||||||||||||
|
|
|
|
58,987 |
|
Other |
|
Other |
|
N/A |
|
N/A |
||||||||||||
|
Financials |
|
|
6,172 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
10.5x |
|
10.5x |
||||||||||||
|
Healthcare, education, and childcare |
|
|
28,607 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
7.8x - 43.7x |
|
10.9x |
||||||||||||
|
|
|
|
296,817 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
8.0x - 12.0x |
|
10.5x |
||||||||||||
|
|
|
|
23,493 |
|
Market approach (comparable companies) |
|
Net income multiple |
|
20.0x - 25.0x |
|
22.5x |
||||||||||||
|
Industrials |
|
|
8,595 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
130,478 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
8.0x - 14.5x |
|
10.3x |
||||||||||||
|
Materials |
|
|
773 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
6.0x |
|
6.0x |
||||||||||||
|
|
|
|
52,947 |
|
Market approach (comparable companies) |
|
Net income multiple |
|
8.0x - 10.0x |
|
9.0x |
||||||||||||
|
Telecommunication services |
|
|
957 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
566 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
6.9x |
|
6.9x |
||||||||||||
|
Utilities |
|
|
14,077 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Fixed Income |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Consumer discretionary |
|
|
287,572 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
394,891 |
|
Discounted cash flow |
|
Yield to maturity |
|
7.0% - 10.0% |
|
8.5% |
||||||||||||
|
|
|
|
18,383 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
6.2x - 18.0x |
|
8.0x |
||||||||||||
|
|
|
|
628,002 |
|
Income approach (other) |
|
Yield |
|
2.5% - 17.9% |
|
9.3% |
||||||||||||
|
|
|
|
5,366 |
|
Income approach (other) |
|
Yield to worst |
|
4.8% - 5.8% |
|
5.3% |
||||||||||||
|
|
|
|
113,305 |
|
Market approach (comparable companies) |
|
Book value multiple |
|
1.5x - 1.8x |
|
1.6x |
||||||||||||
|
|
|
|
406,854 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
8.0x 10.5x |
|
9.2x |
||||||||||||
|
|
|
|
9,730 |
|
Recent transaction price(1) |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Consumer staples |
|
|
469 |
|
Discounted cash flow |
|
Other |
|
20.0% |
|
20.0% |
||||||||||||
|
|
|
|
4,032 |
|
Income approach (other) |
|
Yield |
|
4.4% |
|
4.4% |
||||||||||||
|
Energy |
|
|
112,362 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
7,327 |
|
Recent transaction price(1) |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Financials |
|
|
561,569 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
942 |
|
Discounted cash flow |
|
Weighted average collection rate |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
13,177 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
2.4x |
|
2.4x |
||||||||||||
|
|
|
|
214,719 |
|
Income approach (other) |
|
Yield |
|
3.8% - 13.5% |
|
9.3% |
||||||||||||
|
Healthcare, education, and childcare |
|
|
100,868 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
5,919 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
7.8x - 43.7x |
|
10.9x |
||||||||||||
|
|
|
|
3,916 |
|
Income approach (other) |
|
Discount rate |
|
4.1% - 4.2% |
|
4.2% |
||||||||||||
|
|
|
|
146,983 |
|
Income approach (other) |
|
Yield |
|
6.0% - 10.0% |
|
7.7% |
||||||||||||
|
Industrials |
|
|
89,817 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
71,088 |
|
Income approach (other) |
|
Yield |
|
4.4% - 5.8% |
|
4.6% |
||||||||||||
|
|
|
|
30,579 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
9.7x - 14.5x |
|
12.1x |
||||||||||||
|
|
|
|
4,760 |
|
Market approach (comparable companies) |
|
Illiquidity premium |
|
2.0% - 2.5% |
|
2.3% |
||||||||||||
|
Information technology |
|
|
51,357 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
6,851 |
|
Recent transaction price(1) |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
38,317 |
|
Income approach (other) |
|
Yield |
|
5.3% - 14.0% |
|
11.5% |
||||||||||||
|
Materials |
|
|
39,743 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
20,259 |
|
Discounted cash flow |
|
Discount rate |
|
13.0% |
|
13.0% |
||||||||||||
|
|
|
|
14,056 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
6.0x - 10.0x |
|
9.0x |
||||||||||||
|
|
|
|
54,714 |
|
Income approach (other) |
|
Yield |
|
6.0% - 13.0% |
|
7.7% |
||||||||||||
|
Telecommunication services |
|
|
112,901 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
52,989 |
|
Income approach (other) |
|
Yield |
|
8.8% |
|
8.8% |
||||||||||||
|
Utilities |
|
|
3,336 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Partnership and LLC interests |
|
|
41,001 |
|
NAV |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Other |
|
|
2,372 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Derivative instruments of Consolidated Funds |
|
|
3,135 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Total assets |
|
$ |
6,631,893 |
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Loans payable of Consolidated Funds: |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Fixed income |
|
$ |
11,439,512 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
41,920 |
|
Discounted cash flow |
|
Discount rate |
|
10.7% |
|
10.7% |
||||||||||||
|
|
|
|
53,524 |
|
Market approach (other) |
|
Other |
|
N/A |
|
N/A |
||||||||||||
|
Derivatives instruments of Consolidated Funds |
|
|
6,855 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Total liabilities |
|
$ |
11,541,811 |
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
(1) |
Recent transaction price consists of securities purchased or restructured within six months. The Company has determined that there has been no change to the valuation based on the underlying assumptions used at the closing of such transactions. |
The significant unobservable inputs used in the fair value measurement of the Company's investments in equity securities include earnings before interest, tax, depreciation and amortization ("EBITDA"), book value and net income multiples. Significant increase (decrease) in EBITDA, book value or net income multiples in isolation would result in a significantly higher (lower) fair value measurement.
The significant unobservable inputs used in the fair value measurement of the Company's investments in fixed income securities are EBITDA and book value multiples, discount rates, prepayment rates, recovery rates, and market yields. Significant increases (decreases) in EBITDA and book value multiples and recovery rates in isolation would result in a significantly higher (lower) fair value measurement. Significant increases (decreases) in prepayment rates and market yields in isolation would result in lower (higher) fair value measurements.
The significant unobservable inputs used in the fair value measurement of the Company's loans payable are discount rates, default rates, prepayment rates and other. Significant increases (decreases) in discount rates or default rates in isolation would result in a significantly lower (higher) fair value measurement.
For investments valued using NAV per share, a summary of fair value by segment along with the remaining unfunded commitment and any redemption restriction of such investments are presented below:
As of December 31, 2014
|
Strategy |
|
Fair Value |
|
Unfunded |
|
Redemption |
|
||||||||||||||
|
Direct Lending Group |
|
$ |
30,501 |
|
$ |
26,854 |
|
|
(1)(3) |
|
|||||||||||
|
Real Estate Group |
|
|
49,178 |
|
|
45,239 |
|
|
(1) |
|
|||||||||||
|
Tradable Credit Group |
|
|
52,001 |
|
|
7,420 |
|
|
(1)(2)(3) |
|
|||||||||||
|
Private Equity Group |
|
|
111,719 |
|
|
97,194 |
|
|
(1) |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Totals |
|
$ |
243,399 |
|
$ |
176,707 |
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
As of December 31, 2013
|
Strategy |
|
Fair Value |
|
Unfunded |
|
Redemption |
|
||||||||||||||
|
Direct Lending Group |
|
$ |
2,298 |
|
$ |
1,045 |
|
|
(3) |
|
|||||||||||
|
Real Estate Group |
|
|
34,520 |
|
|
9,734 |
|
|
(1) |
|
|||||||||||
|
Tradable Credit Group |
|
|
28,502 |
|
|
8,664 |
|
|
(1)(2)(3) |
|
|||||||||||
|
Private Equity Group |
|
|
42,012 |
|
|
156,966 |
|
|
(1) |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Totals |
|
$ |
107,332 |
|
$ |
176,409 |
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
(1) |
Certain funds within these strategies are closed-ended and generally do not permit investors to redeem their interests. Distributions are received as the underlying investments are liquidated. |
|
(2) |
Certain funds within these strategies are open-ended and subject to a lock-up period of nine months after the closing date, after which an investor has the right to withdraw its capital. Distributions are received as the underlying investments are liquidated. |
|
(3) |
Certain funds within these strategies are separately managed investment vehicles, which may be redeemed only upon dissolution or liquidation of the fund at the discretion of a simple majority of investors. Distributions are received as the underlying investments are liquidated. |
|
|||
6. LOANS HELD AS INVESTMENTS
Fair Value Disclosure of Financial Instruments Reported at Cost
The following tables present the estimated fair value and carrying value of the Company's Consolidated Funds carried at cost, less an allowance for loan losses aggregated by the level in the fair value hierarchy as of December 31, 2014:
|
|
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
Carrying |
|
||||||||||||||||||||||
|
Loans held for investments |
|
$ |
— |
|
$ |
— |
|
$ |
78,895 |
|
$ |
78,895 |
|
$ |
77,514 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
A summary of activity in loans held as investments is presented below:
|
Balance at acquisition date (June 3, 2014) |
|
$ |
— |
|
|||||
|
Loan acquisition and origination |
|
|
580,954 |
|
|||||
|
Allowance for loan losses |
|
|
(1,185 |
) |
|||||
|
Principal repayment |
|
|
(502,255 |
) |
|||||
|
|
|
|
|
|
|||||
|
Balance as of December 31, 2014 |
|
$ |
77,514 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
The Company determines the fair value estimates of loans held as investments for fair value disclosures primarily using inputs such as the borrower's financial performance, discounted cash flow projections, interest rates available for borrowers with similar credit metrics, market comparables, if available, and other qualitative and quantitative factors.
A summary of the changes in the allowance for loan losses is presented below:
|
Balance at acquisition date (June 3, 2014) |
|
$ |
— |
|
|||||
|
Increase in allowance for loan losses |
|
|
1,185 |
|
|||||
|
|
|
|
|
|
|||||
|
Balance as of December 31, 2014 |
|
$ |
1,185 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
Investment in loan receivables consists of outstanding unpaid principal balance of loans held as investments, net of allowance of loan losses, unamortized loan origination fees and deferred interest on non-accrual loans. A summary of loan receivable balance is presented below:
|
Loan receivables—unpaid principal balance |
|
$ |
79,018 |
|
|||||
|
Unamortized loan origination fees |
|
|
(196 |
) |
|||||
|
Deferred interest on non-accrual loans |
|
|
(123 |
) |
|||||
|
Allowance for loan losses |
|
|
(1,185 |
) |
|||||
|
|
|
|
|
|
|||||
|
Balance as of December 31, 2014 |
|
$ |
77,514 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
As of December 31, 2014, the Company had $155.1 million of loan commitment to it borrowers and $76.1 million remained undrawn.
|
|||
7. DERIVATIVE FINANCIAL INSTRUMENTS
In the normal course of business, the Company and the Consolidated Funds are exposed to certain risks relating to their ongoing operations and use various types of derivative instruments primarily to mitigate against credit and foreign exchange risk. The derivative instruments used by the Company and Consolidated Funds include warrants, currency options, purchased options, interest rate swaps and credit default swaps and forward contracts. The derivative instruments do not qualify for hedge accounting under the accounting standards for derivatives and hedging as the Company does not designate its derivatives as hedging instruments. The Company recognizes all of its derivative instruments at fair value as either assets or liabilities in the Consolidated Statements of Financial Condition.
By using derivatives, the Company and the Consolidated Funds are exposed to counterparty credit risk if counterparties to the derivative contracts do not perform as expected. If a counterparty fails to perform, the Company's counterparty credit risk is equal to the amount reported as a derivative asset in the Consolidated Statements of Financial Condition. The Company minimizes counterparty credit risk through credit approvals, limits, monitoring procedures, executing master netting arrangements and obtaining collateral, where appropriate.
To the extent the master netting arrangements and other criteria meet the applicable requirements, which includes determining the legal enforceability of the arrangements, the Company may choose to offset the derivative assets and liabilities in the same currency by specific derivative type, or in the event of default by the counterparty, offset derivative assets and liabilities with the same counterparty. The Company generally presents derivative and other financial instruments on a gross basis within the Consolidated Statements of Financial Condition, with certain instruments subject to enforceable master netting arrangements that could allow for the derivative and other financial instruments to be offset. The Consolidated Funds present derivative and other financial instruments, and any related cash collateral amounts, on both a gross and a net basis. This election is generally determined at management's discretion on a fund by fund basis. The Company has retained each fund's presentation upon consolidation.
Certain Consolidated Funds have entered into transactions where cash collateral is received and/or pledged with the counterparty. Generally, the collateral practices are governed within each agreement entered into between the Consolidated Funds and the respective counterparty. These agreements specify how the collateral will be handled between the two parties, and the terms of the agreements may dictate that the derivatives be marked to market on a daily basis (or other specified period) and that any collateral needs be met by posting collateral based upon certain financial thresholds and/or upon certain dates, after any applicable minimum thresholds are met. The collateral may also be required to be held in segregated accounts with a custodian in compliance with the terms of the agreements.
Qualitative Disclosures of Derivative Financial Instruments
Derivative instruments are marked to market daily based upon quotations from pricing services or by the Company and the change in value, if any, is recorded as a net change in unrealized appreciation (depreciation) on investments. Upon settlement of the instrument, the Company records net realized gain (loss) on investments in the Consolidated Statements of Operations.
Following is a description of the significant derivative instruments utilized by the Company and the Consolidated Funds during the reporting periods.
Forward Foreign Currency Contracts
The Company and the Consolidated Funds enter into foreign currency forward exchange contracts to hedge against foreign currency exchange rate risk on certain non-U.S. dollar denominated cash flow. When entering into a forward currency contract, the Company and the Consolidated Funds agree to receive and/or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed-upon future date. Forward foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Consolidated Statements of Financial Condition. The Company and the Consolidated Funds bear the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency contract. In addition, the potential inability of the counterparties to meet the terms of their contracts poses a risk to the Company and the Consolidated Funds.
Interest Rate Swaps
The Company and the Consolidated Funds enter into interest rate swap contracts to mitigate their interest rate risk exposure to higher floating interest rates. Interest rate swaps represent an agreement between two counterparties to exchange cash flows based on the difference in two interest rates, applied to the notional principal amount for a specified period. The payment flows are generally netted, with the difference being paid by one party to the other. The interest rate swap contracts effectively mitigate the Company and the Consolidated Funds' exposure to interest rate risk by converting a portion of the Company and the Consolidated Funds' floating-rate debt to a fixed-rate basis.
Credit Default Swaps
The Consolidated Funds enter into credit default swap contracts for investment purposes and to manage credit risk. As a seller in a credit default swap contract, a Consolidated Fund is required to pay the notional or other agreed-upon value to the counterparty in the event of a default by a third party, either a U.S. or foreign corporate issuer (or an index of U.S. or foreign corporate issuers), on the referenced debt obligation. In return, the Consolidated Fund receives from the counterparty a periodic stream of payments over the term of the contract, provided that no event of default has occurred, and has no payment obligations.
The Consolidated Funds may also purchase credit default swap contracts to mitigate the risk of default by issuers of debt securities held. In these cases, the Consolidated Fund functions as the counterparty referenced in the preceding paragraph. As a purchaser of a credit default swap contract, the Consolidated Fund receives the notional or other agreed upon value from the counterparty in the event of default by a third party, either a U.S. or foreign corporate issuer (or an index of U.S. or foreign corporate issuers) on the referenced debt obligation. In return, the Consolidated Fund makes periodic payments to the counterparty over the term of the contract provided no event of default has occurred.
Entering into credit default swaps exposes the Consolidated Funds to credit, market and documentation risk in excess of the related amounts recognized in the Consolidated Statements of Financial Condition. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligations to perform or disagree as to the meaning of the contractual terms in the agreements, and that there will be unfavorable changes in net interest rates.
Quantitative Disclosures of Derivative Financial Instruments
The following tables identify the fair value and notional amounts of derivative contracts by major product type on a gross basis for the Company and the Consolidated Funds as of December 31, 2014 and 2013. These amounts may be offset (to the extent that there is a legal right to offset) and presented on a net basis in derivative assets or derivative liabilities in the Consolidated Statements of Financial Condition:
|
|
|
As of December 31, 2014 |
|
||||||||||||||||||||||||
|
|
|
Assets |
|
Liabilities |
|
||||||||||||||||||||||
|
The Company |
|
Notional(1) |
|
Fair Value |
|
Notional(1) |
|
Fair Value |
|
||||||||||||||||||
|
Interest rate contracts |
|
$ |
— |
|
$ |
— |
|
$ |
250,000 |
|
$ |
847 |
|
||||||||||||||
|
Foreign exchange contracts |
|
|
161,890 |
|
|
7,623 |
|
|
102,231 |
|
|
2,003 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivatives, at fair value |
|
$ |
161,890 |
|
$ |
7,623 |
|
$ |
352,231 |
|
$ |
2,850 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
As of December 31, 2014 |
|
||||||||||||||||||||||||
|
|
|
Assets |
|
Liabilities |
|
||||||||||||||||||||||
|
Consolidated Funds |
|
Notional(1) |
|
Fair Value |
|
Notional(1) |
|
Fair Value |
|
||||||||||||||||||
|
Interest rate contracts |
|
$ |
34,000 |
|
$ |
0 |
|
$ |
10,000 |
|
$ |
21 |
|
||||||||||||||
|
Credit contracts |
|
|
— |
|
|
— |
|
|
385,296 |
|
|
13,265 |
|
||||||||||||||
|
Foreign exchange contracts |
|
|
43,303 |
|
|
2,070 |
|
|
207,577 |
|
|
9,991 |
|
||||||||||||||
|
Other financial instruments |
|
|
4,542 |
|
|
1,056 |
|
|
90,302 |
|
|
19,055 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivatives, at fair value |
|
|
81,845 |
|
|
3,126 |
|
|
693,175 |
|
|
42,332 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Other—equity(2) |
|
|
79,551 |
|
|
3,866 |
|
|
— |
|
|
— |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
TOTAL |
|
$ |
161,396 |
|
$ |
6,992 |
|
$ |
693,175 |
|
$ |
42,332 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
(1) |
Represents the total contractual amount of derivative assets and liabilities outstanding. |
|
(2) |
Includes the fair value of warrants and equity distribution rights which are presented within investments, at fair value in the Consolidated Statements of Financial Condition. |
|
|
|
As of December 31, 2013 |
|
||||||||||||||||||||||||
|
|
|
Assets |
|
Liabilities |
|
||||||||||||||||||||||
|
The Company |
|
Notional(1) |
|
Fair Value |
|
Notional(1) |
|
Fair Value |
|
||||||||||||||||||
|
Interest rate contracts |
|
$ |
— |
|
$ |
— |
|
$ |
250,000 |
|
$ |
1,254 |
|
||||||||||||||
|
Foreign exchange contracts |
|
|
66,733 |
|
|
1,164 |
|
|
76,419 |
|
|
1,653 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivatives, at fair value |
|
$ |
66,733 |
|
$ |
1,164 |
|
$ |
326,419 |
|
$ |
2,907 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
As of December 31, 2013 |
|
||||||||||||||||||||||||
|
|
|
Assets |
|
Liabilities |
|
||||||||||||||||||||||
|
Consolidated Funds |
|
Notional(1) |
|
Fair Value |
|
Notional(1) |
|
Fair Value |
|
||||||||||||||||||
|
Interest rate contracts |
|
$ |
70,000 |
|
$ |
8 |
|
$ |
623,225 |
|
$ |
3,878 |
|
||||||||||||||
|
Credit contracts |
|
|
25,437 |
|
|
4,489 |
|
|
537,921 |
|
|
28,385 |
|
||||||||||||||
|
Equity contracts |
|
|
50 |
|
|
179 |
|
|
— |
|
|
— |
|
||||||||||||||
|
Foreign exchange contracts |
|
|
211,324 |
|
|
8,653 |
|
|
813,997 |
|
|
38,631 |
|
||||||||||||||
|
Other financial instruments |
|
|
6,174 |
|
|
1,296 |
|
|
83,662 |
|
|
4,221 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivatives, at fair value |
|
|
312,985 |
|
|
14,625 |
|
|
2,058,805 |
|
|
75,115 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Other—equity(2) |
|
|
68,253 |
|
|
46,802 |
|
|
— |
|
|
— |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
TOTAL |
|
$ |
381,238 |
|
$ |
61,427 |
|
$ |
2,058,805 |
|
$ |
75,115 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
(1) |
Represents the total contractual amount of derivative assets and liabilities outstanding. |
|
(2) |
Includes the fair value of warrants which is presented within investments, at fair value in the Consolidated Statements of Financial Condition. |
The following tables present a summary of net realized gain (loss) and unrealized appreciation (depreciation) on derivative instruments for the years ended December 31, 2014, 2013 and 2012, and the corresponding line item where these changes are presented within the Consolidated Statements of Operations:
|
|
|
For the year ended |
|
||||||||||||||||||
|
The Company |
|
Interest |
|
Foreign |
|
Total |
|
||||||||||||||
|
Net realized gain (loss) on investments |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Swaps |
|
$ |
(1,368 |
) |
$ |
— |
|
$ |
(1,368 |
) |
|||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
3,330 |
|
|
3,330 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Net realized gain (loss) on investments |
|
$ |
(1,368 |
) |
$ |
3,330 |
|
$ |
1,962 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Net change in unrealized appreciation (depreciation) on investments |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
1,076 |
|
$ |
1,076 |
|
|||||||||||
|
Swaps |
|
|
407 |
|
|
— |
|
|
407 |
|
|||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
5,034 |
|
|
5,034 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total net change in unrealized appreciation (depreciation) on investments |
|
$ |
407 |
|
$ |
6,110 |
|
$ |
6,517 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
For the year ended December 31, 2014 |
|
||||||||||||||||||||||||||||||||||||
|
Consolidated Funds |
|
Interest |
|
Credit |
|
Equity |
|
Foreign |
|
Other |
|
Total |
|
||||||||||||||||||||||||||
|
Net realized gain (loss) on investments of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
— |
|
$ |
(8,952 |
) |
$ |
341 |
|
$ |
— |
|
$ |
(8,611 |
) |
||||||||||||||||||||
|
Written options |
|
|
— |
|
|
— |
|
|
— |
|
|
(116 |
) |
|
— |
|
|
(116 |
) |
||||||||||||||||||||
|
Swaps |
|
|
(513 |
) |
|
(24,092 |
) |
|
— |
|
|
|
|
|
(2,463 |
) |
|
(27,068 |
) |
||||||||||||||||||||
|
Interest rate caps/floor |
|
|
276 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
276 |
|
||||||||||||||||||||
|
Warrants(1) |
|
|
— |
|
|
— |
|
|
3,583 |
|
|
— |
|
|
— |
|
|
3,583 |
|
||||||||||||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
— |
|
|
— |
|
|
(15,763 |
) |
|
— |
|
|
(15,763 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total net realized gain (loss) on investments of Consolidated Funds |
|
$ |
(237 |
) |
$ |
(24,092 |
) |
$ |
(5,369 |
) |
$ |
(15,538 |
) |
$ |
(2,463 |
) |
$ |
(47,699 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
— |
|
$ |
611 |
|
$ |
1,668 |
|
$ |
16 |
|
$ |
2,295 |
|
||||||||||||||||||||
|
Written options |
|
|
— |
|
|
— |
|
|
— |
|
|
(402 |
) |
|
— |
|
|
(402 |
) |
||||||||||||||||||||
|
Swaps |
|
|
1,471 |
|
|
9,421 |
|
|
— |
|
|
842 |
|
|
(1,142 |
) |
|
10,592 |
|
||||||||||||||||||||
|
Interest rate caps/floor |
|
|
269 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
269 |
|
||||||||||||||||||||
|
Warrants(1) |
|
|
— |
|
|
— |
|
|
(13,190 |
) |
|
— |
|
|
— |
|
|
(13,190 |
) |
||||||||||||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
— |
|
|
(1,906 |
) |
|
11,775 |
|
|
|
|
|
9,869 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total net change in unrealized appreciation (depreciation) on investments of Consolidated Funds |
|
$ |
1,740 |
|
$ |
9,421 |
|
$ |
(14,485 |
) |
$ |
13,883 |
|
$ |
(1,126 |
) |
$ |
9,433 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
(1) |
Realized and unrealized gains (losses) on warrants are also reflected in the changes presented within the investment, at fair value. |
|
|
|
As of December 31, 2013 |
|
||||||||||||||||||
|
The Company |
|
Interest |
|
Foreign |
|
Total |
|
||||||||||||||
|
Net realized gain (loss) on investments |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
(147 |
) |
$ |
(147 |
) |
|||||||||||
|
Swaps |
|
|
(1,259 |
) |
|
— |
|
|
(1,259 |
) |
|||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
(2,165 |
) |
|
(2,165 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Net realized gain (loss) on investments |
|
$ |
(1,259 |
) |
$ |
(2,312 |
) |
$ |
(3,571 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Net change in unrealized appreciation (depreciation) on investments |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
(392 |
) |
$ |
(392 |
) |
|||||||||||
|
Swaps |
|
|
1,182 |
|
|
— |
|
|
1,182 |
|
|||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
(128 |
) |
|
(128 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total net change in unrealized appreciation (depreciation) on investments |
|
$ |
1,182 |
|
$ |
(520 |
) |
$ |
662 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
As of December 31, 2013 |
|
||||||||||||||||||||||||||||||||||||
|
Consolidated Funds |
|
Interest |
|
Credit |
|
Equity |
|
Foreign |
|
Other |
|
Total |
|
||||||||||||||||||||||||||
|
Net realized gain (loss) on investments of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
— |
|
$ |
(7,308 |
) |
$ |
(536 |
) |
$ |
— |
|
$ |
(7,844 |
) |
||||||||||||||||||||
|
Written options |
|
|
— |
|
|
— |
|
|
— |
|
|
3,063 |
|
|
— |
|
|
3,063 |
|
||||||||||||||||||||
|
Swaps |
|
|
(2,317 |
) |
|
(53,566 |
) |
|
|
|
|
(3,219 |
) |
|
6,735 |
|
|
(52,367 |
) |
||||||||||||||||||||
|
Interest rate caps/floor |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(879 |
) |
|
(879 |
) |
||||||||||||||||||||
|
Warrants(1) |
|
|
— |
|
|
(4 |
) |
|
2,519 |
|
|
— |
|
|
— |
|
|
2,515 |
|
||||||||||||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
— |
|
|
— |
|
|
(476 |
) |
|
15,008 |
|
|
14,532 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total net realized gain (loss) on investments of Consolidated Funds |
|
$ |
(2,317 |
) |
$ |
(53,570 |
) |
$ |
(4,789 |
) |
$ |
(1,168 |
) |
$ |
20,864 |
|
$ |
(40,980 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
— |
|
$ |
(697 |
) |
$ |
2,122 |
|
$ |
(400 |
) |
$ |
1,025 |
|
||||||||||||||||||||
|
Written options |
|
|
— |
|
|
— |
|
|
— |
|
|
287 |
|
|
— |
|
|
287 |
|
||||||||||||||||||||
|
Swaps |
|
|
2,512 |
|
|
2,456 |
|
|
— |
|
|
1,586 |
|
|
(1,740 |
) |
|
4,814 |
|
||||||||||||||||||||
|
Interest rate caps/floor |
|
|
(1,162 |
) |
|
— |
|
|
— |
|
|
— |
|
|
246 |
|
|
(916 |
) |
||||||||||||||||||||
|
Warrants(1) |
|
|
— |
|
|
— |
|
|
21,403 |
|
|
829 |
|
|
— |
|
|
22,232 |
|
||||||||||||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
— |
|
|
— |
|
|
(14,294 |
) |
|
(8,887 |
) |
|
(23,181 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total net change in unrealized appreciation (depreciation) on investments of Consolidated Funds |
|
$ |
1,350 |
|
$ |
2,456 |
|
$ |
20,706 |
|
$ |
(9,470 |
) |
$ |
(10,781 |
) |
$ |
4,261 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
(1) |
Realized and unrealized gains (losses) on warrants are also reflected in the changes presented on the investment footnote table. |
Net realized and unrealized appreciation (depreciation) on derivative contracts as of December 31, 2012 are as follows:
|
|
|
As of December 31, 2012 |
|
||||||||||||||||||
|
The Company |
|
Interest |
|
Foreign |
|
Total |
|
||||||||||||||
|
Net realized gain (loss) on investments |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
112 |
|
$ |
112 |
|
|||||||||||
|
Swaps |
|
|
(601 |
) |
|
— |
|
|
(601 |
) |
|||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
66 |
|
|
66 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total net realized gain (loss) on investments |
|
$ |
(601 |
) |
$ |
178 |
|
$ |
(423 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Net change in unrealized appreciation (depreciation) on investments |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
(982 |
) |
$ |
(982 |
) |
|||||||||||
|
Written options |
|
|
— |
|
|
139 |
|
|
139 |
|
|||||||||||
|
Swaps |
|
|
(2,436 |
) |
|
— |
|
|
(2,436 |
) |
|||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
(1,259 |
) |
|
(1,259 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total net change in unrealized appreciation (depreciation) on investments |
|
$ |
(2,436 |
) |
$ |
(2,102 |
) |
$ |
(4,538 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
As of December 31, 2012 |
|
||||||||||||||||||||||||||||||||||||
|
Consolidated Funds |
|
Interest |
|
Credit |
|
Equity |
|
Foreign |
|
Other |
|
Total |
|
||||||||||||||||||||||||||
|
Net realized gain (loss) on investments of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
— |
|
$ |
(5,918 |
) |
$ |
(3,626 |
) |
$ |
— |
|
$ |
(9,544 |
) |
||||||||||||||||||||
|
Written options |
|
|
— |
|
|
— |
|
|
— |
|
|
2,075 |
|
|
— |
|
|
2,075 |
|
||||||||||||||||||||
|
Swaps |
|
|
(28,023 |
) |
|
(3,522 |
) |
|
(6,070 |
) |
|
3,615 |
|
|
— |
|
|
(34,000 |
) |
||||||||||||||||||||
|
Interest rate caps/floor |
|
|
— |
|
|
— |
|
|
— |
|
|
5,821 |
|
|
— |
|
|
5,821 |
|
||||||||||||||||||||
|
Warrants(1) |
|
|
— |
|
|
— |
|
|
358 |
|
|
— |
|
|
— |
|
|
358 |
|
||||||||||||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
— |
|
|
— |
|
|
(9,215 |
) |
|
— |
|
|
(9,215 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total net realized gain (loss) on investments of Consolidated Funds |
|
$ |
(28,023 |
) |
$ |
(3,522 |
) |
$ |
(11,630 |
) |
$ |
(1,330 |
) |
$ |
— |
|
$ |
(44,505 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
— |
|
$ |
(145 |
) |
$ |
667 |
|
$ |
— |
|
$ |
522 |
|
||||||||||||||||||||
|
Written options |
|
|
— |
|
|
— |
|
|
— |
|
|
(550 |
) |
|
— |
|
|
(550 |
) |
||||||||||||||||||||
|
Swaps |
|
|
4,049 |
|
|
(17,245 |
) |
|
(391 |
) |
|
(2,915 |
) |
|
(706 |
) |
|
(17,208 |
) |
||||||||||||||||||||
|
Interest rate caps/floor |
|
|
(76 |
) |
|
— |
|
|
— |
|
|
(4,751 |
) |
|
— |
|
|
(4,827 |
) |
||||||||||||||||||||
|
Warrants(1) |
|
|
(479 |
) |
|
— |
|
|
(8,668 |
) |
|
(4 |
) |
|
— |
|
|
(9,151 |
) |
||||||||||||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
— |
|
|
— |
|
|
(174 |
) |
|
— |
|
|
(174 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total net change in unrealized appreciation (depreciation) on investments of Consolidated Funds |
|
$ |
3,494 |
|
$ |
(17,245 |
) |
$ |
(9,204 |
) |
$ |
(7,727 |
) |
$ |
(706 |
) |
$ |
(31,388 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
(1) |
Realized and unrealized gains (losses) on warrants are also reflected in the changes presented on the investment footnote table. |
The table below sets forth the rights of setoff and related arrangements associated with the Company's derivative and other financial instruments as of December 31, 2014 and 2013. The column titled "Gross Amounts Not Offset in the Statement of Financial Position" in the table below relates to derivative instruments that are eligible to be offset in accordance with applicable accounting guidance but for which management has elected not to offset in the Consolidated Statements of Financial Condition.
Derivative and Other Instruments of the Company as of December 31, 2014
|
|
|
|
|
|
|
|
|
Gross Amounts |
|
|
|
||||||||||||||||||||||
|
|
|
Gross Amounts |
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
|
|
Gross Amounts |
|
Net Amounts of |
|
Financial |
|
Net Amount |
|
||||||||||||||||||||||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Derivatives |
|
$ |
7,623 |
|
$ |
— |
|
$ |
7,623 |
|
$ |
1,056 |
|
$ |
6,567 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total |
|
|
7,623 |
|
|
— |
|
|
7,623 |
|
|
1,056 |
|
|
6,567 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Derivatives |
|
|
(2,850 |
) |
|
— |
|
|
(2,850 |
) |
|
(1,056 |
) |
|
(1,794 |
) |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total |
|
|
(2,850 |
) |
|
— |
|
|
(2,850 |
) |
|
(1,056 |
) |
|
(1,794 |
) |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Grand Total |
|
$ |
4,773 |
|
$ |
— |
|
$ |
4,773 |
|
$ |
— |
|
$ |
4,773 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Derivative and Other Instruments of the Company as of December 31, 2013
|
|
|
|
|
|
|
|
|
Gross Amounts |
|
|
|
||||||||||||||||||||||
|
|
|
Gross Amounts |
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
|
|
Gross Amounts |
|
Net Amounts of |
|
Financial |
|
Net Amount |
|
||||||||||||||||||||||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Derivatives |
|
$ |
1,164 |
|
$ |
— |
|
$ |
1,164 |
|
$ |
338 |
|
$ |
826 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total |
|
|
1,164 |
|
|
— |
|
|
1,164 |
|
|
338 |
|
|
826 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Derivatives |
|
|
(2,907 |
) |
|
— |
|
|
(2,907 |
) |
|
(338 |
) |
|
(2,569 |
) |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total |
|
|
(2,907 |
) |
|
— |
|
|
(2,907 |
) |
|
(338 |
) |
|
(2,569 |
) |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Grand Total |
|
$ |
(1,743 |
) |
$ |
— |
|
$ |
(1,743 |
) |
$ |
— |
|
$ |
(1,743 |
) |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
The table below sets forth the rights of setoff and related arrangements associated with the Consolidated Funds' derivative and other financial instruments as of December 31, 2014 and 2013. The column titled "Gross Amounts Not Offset in the Statement of Financial Position" in the table below relates to derivative instruments that are eligible to be offset in accordance with applicable accounting guidance but for which management has elected not to offset in the Consolidated Statements of Financial Condition.
Derivative and Other Instruments of the Consolidated Funds as of December 31, 2014
|
|
|
|
|
|
|
|
|
Gross Amounts |
|
|
|
||||||||||||||||||||||||||||
|
|
|
Gross Amounts |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
|
|
|
Gross Amounts |
|
Net Amounts of |
|
Financial |
|
Cash Collateral |
|
Net |
|
||||||||||||||||||||||||||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Derivatives |
|
$ |
4,940 |
|
$ |
1,814 |
|
$ |
3,126 |
|
$ |
989 |
|
$ |
(2,295 |
) |
$ |
4,432 |
|
||||||||||||||||||||
|
Reverse repurchase, securities borrowing, and similar arrangements(1) |
|
|
4,150 |
|
|
|
|
|
4,150 |
|
|
|
|
|
|
|
|
4,150 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total |
|
$ |
9,090 |
|
$ |
1,814 |
|
$ |
7,276 |
|
$ |
989 |
|
$ |
(2,295 |
) |
$ |
8,582 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Derivatives |
|
$ |
(44,146 |
) |
$ |
(1,814 |
) |
$ |
(42,332 |
) |
$ |
(989 |
) |
$ |
(12,386 |
) |
$ |
(28,957 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total |
|
|
(44,146 |
) |
$ |
(1,814 |
) |
$ |
(42,332 |
) |
$ |
(989 |
) |
|
(12,386 |
) |
$ |
(28,957 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Grand Total |
|
$ |
(35,056 |
) |
$ |
— |
|
$ |
(35,056 |
) |
$ |
— |
|
$ |
(14,681 |
) |
$ |
(20,375 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Derivative and Other Instruments of the Consolidated Funds as of December 31, 2013
|
|
|
|
|
|
|
|
|
Gross Amounts |
|
|
|
||||||||||||||||||||||||||||
|
|
|
Gross Amounts |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
|
|
|
Gross Amounts |
|
Net Amounts of |
|
Financial |
|
Cash Collateral |
|
Net |
|
||||||||||||||||||||||||||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Derivatives |
|
$ |
27,081 |
|
$ |
12,456 |
|
$ |
14,625 |
|
$ |
9,642 |
|
$ |
4,675 |
|
$ |
308 |
|
||||||||||||||||||||
|
Reverse repurchase, securities borrowing, and similar arrangements(1) |
|
|
1,695 |
|
|
— |
|
|
1,695 |
|
|
— |
|
|
— |
|
|
1,695 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total |
|
|
28,776 |
|
|
12,456 |
|
|
16,320 |
|
|
9,642 |
|
|
4,675 |
|
|
2,003 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Derivatives |
|
|
(87,571 |
) |
|
(12,456 |
) |
|
(75,115 |
) |
|
(9,642 |
) |
|
(42,903 |
) |
|
(22,570 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total |
|
|
(87,571 |
) |
|
(12,456 |
) |
|
(75,115 |
) |
|
(9,642 |
) |
|
(42,903 |
) |
|
(22,570 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Grand Total |
|
$ |
(58,795 |
) |
$ |
— |
|
$ |
(58,795 |
) |
$ |
— |
|
$ |
(38,228 |
) |
$ |
(20,567 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
(1) |
Included within investments, at fair value in the Consolidated Statements of Financial Condition. |
|
|||
8. DEBT
Debt represents the (a) Company's Credit Facility (as defined below), (b) senior notes of Ares Finance Co. LLC, a wholly owned subsidiary of Ares Holdings, (c) term note of AHI, which was paid off prior to the Reorganization, (d) promissory notes issued in connection with an acquisition, (e) loan obligations of the consolidated CLOs and (f) credit facilities of the Consolidated Funds. The Company has elected to measure the loan obligations of the consolidated CLOs at fair value and reflect the credit facilities of the Company and Consolidated Funds at cost.
Credit Facility of the Company
On October 29, 2013, the Company amended and restated its credit facility (the "Credit Facility") with a syndicate of financial institutions. This amendment provided an increase in the borrowing capacity available to the Company under the facility and converted the existing term loan to a revolver. The Credit Facility was amended to be a $735.0 million revolving credit facility that is scheduled to mature on December 17, 2017. Interest rates were calculated for base rate loans based on Base Rate (as defined in the Credit Facility) plus 0.75% and LIBOR rate loans based on LIBOR rate plus 1.75%. Unused commitment fees under the Credit Facility were payable quarterly in arrears at a rate of 0.25%. The Company's investment holdings and management contracts were pledged as collateral for borrowings under the Credit Facility. Proceeds from the Credit Facility are primarily used by the Company to fund operations and investments. Debt issuance costs are amortized on a straight line basis over the life of the Credit Facility. Fluctuations in the interest rate are hedged against with the interest rate swap contracts that AIH LLC has entered into. For each of the periods presented, the Company has made all repayments required by the Credit Facility and has been in compliance with financial and non-financial covenants under the Credit Facility.
As of December 31, 2013, the Company had $121.3 million outstanding under the Credit Facility, presented within debt obligations on the Consolidated Statements of Financial Condition. The annual interest rate on the Credit Facility (the "All-In Rate") was 1.9%. Debt issuance costs of $1.1 million were incurred in connection with the amendment of the Credit Facility, and are included in the total net debt issuance costs of $3.5 million within other assets in the Consolidated Statements of Financial Condition. For the year ended December 31, 2013, $1.1 million of unused commitment fees, $5.3 million of interest and $1.0 million of amortization of debt issuance costs are included in interest expense in the Consolidated Statements of Operations. For the year ended December 31, 2013, the Company recorded $1.9 million of debt extinguishment expense associated with the termination of its previous credit facilities.
Effective May 7, 2014, the Credit Facility was amended and restated to provide for a $1.03 billion revolving Credit Facility. Under the amended Credit Facility, the Ares Operating Group entities replaced AM LLC and AIH LLC as borrowers, and AM LLC and AIH LLC became guarantors along with the Company. Additionally, the Credit Facility's maturity was extended to April 30, 2019. Interest rates remain dependent upon corporate credit ratings. For the periods presented through June 27, 2014, the interest rates and unused commitment fees remained unchanged from the previous amendment. As the amendment was determined to be a modification of terms, there was no debt extinguishment recognized for the year ended December 31, 2014.
On June 27, 2014, the Company's corporate credit rating improved, resulting in a reduction of 0.25% in both base rate and LIBOR margins. Base rate loans now bear interest calculated based on the base rate plus 0.50% and the LIBOR rate loans now bear interest calculated based on LIBOR rate plus 1.50%. Unused commitment fees were reduced to a rate of 0.20% per annum.
As of December 31, 2014, the Company had no balance outstanding under the Credit Facility. The outstanding amount was repaid on October 8, 2014 from the proceeds of the issuance of the Notes (as defined below). The All-In Rate for the Credit Facility was 1.69%. At December 31, 2014, unamortized debt issuance costs of $5.3 million incurred in connection with the October 29, 2013 and May 7, 2014 amendments of the Credit Facility were capitalized and are included in other assets in the Consolidated Statements of Financial Condition. For the year ended December 31, 2014, $1.8 million in unused commitment fees, $2.5 million of interest and $1.1 million of amortization of debt issuance costs are included in interest expense in the Consolidated Statements of Operations.
Senior Notes of the Company
On October 8, 2014, Ares Finance Co. LLC, a subsidiary of the Company, issued $250.0 million aggregate principal amount of 4.000% senior notes (the "Notes") due October 8, 2024, at 98.268% of the face amount. The Notes are fully and unconditionally guaranteed by the Company, AHI, Domestic Holdings, Ares Real Estate Holdings LLC, Ares Holdings, Ares Domestic Holdings, Ares Investments, Ares Real Estate, AM LLC and AIH LLC. Interest is payable semi-annually on April 8 and October 8 each year, commencing on April 8, 2015. The Notes may be redeemed prior to maturity at the Company's option at a redemption price equal to the greater of 100% of the principal amount to be redeemed and a "make-whole" redemption price, plus accrued and unpaid interest to the redemption date; however, Ares Finance Co. LLC is not required to pay any "make-whole" on or after July 8, 2024. Debt issuance costs of $2.4 million are amortized on a straight line basis over the life of the Notes. The discount of $4.3 million is amortized using the effective interest rate over the life of the Notes.
As of December 31, 2014, the Company had $245.8 million reported within debt obligations on the Consolidated Statements of Financial Condition. The effective annual interest rate of the Notes was 4.21%. Debt issuance costs incurred in connection with issuance of the Notes were $2.3 million and are included in other assets in the Consolidated Statements of Financial Condition. Interest expense of $2.4 million, including $0.1 million from the amortization of debt issuance costs, and is included in interest expense in the Consolidated Statements of Financial Operations for the year ending December 31, 2014.
Term Note of AHI
On December 18, 2012, AHI borrowed $55.0 million under a term note with a financial institution. Interest was paid quarterly and accrued at the Company's option of a rate of LIBOR plus 1.75% or prime rate plus 0.75% per annum. Principal was payable in seven consecutive quarterly installments with increasing principal payments, commencing on January 15, 2013 and continuing up to and including June 15, 2014. The term note was secured by account balances on deposit with the same financial institution and AHI remained in compliance with all provisions of the term note. As of December 31, 2013, the principal outstanding under this term note was $11.0 million. On March 20, 2014, the Company paid off the remaining balance of the term note. Interest expense of $0.1 million and $1.6 million for the years ended December 31, 2014 and 2013, respectively, is included in the Consolidated Statements of Operations.
Promissory Notes of the Company
On July 1, 2013, in connection with the AREA acquisition, the Company entered into two promissory notes in the principal amounts of approximately $13.7 million and $7.2 million, with two former AREA partners. The maturity date of the notes is July 1, 2016. Beginning on July 1, 2014, the notes are required to be repaid in three equal annual principal payments of approximately $4.6 million and $2.4 million, respectively, unless prepaid at the Company's option. Interest accrues at a per annum rate equal to LIBOR plus 4.00%. As of December 31, 2013, the aggregate principal outstanding under the promissory notes was $20.9 million. As of December 31, 2014, the entire balance of the promissory notes had been paid off with no balance outstanding. Interest expense of $0.7 million and $0.5 million for the years ended December 31, 2014 and 2013, respectively, is included in interest expense in the Consolidated Statements of Operations.
Loan Obligations of the Consolidated CLOs
Loan obligations of the Consolidated Funds that are CLOs ("Consolidated CLOs") represent amounts due to holders of debt securities issued by the Consolidated CLOs. Several of the Consolidated CLOs issued preferred shares representing the subordinated interests that are mandatorily redeemable upon the maturity dates of the senior secured loan obligations. As a result, these shares have been classified as liabilities and are included in CLO loan obligations in the Consolidated Statements of Financial Condition.
As of December 31, 2014 and 2013, the following loan obligations were outstanding and classified as liabilities:
|
|
|
As of December 31, 2014 |
|
|||||||
|
|
|
Loan |
|
Market |
|
Weighted |
|
|||
|
Senior secured notes(1) |
|
$ |
11,394,820 |
|
$ |
11,062,501 |
|
|
9.02 |
|
|
Subordinated notes / preferred shares(2) |
|
|
1,523,670 |
|
|
894,795 |
|
|
9.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loan obligations of Consolidated CLOs |
|
|
12,918,490 |
|
|
11,957,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type of Facility |
|
Total |
|
Loan |
|
Market |
|
Effective |
|
Commitment |
|
Maturity |
|
||||||||||||||||||||||||||
|
Revolvers of Consolidated CLOs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Revolving credit line |
|
$ |
44,113 |
|
$ |
44,113 |
|
$ |
43,980 |
|
|
0.49 |
% |
|
0.17 |
% |
|
04/16/21 |
|
||||||||||||||||||||
|
Revolving credit line |
|
|
48,510 |
|
|
48,510 |
|
|
47,894 |
|
|
0.43 |
% |
|
0.17 |
% |
|
10/11/21 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total revolvers of Consolidated CLOs |
|
|
|
|
|
92,623 |
|
|
91,874 |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total notes payable and credit facilities of Consolidated CLOs |
|
|
|
|
$ |
13,011,113 |
|
$ |
12,049,170 |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
(1) |
Weighted average interest rate of 2.62%. |
|
(2) |
The subordinated notes do not have contractual interest rates, but instead receive distributions from the excess cash flows generated by each Consolidated CLO. |
|
|
|
As of December 31, 2013 |
|
|||||||
|
|
|
Loan |
|
Market |
|
Weighted |
|
|||
|
Senior secured notes(1) |
|
$ |
10,967,524 |
|
$ |
10,679,878 |
|
|
8.92 |
|
|
Subordinated notes / preferred shares(2) |
|
|
1,325,446 |
|
|
962,098 |
|
|
8.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loan obligations of Consolidated CLOs |
|
|
12,292,970 |
|
|
11,641,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type of Facility |
|
Total |
|
Loan |
|
Market |
|
Effective |
|
Commitment |
|
Maturity |
|
||||||||||||||||||||||||||
|
Revolvers of Consolidated CLOs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Revolving credit line |
|
$ |
48,949 |
|
$ |
48,949 |
|
$ |
48,119 |
|
|
0.43 |
% |
|
0.17 |
% |
|
04/16/21 |
|
||||||||||||||||||||
|
Revolving credit line |
|
|
1,035 |
|
|
1,035 |
|
|
1,034 |
|
|
0.51 |
% |
|
0.19 |
% |
|
02/24/18 |
|
||||||||||||||||||||
|
Revolving credit line |
|
|
23,567 |
|
|
23,567 |
|
|
23,351 |
|
|
0.52 |
% |
|
0.18 |
% |
|
03/12/18 |
|
||||||||||||||||||||
|
Revolving credit line |
|
|
48,510 |
|
|
48,510 |
|
|
46,812 |
|
|
0.45 |
% |
|
0.17 |
% |
|
10/11/21 |
|
||||||||||||||||||||
|
Revolving credit line |
|
|
12,865 |
|
|
12,865 |
|
|
12,865 |
|
|
0.52 |
% |
|
0.14 |
% |
|
01/26/20 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total revolvers of Consolidated CLOs |
|
|
|
|
|
134,926 |
|
|
132,181 |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total notes payable and credit facilities of Consolidated CLOs |
|
|
|
|
$ |
12,427,896 |
|
$ |
11,774,157 |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
(1) |
Weighted average interest rate of 2.36%. |
|
(2) |
The subordinated notes do not have contractual interest rates, but instead receive distributions from the excess cash flows generated by each Consolidated CLO. |
Loan obligations of the Consolidated CLOs are collateralized by the assets held by the Consolidated CLOs, consisting of cash and cash equivalents, corporate loans, corporate bonds and other securities. The assets of one Consolidated CLO may not be used to satisfy the liabilities of another Consolidated CLO. Loan obligations of the Consolidated CLOs include floating rate notes, deferrable floating rate notes, revolving lines of credit and subordinated notes. Amounts borrowed under the notes are repaid based on available cash flows subject to priority of payments under each Consolidated CLO's governing documents. The Company has elected to apply the fair value option to all of the loan obligations of the Consolidated CLOs, with the exception of the loan obligation of Ares Enhanced Loan Investment Strategy II, Ltd., which is carried at cost to accommodate investor preference.
Credit Facilities of the Consolidated Funds
Certain Consolidated Funds maintain credit facilities to fund investments between capital drawdowns. These facilities generally are collateralized by the unfunded capital commitments of the Consolidated Funds' limited partners, bear an annual commitment fee based on unfunded commitments and contain various affirmative and negative covenants and reporting obligations, including restrictions on additional indebtedness, liens, margin stock, affiliate transactions, dividends and distributions, release of capital commitments and portfolio asset dispositions. The creditors of these entities have no recourse to the Company. As of December 31, 2014 and 2013, the Consolidated Funds were in compliance with all financial and non-financial covenants under such credit facilities.
The Consolidated Funds had the following revolving bank credit facilities and term loans outstanding as of December 31, 2014:
|
Type of Facility |
|
Total |
|
Outstanding |
|
Effective Rate |
|
Commitment |
|
Maturity |
|
||||||||||||||||||||
|
Short-term borrowings of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Credit facility |
|
$ |
25,000 |
|
$ |
— |
|
LIBOR + 1.75% |
|
|
0.30 |
% |
|
06/06/15 |
|
||||||||||||||||
|
Credit facility |
|
|
25,000 |
|
|
— |
|
LIBOR + 2.00% |
|
|
0.30 |
% |
|
06/30/15 |
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Total short-term borrowings of Consolidated Funds |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Long-term borrowings of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Credit facility |
|
|
150,000 |
|
|
39,300 |
|
LIBOR + 2.25% |
|
|
0.25 |
% |
|
06/04/18 |
|
||||||||||||||||
|
Notes payable |
|
|
1,500,000 |
|
|
738,300 |
|
LIBOR + 1.65% |
|
|
0.75 |
% |
|
09/19/18 |
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Total long-term borrowings of Consolidated Funds |
|
|
|
|
$ |
777,600 |
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Total borrowings of Consolidated Funds |
|
|
|
|
$ |
777,600 |
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
(1) |
The market values of the long term notes approximate the current carrying value that is tied to the LIBOR rate. |
The Consolidated Funds had the following revolving bank credit facilities and term loans outstanding as of December 31, 2013:
|
Type of Facility |
|
Total |
|
Outstanding |
|
Effective Rate |
|
Commitment |
|
Maturity |
|
||||||||||||||||||
|
Short-term borrowings of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Credit facility |
|
$ |
40,000 |
|
$ |
— |
|
LIBOR + 1.75% |
|
0.25% |
|
|
06/06/14 |
|
|||||||||||||||
|
Credit facility |
|
|
116,841 |
|
|
— |
|
LIBOR + 2.00% |
|
0.38% |
|
|
06/13/14 |
|
|||||||||||||||
|
Credit facility |
|
|
100,000 |
|
|
— |
|
LIBOR + 2.00% |
|
0.75% |
|
|
06/30/14 |
|
|||||||||||||||
|
Credit facility |
|
|
35,000 |
|
|
35,000 |
|
LIBOR + 0.50% |
|
0.50% |
|
|
07/19/14 |
|
|||||||||||||||
|
Term loan payable |
|
|
1,805,000 |
|
|
1,137,526 |
|
(2) |
|
0.50% |
|
|
07/19/14 |
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Total short-term borrowings of Consolidated Funds |
|
|
|
|
|
1,172,526 |
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Long-term borrowings of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Credit facility |
|
£ |
186,290 |
|
|
308,477 |
|
LIBOR + 1.85% |
|
N/A |
|
|
01/15/16 |
|
|||||||||||||||
|
Credit facility |
|
$ |
532,350 |
|
|
532,350 |
|
LIBOR + 2.20% |
|
N/A |
|
|
10/15/15 |
|
|||||||||||||||
|
Credit facility |
|
€ |
200,000 |
|
|
— |
|
LIBOR + 3.00% |
|
0.38% |
|
|
08/16/19 |
|
|||||||||||||||
|
Notes payable |
|
$ |
46,733 |
|
|
16,644 |
|
1.93% |
|
N/A |
|
|
09/19/15 |
|
|||||||||||||||
|
Notes payable |
|
|
114,048 |
|
|
40,601 |
|
1.93% |
|
N/A |
|
|
09/19/15 |
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Total long-term borrowings of Consolidated Funds |
|
|
|
|
|
898,072 |
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Total borrowings of Consolidated Funds |
|
|
|
|
$ |
2,070,598 |
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
(1) |
The market values of the long term notes approximate the current carrying value that is tied to the LIBOR rate. |
|
(2) |
Rate depends on the tranche of each note held. The rates during the period ranged from One Month LIBOR +0.35% to Three Month LIBOR +0.90%. |
|
(3) |
For loan maintained in a foreign currency, outstanding loan balances are converted and reported into U.S. dollars at the spot rate at each reporting date. |
Loan Obligations of the Consolidated Mezzanine Debt Funds
Loan obligations of consolidated mezzanine debt funds represent amounts due to holders of debt securities issued by Ares Institutional Loan Fund B.V. (the "AILF Master Fund"), a Netherlands limited liability company. The AILF Master Fund issued Class A, Class B and Class C participating notes that have equal rights and privileges, except with respect to management fees and the performance fee that are applicable to only the Class A participating notes. These participating notes are redeemable debt instruments that do not have a stated interest rate or fixed maturity date. The AILF Master Fund may cause any holders to redeem all or any portion of such notes at any time upon at least five days prior written notice for any reason or no reason. A participating note holder may withdraw all or some of its notes as of the last business day of each calendar month by providing at least 30 days prior written notice. The holders of these participating notes have the right to receive the AILF Master Fund's first gains and the obligation to absorb the AILF Master Fund's first losses. As of December 31, 2014 and 2013, outstanding loan obligations of the consolidated mezzanine debt funds were approximately $378.4 million and $323.2 million, respectively, and are presented as mezzanine debt in the Consolidated Statements of Financial Condition. The residual interests of the consolidated mezzanine debt funds are carried at cost plus accrued interest. The mezzanine funds are collateralized by all of the assets of the AILF Master Fund with no recourse to the Company.
Debt Extinguishment of Consolidated Funds
In connection with an early repayment of debt in 2013, one of the Consolidated Funds extinguished $670.0 million of debt at a discount, resulting in a gain of $11.8 million, which is recorded in debt extinguishment gain of Consolidated Funds within the Consolidated Statement of Operations.
|
|||
9. REDEEMABLE AND NON-CONTROLLING INTERESTS
The following table sets forth a summary of changes in the redeemable interests in Ares Operating Group entities and redeemable interest in Consolidated Funds as of December 31, 2014 and 2013:
|
|
|
As of December 31, |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Redeemable interests in Consolidated Funds |
|
|
|
|
|
|
|
||||||||
|
Redeemable non-controlling interests in Consolidated Funds, beginning of period |
|
$ |
1,093,770 |
|
$ |
1,100,108 |
|
||||||||
|
Contributions from redeemable, non-controlling interests in Consolidated Funds |
|
|
30,408 |
|
|
— |
|
||||||||
|
Distributions to redeemable, non-controlling interests in Consolidated Funds |
|
|
(61,534 |
) |
|
(143,378 |
) |
||||||||
|
Currency translation adjustment attributable to redeemable, non-controlling interests in Consolidated Funds |
|
|
— |
|
|
(884 |
) |
||||||||
|
Net income attributable to redeemable, non-controlling interests in Consolidated Funds |
|
|
33,455 |
|
|
137,924 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Equity Balance Post—Reorganization |
|
$ |
1,096,099 |
|
$ |
1,093,770 |
|
||||||||
|
Net income (loss) attributable to redeemable, non-controlling interests in Consolidated Funds |
|
|
(30,890 |
) |
|
— |
|
||||||||
|
Distributions to redeemable, non-controlling interests in Consolidated Funds |
|
|
(27,759 |
) |
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Ending Balance |
|
$ |
1,037,450 |
|
$ |
1,093,770 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
As of December 31, |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Redeemable interests in Ares Operating Group Entities |
|
|
|
|
|
|
|
||||||||
|
Beginning balance |
|
$ |
40,751 |
|
$ |
30,488 |
|
||||||||
|
Net income |
|
|
164 |
|
|
2,451 |
|
||||||||
|
Allocation of contributions in excess of carrying value of net assets attributable to the AREA acquisition |
|
|
— |
|
|
254 |
|
||||||||
|
Allocation of contributions in excess of carrying value of net assets attributable to Class D units |
|
|
— |
|
|
3,458 |
|
||||||||
|
Distributions |
|
|
(1,313 |
) |
|
(4,641 |
) |
||||||||
|
Currency translation adjustment |
|
|
9 |
|
|
13 |
|
||||||||
|
Revaluation of redeemable interest |
|
|
— |
|
|
8,437 |
|
||||||||
|
Equity compensation |
|
|
234 |
|
|
291 |
|
||||||||
|
Tandem award compensation adjustment |
|
|
(15,898 |
) |
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Equity Balance Post Reorganization |
|
|
23,947 |
|
|
40,751 |
|
||||||||
|
Issuance cost |
|
|
(124 |
) |
|
— |
|
||||||||
|
Allocation of contributions in excess of the carrying value of the net assets (dilution) |
|
|
910 |
|
|
— |
|
||||||||
|
Reallocation of Partners' capital for change in ownership interest |
|
|
(900 |
) |
|
— |
|
||||||||
|
Distributions |
|
|
(477 |
) |
|
— |
|
||||||||
|
Net income |
|
|
567 |
|
|
— |
|
||||||||
|
Currency translation adjustment |
|
|
(16 |
) |
|
— |
|
||||||||
|
Equity compensation |
|
|
81 |
|
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Ending Balance |
|
$ |
23,988 |
|
$ |
40,751 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
The following table sets forth a summary of changes in the non-controlling interest in Ares Operating Group entities for the year ended December 31, 2014:
|
|
|
Non-controlling interest in Predecessor |
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
Total |
|
||||||||||||||||||||||||||||||||||||||||
|
|
|
Members' |
|
Common |
|
Additional |
|
Retained |
|
Accumulated |
|
Non-Controlling |
|
||||||||||||||||||||||||||||||||
|
Balance at December 31, 2012 |
|
$ |
87,584 |
|
$ |
— |
|
$ |
54,561 |
|
$ |
(11,283 |
) |
$ |
(27 |
) |
$ |
— |
|
$ |
130,835 |
|
|||||||||||||||||||||||
|
Allocation of contributions in excess of carrying value of net assets attributable to the AREA acquisition |
|
|
2,152 |
|
|
— |
|
|
3,835 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,987 |
|
|||||||||||||||||||||||
|
Issuance of Class D units, net of offering costs |
|
|
241,735 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
241,735 |
|
|||||||||||||||||||||||
|
Allocation of contribution in excess of carrying value of net assets attributable to Class D units |
|
|
(183,820 |
) |
|
— |
|
|
6,404 |
|
|
— |
|
|
— |
|
|
— |
|
|
(177,416 |
) |
|||||||||||||||||||||||
|
Deferred tax liabilities arising from allocation of contributions |
|
|
|
|
|
— |
|
|
(12,171 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(12,171 |
) |
|||||||||||||||||||||||
|
Distributions |
|
|
(69,173 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(69,173 |
) |
|||||||||||||||||||||||
|
Net income |
|
|
30,715 |
|
|
— |
|
|
— |
|
|
12,959 |
|
|
— |
|
|
— |
|
|
43,674 |
|
|||||||||||||||||||||||
|
Revaluation of redeemable equity |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,093 |
) |
|
— |
|
|
— |
|
|
(2,093 |
) |
|||||||||||||||||||||||
|
Currency translation adjustment |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
341 |
|
|
— |
|
|
341 |
|
|||||||||||||||||||||||
|
Equity compensation |
|
|
799 |
|
|
— |
|
|
5,213 |
|
|
— |
|
|
— |
|
|
— |
|
|
6,012 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Balance at December 31, 2013 |
|
|
109,992 |
|
|
— |
|
|
57,842 |
|
|
(417 |
) |
|
314 |
|
|
— |
|
|
167,731 |
|
|||||||||||||||||||||||
|
Distributions |
|
|
(46,534 |
) |
|
— |
|
|
(3,908 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(50,442 |
) |
|||||||||||||||||||||||
|
Net income |
|
|
6,836 |
|
|
— |
|
|
— |
|
|
(3,589 |
) |
|
— |
|
|
— |
|
|
3,247 |
|
|||||||||||||||||||||||
|
Currency translation adjustment |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
404 |
|
|
— |
|
|
404 |
|
|||||||||||||||||||||||
|
Equity compensation |
|
|
3,346 |
|
|
— |
|
|
9,133 |
|
|
— |
|
|
— |
|
|
— |
|
|
12,479 |
|
|||||||||||||||||||||||
|
Tandem award compensation adjustment |
|
|
864 |
|
|
— |
|
|
608 |
|
|
(230 |
) |
|
— |
|
|
— |
|
|
1,242 |
|
|||||||||||||||||||||||
|
Net effect of Reorganization, including contribution of AOG Units for common units |
|
|
(74,504 |
) |
|
— |
|
|
(63,675 |
) |
|
4,236 |
|
|
(718 |
) |
|
332,575 |
|
|
197,914 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Equity Balance Post—Reorganization |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
332,575 |
|
|
332,575 |
|
|||||||||||||||||||||||
|
Issuance costs |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(17,581 |
) |
|
(17,581 |
) |
|||||||||||||||||||||||
|
Allocation of contributions in excess of the carrying value of the net assets (dilution) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
128,536 |
|
|
128,536 |
|
|||||||||||||||||||||||
|
Reallocation of Partners' capital for changes in ownership interest |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(611 |
) |
|
(611 |
) |
|||||||||||||||||||||||
|
Deferred tax liabilities arising from allocation of contributions and Partners' capital |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(16 |
) |
|
(16 |
) |
|||||||||||||||||||||||
|
Distributions |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(68,872 |
) |
|
(68,872 |
) |
|||||||||||||||||||||||
|
Net income |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
80,240 |
|
|
80,240 |
|
|||||||||||||||||||||||
|
Currency translation adjustment |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,285 |
) |
|
(2,285 |
) |
|||||||||||||||||||||||
|
Equity compensation |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
11,507 |
|
|
11,507 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Balance at December 31, 2014 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
463,493 |
|
$ |
463,493 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|||
10. OTHER ASSETS
The components of other assets for the years ended December 31, 2014 and 2013 were as follows:
|
|
|
As of December 31, |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Other assets of the Company: |
|
|
|
|
|
|
|
||||||||
|
Accounts and interest receivable |
|
$ |
4,310 |
|
$ |
1,863 |
|
||||||||
|
Receivable for securities sold |
|
|
— |
|
|
11,594 |
|
||||||||
|
Fixed assets, net |
|
|
34,055 |
|
|
27,852 |
|
||||||||
|
Other assets |
|
|
26,340 |
|
|
32,291 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total other assets of Company |
|
$ |
64,705 |
|
$ |
73,600 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Other assets of Consolidated Funds: |
|
|
|
|
|
|
|
||||||||
|
Deferred debt issuance costs |
|
$ |
7,610 |
|
$ |
13,106 |
|
||||||||
|
Note receivables |
|
|
381 |
|
|
366 |
|
||||||||
|
Income tax receivable |
|
|
1,417 |
|
|
314 |
|
||||||||
|
Other receivables |
|
|
977 |
|
|
3,641 |
|
||||||||
|
Other assets |
|
|
2,088 |
|
|
8,101 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total other assets of Consolidated Funds |
|
$ |
12,473 |
|
$ |
25,528 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total other assets |
|
$ |
77,178 |
|
$ |
99,128 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Fixed Assets, Net
The major classes of depreciable assets for the years ended December 31, 2014 and 2013 were as follows:
|
|
|
Year Ended December 31, |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Furniture |
|
$ |
6,831 |
|
$ |
9,722 |
|
||||||||
|
Office and computer equipment |
|
|
15,772 |
|
|
13,059 |
|
||||||||
|
Internal use software |
|
|
5,572 |
|
|
5,670 |
|
||||||||
|
Leasehold improvements |
|
|
37,928 |
|
|
34,484 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Fixed assets, at cost |
|
|
66,103 |
|
|
62,935 |
|
||||||||
|
Less: accumulated depreciation |
|
|
(32,048 |
) |
|
(35,083 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Fixed assets, net |
|
|
34,055 |
|
$ |
27,852 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
For the years ended December 31, 2014, 2013 and 2012, depreciation expense was $7.3 million, $6.3 million and $4.6 million, respectively, which is included in general, administrative and other expense in the Consolidated Statements of Operations.
|
|||
11. COMMITMENTS AND CONTINGENCIES
Indemnification Arrangements
Consistent with standard business practices in the normal course of business, the Company enters into contracts that contain indemnities for affiliates of the Company, persons acting on behalf of the Company or such affiliates and third parties. The terms of the indemnities vary from contract to contract and the Company's maximum exposure under these arrangements cannot be determined and has not been recorded in the Consolidated Statements of Financial Condition. As of December 31, 2014, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
Capital Commitments
As of December 31, 2014 and 2013, the Company had aggregate unfunded commitments of $187.9 million, of which $5.6 million is contingent consideration recorded in relation to the acquisition of AREA, and is presented within accounts payable and accrued expenses in the consolidated statements of financial condition, and $244.5 million, respectively, including commitments to both non-consolidated funds and Consolidated Funds.
Rental Leases
The Company leases office space in various countries and maintains its headquarters in Los Angeles, where it leases its primary office space under non-cancelable rental operating lease agreements that expire in May 2020. The Company's rental lease agreements are generally subject to escalation provisions on base rental payments, as well as certain costs incurred by the property owner and are recognized on a straight-line basis over the term of the lease agreement. Rent expense includes base contractual rent. Rent expense for the years ended December 31, 2014, 2013 and 2012 was $17.9 million, $12.7 million and $8.6 million, respectively, and is recorded within general, administrative and other expense in the Consolidated Statements of Operations. All leases expire in various years ranging from 2015 to 2026.
The future minimum commitments for the Company's operating leases are as follows:
|
2015 |
|
$ |
16,214 |
|
|||||
|
2016 |
|
|
19,587 |
|
|||||
|
2017 |
|
|
19,454 |
|
|||||
|
2018 |
|
|
18,384 |
|
|||||
|
Thereafter |
|
|
79,520 |
|
|||||
|
|
|
|
|
|
|||||
|
Total |
|
$ |
153,159 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
Guarantees
For the years ended December 31, 2014 and 2013, the Company guaranteed loans for certain professionals in affiliated co-investment entities. These entities were formed to permit certain employees and members to invest alongside the Company and its investors in the funds managed by the Company. The Company would be responsible for all outstanding payments due in the event of a default on the loans by certain professionals. As of December 31, 2014 and 2013, the total outstanding loan balance was approximately $3.2 million and $4.1 million with an additional $1.1 million and $1.2 million in unfunded commitments, respectively. There has been no history of default and the Company has determined that the likelihood of default is remote. These guarantees are not considered to be compensation.
The Company assumed a guarantee of a mortgage associated with an office space in New York City in connection with the AREA acquisition. The guarantee, dated March 20, 2008, was for the benefit of a Germany-based commercial property lender in connection with a $21.5 million loan provided to an affiliate of the Company. As of April 30, 2014, the Company was released of its guarantee and no longer bears any obligation for the mortgage.
On July 30, 2014, AM LLC agreed to provide credit support to a new $75 million credit facility, (the "Guaranteed Facility") entered into by a wholly owned subsidiary of ACRE with a national banking association. AM LLC is the parent entity to ACRE's external manager. In connection with the facility, AM LLC agreed to purchase all loans and other obligations outstanding under the Guaranteed Facility at a price equal to 100% of the outstanding balance (i) upon an acceleration or certain events of default by ACRE under the Guaranteed Facility or (ii) in the event that AM LLC's corporate credit rating is downgraded to below investment grade, among other things. ACRE pays AM LLC a credit support fee of 1.50% per annum times the average amount of the loans outstanding under the Guaranteed Facility, payable monthly, and reimburses AM LLC for its out-of-pocket costs and expenses in connection with the Guaranteed Facility. In addition to the credit support fee, ACRE pledged to AM LLC its ownership interest in its principal lending holding entity to support the Guaranteed Facility. The Company's maximum exposure to loss shall not exceed $75 million plus accrued interest. The Company recorded $1.3 million as a receivable in connection with the credit support that is based on the present value of discounted expected cash flows. This receivable balance decreases as the Company collects the monthly credit support fee from ACRE. As of December 31, 2014, the receivable balance is $1.1 million and is included in due from affiliates in the Consolidated Statements of Financial Condition. The Company also recorded the fair value of this guarantee in the amount of $1.6 million within accounts payable, accrued expenses and other liabilities in the Consolidated Statements of Financial Condition for the year ended December 31, 2014. The fair value of this guarantee was determined by an independent third-party valuation firm using a market-based approach and a discounted cash flow model using a discount rate of 1.97% as the primary input. As of December 31, 2014, the total outstanding balance under the Guaranteed Facility was $75.0 million. The Company believes the likelihood of default by the ACRE subsidiary to be remote. The Company recognized $0.3 million of expense in connection with the guarantee for the year ended December 31, 2014, which is included in other income (expense), net in the Consolidated Statements of Operations.
Performance Fees
Generally, if at the termination of a fund (and increasingly at interim points in the life of a fund), the fund has not achieved investment returns that (in most cases) exceed the preferred return threshold or (in all cases) the general partner receives net profits over the life of the fund in excess of its allocable share under the applicable partnership agreement, the Company will be obligated to repay carried interest that was received by the Company in excess of the amounts to which the Company is entitled. This obligation is known as a "clawback" obligation. The clawback obligation may be reduced by income taxes paid by the Company related to its carried interest.
At December 31, 2014 and 2013, if the Company assumed all existing investments were valued at $0, the amount of performance fees subject to potential clawback, net of tax, which may differ from the recognition of revenue, would have been approximately $295.7 million and $346.4 million, respectively, of which approximately $239.3 million and $280.5 million, respectively, is reimbursable to the Company by certain professionals. Management believes the possibility of all of the investments becoming worthless is remote. If the funds were liquidated at their then current fair values as of December 31, 2014 and 2013, there would be no event of clawback. For all periods presented, the Company did not accrue any expense or record a liability associated with the clawback obligation.
|
|||
12. RELATED PARTY TRANSACTIONS
Substantially all of the Company's revenue is earned from its affiliates, including management fees, performance fees, administrative expense reimbursements and service fees. The related accounts receivable are included within due from affiliates within the Consolidated Statements of Financial Condition, except that performance fees receivable, which are entirely due from affiliated funds, are presented separately within the Consolidated Statements of Financial Condition.
The Company has investment management agreements with various funds and accounts that it manages. In accordance with these agreements, the Consolidated Funds bear certain operating costs and expenses which are initially paid by the Company and subsequently reimbursed by the Consolidated Funds. In addition, the Company has agreements to provide administrative services to various entities.
The Company also has entered into agreements to provide administrative services which are eligible for reimbursement from related parties, including ARCC, ACRE, ARDC, ARMF, Ivy Hill Asset Management, L.P., European Senior Secured Loan Programme S.à.r.l. and ACF FinCo I L.P.
Employees and other related parties may be permitted to participate in co-investment vehicles that generally invest in Ares funds alongside fund investors. Participation is limited by law to individuals who qualify under applicable securities laws. These co-investment vehicles generally do not require these individuals to pay management or performance fees.
Performance fees from the funds can be distributed to professionals on a current basis, subject to repayment by the subsidiary of the Company that acts as general partner of the relevant fund in the event that certain specified return thresholds are not ultimately achieved. The professionals have personally guaranteed, subject to certain limitations, the obligations of these subsidiaries in respect of this general partner obligation. Such guarantees are several and not joint and are limited to distributions received by the relevant recipient.
The Company considers its professionals and non-consolidated funds to be affiliates. Amounts due from and to affiliates were comprised of the following:
|
|
|
As of December 31, |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Due from affiliates: |
|
|
|
|
|
|
|
||||||||
|
Management fees receivable from non-consolidated funds |
|
|
113,358 |
|
$ |
91,917 |
|
||||||||
|
Payments made on behalf of and amounts due from non-consolidated funds |
|
|
33,176 |
|
|
17,003 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Due from affiliates—Company |
|
$ |
146,534 |
|
$ |
108,920 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Amounts due from portfolio companies and non-consolidated funds |
|
$ |
11,342 |
|
$ |
2,010 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Due from affiliates—Consolidated Funds |
|
$ |
11,342 |
|
$ |
2,010 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Due to affiliates: |
|
|
|
|
|
|
|
||||||||
|
Management fee rebate payable to non-consolidated funds |
|
$ |
14,390 |
|
$ |
28,715 |
|
||||||||
|
Payments made by non-consolidated funds on behalf of and amounts due from the Company |
|
|
4,640 |
|
|
3,975 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Due to affiliates—Company |
|
$ |
19,030 |
|
$ |
32,690 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Amounts due to non-consolidated funds |
|
$ |
2,441 |
|
$ |
2,695 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Due to affiliates—Consolidated Funds |
|
$ |
2,441 |
|
$ |
2,695 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Due from Ares Funds and Portfolio Companies
In the normal course of business, the Company pays certain expenses on behalf of Consolidated Funds and non-consolidated funds for which it is reimbursed. Amounts advanced on behalf of Consolidated Funds are eliminated in consolidation. Certain expenses initially paid by the Company, primarily professional travel and other costs associated with particular portfolio company holdings, may be reimbursed by the portfolio companies.
|
|||
13. INCOME TAXES
A substantial portion of the Company's earnings flow through to owners of the Company without being subject to entity level income taxes. Consequently, a significant portion of the Company's earnings reflects no provision for income taxes except those for foreign, city and local income taxes incurred at the entity level. A portion of the Company's operations is held through AHI and Domestic Holdings, which are U.S. corporations for tax purposes. Their income is subject to U.S. federal, state and local income taxes and certain of its foreign subsidiaries are subject to foreign income taxes (for which a foreign tax credit can generally offset U.S. corporate taxes imposed on the same income). A provision for corporate level income taxes imposed on AHI's and Domestic Holdings' earnings is included in the Company's tax provision. The Company's tax provision also includes entity level income taxes incurred by certain affiliated funds and co-investment entities that are consolidated in these financial statements.
The Company's effective income tax rate is dependent on many factors, including the estimated nature of many amounts and the mix of revenues and expenses between U.S. corporate subsidiaries that are subject to income taxes and those subsidiaries that are not. Additionally, the Company's effective tax rate is influenced by the amount of income tax provision recorded for any affiliated funds and co-investment entities that are consolidated in these financial statements. Consequently, the effective income tax rate is subject to significant variation from period to period.
The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state, local and foreign tax regulators. With limited exceptions, the Company is no longer subject to income tax audits by taxing authorities for any years before 2010. Although the outcome of tax audits is always uncertain, the Company does not believe the outcome of any future audit will have a material adverse effect on the Company's consolidated financial statements.
The provision for income taxes attributable to the Company and the Consolidated Funds, consisted of the following for the years ended December 31, 2014, 2013 and 2012:
Provision for Income Taxes of the Company
|
|
|
Year Ended December 31, |
|
||||||||||||||||||
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Current: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
U.S. federal income tax |
|
$ |
12,801 |
|
$ |
19,774 |
|
$ |
18,355 |
|
|||||||||||
|
State and local income tax |
|
|
1,719 |
|
|
3,522 |
|
|
2,714 |
|
|||||||||||
|
Foreign income tax |
|
|
1,613 |
|
|
617 |
|
|
2,339 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
16,133 |
|
|
23,913 |
|
|
23,408 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
U.S. federal income tax (benefit) |
|
|
123 |
|
|
(5,743 |
) |
|
4,029 |
|
|||||||||||
|
State and local income tax (benefit) |
|
|
210 |
|
|
(747 |
) |
|
530 |
|
|||||||||||
|
Foreign income tax (benefit) |
|
|
70 |
|
|
— |
|
|
(6,151 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
403 |
|
|
(6,490 |
) |
|
(1,592 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
U.S. federal income tax |
|
|
12,924 |
|
|
14,031 |
|
|
22,384 |
|
|||||||||||
|
State and local income tax |
|
|
1,929 |
|
|
2,775 |
|
|
3,244 |
|
|||||||||||
|
Foreign income tax (benefit) |
|
|
1,683 |
|
|
617 |
|
|
(3,812 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Income tax expense |
|
$ |
16,536 |
|
$ |
17,423 |
|
$ |
21,816 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Provision for Income Taxes of the Consolidated Funds
|
|
|
Year Ended December 31, |
|
|||||||
|
|
|
2014 |
|
2013 |
|
2012 |
|
|||
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
U.S. federal income tax |
|
$ |
6,807 |
|
$ |
4,280 |
|
$ |
— |
|
|
State and local income tax (benefit) |
|
|
1,564 |
|
|
1,083 |
|
|
(2 |
) |
|
Foreign income tax |
|
|
36 |
|
|
1,396 |
|
|
4,245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,407 |
|
|
6,759 |
|
|
4,243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
U.S. federal income tax (benefit) |
|
|
(9,958 |
) |
|
26,368 |
|
|
78 |
|
|
State and local income tax (benefit) |
|
|
(2,832 |
) |
|
7,417 |
|
|
19 |
|
|
Foreign income tax (benefit) |
|
|
(900 |
) |
|
1,296 |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,690 |
) |
|
35,081 |
|
|
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
|
|
|
|
|
|
|
|
|
U.S. federal income tax (benefit) |
|
|
(3,151 |
) |
|
30,648 |
|
|
78 |
|
|
State and local income tax (benefit) |
|
|
(1,268 |
) |
|
8,500 |
|
|
17 |
|
|
Foreign income tax (benefit) |
|
|
(864 |
) |
|
2,692 |
|
|
4,243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
$ |
(5,283 |
) |
$ |
41,840 |
|
$ |
4,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Provision for Income Taxes of the Company and Consolidated Funds
|
|
|
Year Ended December 31, |
|
||||||||||||||||||
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Total current income tax expense |
|
$ |
24,540 |
|
$ |
30,672 |
|
$ |
27,651 |
|
|||||||||||
|
Total deferred income tax expense (benefit) |
|
|
(13,287 |
) |
|
28,591 |
|
|
(1,497 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total income tax expense |
|
$ |
11,253 |
|
$ |
59,263 |
|
$ |
26,154 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
The effective income tax rate differed from the federal statutory rate for the following reasons for the years ended December 31, 2014, 2013 and 2012:
|
|
|
Year Ended December 31, |
|
||||||||||||||||||
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Income tax expense at federal statutory rate |
|
|
35.0 |
% |
|
35.0 |
% |
|
35.0 |
% |
|||||||||||
|
Income passed through to non-controlling interests |
|
|
(34.9 |
) |
|
(29.2 |
) |
|
(34.3 |
) |
|||||||||||
|
State and local taxes, net of federal benefit |
|
|
0.4 |
|
|
0.8 |
|
|
0.2 |
|
|||||||||||
|
Foreign taxes |
|
|
0.1 |
|
|
0.6 |
|
|
(0.4 |
) |
|||||||||||
|
Other, net |
|
|
1.1 |
|
|
0.4 |
|
|
1.2 |
|
|||||||||||
|
Valuation allowance |
|
|
0.3 |
|
|
(0.8 |
) |
|
0.4 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total effective rate |
|
|
2.0 |
% |
|
6.8 |
% |
|
2.1 |
% |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Deferred Taxes
The income tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities were as follows as of December 31, 2014 and 2013:
Deferred Tax Assets and Liabilities of the Company
|
|
|
Year Ended |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Deferred tax assets |
|
|
|
|
|
|
|
||||||||
|
Net operating losses |
|
$ |
4,550 |
|
$ |
3,565 |
|
||||||||
|
Other, net |
|
|
— |
|
|
1,699 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total gross deferred tax assets |
|
|
4,550 |
|
|
5,264 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Valuation allowance |
|
|
(4,335 |
) |
|
(3,788 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total deferred tax assets, net |
|
|
215 |
|
|
1,476 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Deferred tax liabilities |
|
|
|
|
|
|
|
||||||||
|
Investment in partnerships |
|
|
(17,176 |
) |
|
(22,478 |
) |
||||||||
|
Other, net |
|
|
(2,900 |
) |
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total deferred tax liabilities |
|
|
(20,076 |
) |
|
(22,478 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Net deferred tax assets (liabilities) |
|
$ |
(19,861 |
) |
$ |
(21,002 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Deferred Tax Assets and Liabilities of the Consolidated Funds
|
|
|
Year Ended |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Deferred tax assets |
|
|
|
|
|
|
|
||||||||
|
Net operating loss |
|
$ |
1,841 |
|
$ |
608 |
|
||||||||
|
Other, net |
|
|
435 |
|
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total gross deferred tax assets |
|
|
2,276 |
|
|
608 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Valuation allowance |
|
|
(1,635 |
) |
|
(467 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total deferred tax assets, net |
|
|
641 |
|
|
141 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Deferred tax liabilities |
|
|
|
|
|
|
|
||||||||
|
Investment in partnerships |
|
|
(22,855 |
) |
|
(36,045 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total deferred tax liabilities |
|
|
(22,855 |
) |
|
(36,045 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Net deferred tax assets (liabilities) |
|
$ |
(22,214 |
) |
$ |
(35,904 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
In assessing the realizability of deferred tax assets, the Company considers whether it is probable that some or all of the deferred tax assets will not be realized. In determining whether the deferred taxes are realizable, the Company considers the period of expiration of the tax asset, historical and projected taxable income, and tax liabilities for the tax jurisdiction in which the tax asset is located. Valuation allowances are provided to reduce the amounts of deferred tax assets to an amount that is more likely than not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts.
The valuation allowance for deferred tax assets increased by $1.7 million in 2014 as a result of operating losses incurred in various jurisdictions in which the Company operates. The valuation allowance for deferred tax assets decreased by $6.9 million in 2013 as a result of income generated within the Company's foreign subsidiaries and increased by $5.0 million in 2012, due primarily to operating losses incurred in various foreign jurisdictions in which the Company operates.
At December 31, 2014, the Company had $26.7 million of net operating loss ("NOL") carryforwards available to reduce future foreign income taxes for which a full valuation allowance has been provided. The majority of the foreign NOLs have no expiry. The Company also has approximately $1.8 million and $2.9 million of US federal and state net operating loss carryforwards that begin to expire in 2029 and 2027, respectively.
As of, and for the three years ended December 31, 2014, 2013 and 2012, the Company had no significant uncertain tax positions.
|
|||
14. EARNINGS PER COMMON UNIT
Prior to the Reorganization and the IPO in May 2014, the Company's businesses were conducted through multiple operating businesses rather than a single holding entity. As such, there was no single capital structure upon which to calculate historical earnings per common unit information. Accordingly, earnings per common unit information has not been presented for historical periods prior to the IPO.
Basic earnings per common unit is computed by dividing income available to common unitholders by the weighted-average number of common units outstanding during the period. Diluted earnings per common unit is computed using the more dilutive method of either the two-class method or the treasury stock method.
The two-class method is an earnings allocation method under which earnings per unit is calculated for common units and participating securities considering both dividends declared (or accumulated) and participation rights in undistributed earnings as if all such earnings had been distributed during the period. Because the holders of unvested restricted units have the right to participate in distributions when declared, the unvested restricted units are considered participating securities to the extent they are expected to vest. For the period from May 1, 2014 to December 31, 2014, the two-class method was the more dilutive method for the unvested restricted stock units. For the period of May 1, 2014 to December 31, 2014, no participating securities have rights to undistributed earnings.
The treasury stock method is used to determine potentially dilutive securities resulting from options and unvested restricted units granted under the 2014 Equity Incentive Plan. Potentially dilutive securities representing 24,230,518 options were excluded from the computation of diluted earnings per common unit because their effect would have been anti-dilutive. If the treasury stock method had been the more dilutive method for the unvested restricted stock units, the dilutive effect of those units would have been 197,961 units for the period of May 1, 2014 to December 31, 2014.
Holders of AOG Units may exchange their AOG Units for common units on a one-for-one basis after the second anniversary of the date of the closing of the IPO provided that Alleghany may exchange up to half of its Ares Operating Group Units from and after May 7, 2015 (the first anniversary of our initial public offering), subject to any applicable transfer restrictions and other provisions. The Company applies the "if-converted" method to determine the dilutive weighted-average partnership units represented by these contingently issuable common units, assuming December 31, 2014 represents the end of contingency period.
The Company has excluded 130,858,662 AOG Units from the calculation of diluted earnings per common unit for the period from May 1, 2014 to December 31, 2014 since the exchange of these units would proportionally increase Ares Management, L.P.'s interest in the Ares Operating Group and would have an anti-dilutive effect on earnings per common unit as a result of certain tax benefits that Ares Management, L.P. is assumed to receive upon the exchange.
The following table presents the computation of basic and diluted earnings per common unit:
|
|
|
May 1, 2014 through |
|
||||||||||||
|
(Dollars in thousands, except unit data) |
|
Basic |
|
Diluted |
|
||||||||||
|
Net income attributable to Ares Management, L.P. |
|
$ |
34,988 |
|
$ |
34,988 |
|
||||||||
|
Earnings distributed to participating securities (restricted units) |
|
|
(417 |
) |
|
(417 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Net income available to common unitholders |
|
$ |
34,571 |
|
$ |
34,571 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Weighted-average common units |
|
|
80,358,036 |
|
|
80,358,036 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Effect of dilutive units: |
|
|
|
|
|
|
|
||||||||
|
Restricted units |
|
|
— |
|
|
— |
|
||||||||
|
Options |
|
|
— |
|
|
— |
|
||||||||
|
Contingently issuable common units |
|
|
— |
|
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Diluted weighted-average common units |
|
|
80,358,036 |
|
|
80,358,036 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Earnings per common unit |
|
$ |
0.43 |
|
$ |
0.43 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|||
15. EQUITY COMPENSATION
Prior to the IPO, the Company historically issued various profit interests and membership interests to pools of certain professionals that provide for the participation in the profits of APMC and/or proceeds of certain capital events. Unless otherwise stated, the grant date fair value of each award or respective membership interest was determined by an independent third-party valuation firm principally using a contingent claims analysis. These awards are referred to as Ares Employee Participation ("AEP") plans and are described below:
Ares Employee Participation LLC Interests
AEP I and AEP II Profit Interests—AEP I Profit Interests represent a 3.3% profit interest in APMC and AEP II Profit Interests represent an aggregate of 4.64% profit interest in APMC, issued to a pool of professionals to participate in the profits of APMC and proceeds of certain capital events. The AEP I Profit Interest and AEP II Profit Interest vest over five years from the grant dates, subject to the professionals' continuous service with the Company through vesting dates.
Exchanged AEP Awards—Represents (a) a 2% indirect membership interest in each of AMH LLC and AIH LLC and (b) a 2.2% profit interest to participate in the proceeds of certain capital events (collectively, "Exchanged AEP Awards"). The Exchanged AEP Awards vest over 17 months from the grant date, subject to the professional's continuous service with the Company through the vesting date.
AEP IV and AEP VI—Represent awards that vest on the occurrence of (a) a sale, exchange or other transfer of the business of Ares that is not in the ordinary course of business or to another controlled affiliate of Ares or (b) any other similar transaction deemed a capital event in the sole discretion of the manager of the awards (a "Capital Event"). The holders of the awards will be entitled to newly issued partnership interests as a result of the Capital Event. The occurrence of a Capital Event is considered a performance condition. Since Capital Events are defined at the discretion of the manager and represent events for which external factors and uncertainties make it difficult to establish a probability of occurrence prior to the consummation date or effective date, the Company had not deemed a Capital Events to be probable until consummated or effective. As such, the Company had not recorded compensation expenses in connection with these awards as no Capital Event occurred prior to May 1, 2014.
Indicus—Represents (a) a 0.5% membership interest in each of Ares Holdings and AI (the "Indicus Membership Interest") and (b) a right to receive a 1.14% profit interest to participate in the proceeds of certain capital events (the "Indicus Profit Interest") issued in connection with the Indicus acquisition to the principals who sold their interests in Indicus (the "Indicus Partners").
The Indicus Membership Interest vests over five years from the Indicus acquisition date, subject to the Indicus Partners' continuous employment or service with the Company through such date. The Indicus Membership Interest is subject to certain forfeiture provisions and the Indicus Partners have a right to exercise a put option during the six-month period ending on August 16, 2016. If all of the Indicus Partners were to exercise their put options, the aggregate settlement amount would be $20.0 million as of December 31, 2014. The amount is presented as equity compensation put option liability in the Consolidated Statements of Financial Condition.
The grant date fair value of the equity compensation put option feature associated with the Indicus Membership Interest was determined using an option pricing model utilizing a five-year term, a risk-free rate of 0.91%, a strike price of $20.0 million and an expected volatility of 45.5%.
The grant date fair value of the Indicus Profit Interest was $5.5 million as determined using the Black-Scholes option pricing model utilizing a seven-year term, a risk-free rate of 0.4%, a minimum strike price of $46.0 million and an expected volatility of 47.6%. This fair value was fixed as of the grant date and was being expensed ratably over the three years vesting period. The Indicus Profit Interest is automatically cancelled on the seventh anniversary of the Indicus acquisition.
AREA Membership Interest—Represents a 1.2% membership interest ("AREA Membership Interest") issued by the Company to a group of former AREA partners who joined the Company in connection with the acquisition of AREA on July 1, 2013. The AREA Membership Interest will be generally 50% vested on the first anniversary of issuance and 100% vested on the second anniversary of issuance. The fair value of these awards was determined using a recent market transaction at the time of determination.
The following summarizes the grant date fair value associated with each equity award issued prior to May 1, 2014, as well as the expense recognized for each year presented:
|
|
|
|
|
Equity Compensation Expenses |
|
Unrecognized |
|
||||||||||||||||||||||||||
|
|
|
|
|
Year Ended December 31, |
|
April 30, |
|
||||||||||||||||||||||||||
|
|
|
Grant Date |
|
||||||||||||||||||||||||||||||
|
|
|
2014 |
|
2013 |
|
2012 |
|
2014 |
|
||||||||||||||||||||||||
|
AEP I Profit Interest |
|
$ |
38,400 |
|
$ |
— |
|
$ |
— |
|
$ |
5,730 |
|
$ |
— |
|
|||||||||||||||||
|
AEP II Profit Interests |
|
|
33,423 |
|
|
14,714 |
|
|
6,016 |
|
|
5,923 |
|
|
12,709 |
|
|||||||||||||||||
|
AEP IV Profit Interests |
|
|
10,657 |
|
|
10,657 |
|
|
— |
|
|
— |
|
|
10,657 |
|
|||||||||||||||||
|
AEP VI Profit Interests |
|
|
9,047 |
|
|
9,047 |
|
|
— |
|
|
— |
|
|
9,047 |
|
|||||||||||||||||
|
Exchanged AEP Awards |
|
|
68,607 |
|
|
— |
|
|
12,944 |
|
|
33,584 |
|
|
— |
|
|||||||||||||||||
|
Indicus |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
—Membership Interest |
|
|
20,700 |
|
|
11,913 |
|
|
3,371 |
|
|
4,947 |
|
|
10,532 |
|
|||||||||||||||||
|
—Profit Interest |
|
|
5,464 |
|
|
(3,871 |
) |
|
1,821 |
|
|
1,851 |
|
|
— |
|
|||||||||||||||||
|
AREA Membership Interest |
|
|
25,381 |
|
|
20,678 |
|
|
4,685 |
|
|
— |
|
|
17,555 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total |
|
$ |
211,679 |
|
$ |
63,138 |
|
$ |
28,837 |
|
$ |
52,035 |
|
$ |
60,500 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Conversion and Vesting of AEP awards
On May 1, 2014, in connection with the Reorganization, certain existing interests held by APMC, on behalf of certain of our Co-Founders and senior professionals under AEP plans, that represent less than a full equity interest in the Predecessors were converted into AOG Units and were immediately vested and expensed in full. There was no change in the fair value of these converted interests as a result of the acceleration in vesting; however, the Indicus Profit Interest was cancelled. In connection with this cancellation, the Company reversed expense of $4.3 million. As a result, the Company recognized one-time compensation expense of $56.2 million related to vesting and cancellation of the converted awards in the year ended December 31, 2014.
Ares Management, L.P. 2014 Equity Incentive Plan
In connection with the IPO, the board of directors of our general partner adopted the Equity Incentive Plan. Under the Equity Incentive Plan, the Company granted options to acquire 24,835,227 common units, 4,936,051 restricted units to be settled in common units and 686,395 phantom common units to be settled in cash. The total number of units immediately available for issuance under the Equity Incentive Plan was 31,704,545 and as of December 31, 2014, 2,697,974 had not been issued. Based on a formula as defined in the Equity Incentive Plan, the total number units available to be issued under the Equity Incentive Plan increases annually on January 1. As of January 1, 2015, the total number of units available for issuance under the Equity Incentive Plan increased to 31,728,949.
Equity-based compensation expense, net of assumed forfeitures is included in the following table:
|
|
|
For the period from |
|
||||||
|
Restricted units |
|
$ |
8,826 |
|
|||||
|
Options |
|
|
9,869 |
|
|||||
|
Phantom units |
|
|
1,396 |
|
|||||
|
|
|
|
|
|
|||||
|
Equity-based compensation expense |
|
$ |
20,091 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|||||
Restricted Units
Each restricted unit represents an unfunded, unsecured right of the holder to receive a common unit on the vesting date. The restricted units generally vest either (i) at a rate of one-third per year, beginning on the third anniversary of the grant date, or (ii) in their entirety on the fifth anniversary of the grant date. Compensation expense associated with restricted units is being recognized on a straight-line basis over the service period of the respective grant. The grant date fair value gives effect to a discount for lack of marketability imposed by a five-year lock up period that was determined to be 5.0% based on Finnerty's average strike price put option model.
The holders of restricted units have the right to receive as current compensation an amount in cash equal to (i) the amount of any distribution paid with respect to a common unit multiplied by (ii) the number of unvested restricted units held at the time such distributions are declared ("Distribution Equivalent"). The board of directors of our general partner declared a quarterly distribution of $0.18 per common unit to common unitholders of record at the close of business on August 25, 2014 and $0.24 per common unit to common unitholders of record at the close of business on November 24, 2014. For the year ended December 31, 2014, Distribution Equivalents were made to the holders of restricted units of $2.0 million, of which $0.5 million is presented within compensation and benefits in the Consolidated Statements of Operations and $1.5 million is included in distributions in the Consolidated Statements of Changes in Equity.
The following table presents unvested restricted units' activity during the period from May 1, 2014 through December 31, 2014:
|
|
|
Restricted Units |
|
Weighted Average |
|
||||||||||
|
Balance—May 1, 2014 |
|
|
— |
|
$ |
— |
|
||||||||
|
Granted—IPO |
|
|
4,936,051 |
|
|
18.08 |
|
||||||||
|
Forfeited |
|
|
(159,998 |
) |
|
18.05 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Balance—December 31, 2014 |
|
|
4,776,053 |
|
$ |
18.08 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
No restricted units were vested during the period from May 1, 2014 through December 31, 2014. The total compensation expense expected to be recognized in all future periods associated with the restricted units, considering assumed annual forfeitures of 7.0%, is approximately $58.1 million at December 31, 2014, which is expected to be recognized over the remaining weighted average period of 4.32 years.
Options
Each option entitles the holders to purchase from the Company, upon exercise thereof, one common unit at the stated exercise price. The term of the options is generally ten years from the grant date. The options generally vest at a rate of one-third per year, beginning on the third anniversary of the grant date. Compensation expense associated with these options is being recognized on a straight-line basis during the service period of the respective grant. As of December 31, 2014, there was $64.7 million of total unrecognized compensation expense, net of assumed annual forfeitures of 7.0%, that is expected to be recognized over the remaining weighted average period of 4.32 years.
A summary of unvested options activity during the period from May 1, 2014 through December 31, 2014 is presented below:
|
|
|
Options |
|
Weighted Average |
|
Weighted Average |
|
Aggregate |
|
||||||||||||||||||
|
Balance—May 1, 2014 |
|
|
— |
|
$ |
— |
|
|
— |
|
|
|
|
||||||||||||||
|
Granted—IPO |
|
|
24,835,227 |
|
|
19.00 |
|
|
9.33 |
|
|
|
|
||||||||||||||
|
Forfeited |
|
|
(604,709 |
) |
|
19.00 |
|
|
— |
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Balance—December 31, 2014 |
|
|
24,230,518 |
|
$ |
19.00 |
|
|
9.33 |
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Exercisable at December 31, 2014 |
|
|
— |
|
$ |
— |
|
|
— |
|
$ |
— |
|
||||||||||||||
|
Expected to vest after December 31, 2014 |
|
|
18,611,216 |
|
$ |
19.00 |
|
|
9.33 |
|
$ |
— |
|
||||||||||||||
Aggregate intrinsic value represents the value of the Company's closing unit price on the last trading day of the period in excess of the weighted-average exercise price multiplied by the number of options exercisable or expected to vest. As of December 31, 2014, the Company's closing unit price is lower than the weighted average exercise price of the options exercisable or expected to vest. As a result, the options are out of the money and have no intrinsic value.
The fair value of each option granted during the period from May 1 to December 31, 2014 is measured on the date of grant using the Black-Scholes option-pricing model and the following weighted average assumptions:
|
Risk-free interest rate |
|
2.06% to 2.22% |
|
Weighted average expected dividend yield |
|
5.00% |
|
Expected volatility factor(a) |
|
34.00% to 35.00% |
|
Expected life in years |
|
6.92 to 7.00 |
|
(a) |
Expected volatility is based on comparable companies using daily stock prices. |
The fair value of an award is affected by the Company's unit price on the date of grant as well as other assumptions including the estimated volatility of the Company's unit price over the term of the awards and the estimated period of time that management expects employees to hold their unit options. The estimated period of time that management expects employees to hold their options was estimated as the midpoint between the vesting date and maturity date.
Phantom Units
Each phantom unit represents an unfunded, unsecured right of the holder to receive an amount in cash per phantom unit equal to the average closing price of a common unit for the 15 trading days immediately prior to, and the 15 trading days immediately following, the vesting date. The phantom units will vest in equal installments over five years at the anniversaries of the initial public offering date. The phantom units are accounted for as liability awards with compensation expense being recognized based on a straight-line basis based on the number of units expected to vest during the service period. Forfeitures will reduce the expenses in the period in which the forfeiture occurs.
A summary of unvested phantom units' activity during the period from May 1, 2014 through December 31, 2014 is presented below:
|
|
|
Phantom Units |
|
Weighted Average |
|
||||||||||
|
Balance May 1, 2014 |
|
|
— |
|
$ |
— |
|
||||||||
|
Granted—IPO |
|
|
686,395 |
|
|
19.00 |
|
||||||||
|
Forfeited |
|
|
(75,684 |
) |
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Balance December 31, 2014 |
|
|
610,711 |
|
$ |
19.00 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
No phantom units were vested during the period from May 1, 2014 through December 31, 2014. Forfeitures are accounted for as they occur. The fair value of the awards is remeasured at each reporting period and was $17.14 per unit as of December 31, 2014. Based on the fair value of the awards at December 31, 2014, $9.1 million of unrecognized compensation expense in connection with phantom units outstanding is expected to be recognized over a weighted average period of 4.33 years. For the period from May 1, 2014 to December 31, 2014, no cash was paid to settle phantom units.
Unvested phantom units, restricted units and options are forfeited upon any termination of employment; provided that, with respect to certain restricted units and options, if a participant's employment is terminated between the first and second year after grant by the Company without "cause," or as a result of a participant's death or disability, 11% of the award will vest and, if the participant's employment is so terminated between the second and third year after grant, 22% of the award will vest.
The Company records deferred tax assets for equity-based compensation awards, based on the amount of equity-based compensation expense recognized at the statutory tax rate in the jurisdiction in which the Company is expected to receive a future tax deduction. From the period of May 1 to December 31, 2014, the Company recognized $2.7 million of deferred tax assets related to its equity-based award. In addition, differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on the Company's income tax returns are recorded as adjustments to partners' capital. If the tax deduction is less than the deferred tax asset, the calculated shortfall reduces the pool of excess tax benefits. If the pool of excess tax benefits is reduced to zero, then subsequent shortfalls would increase the income tax expense.
|
|||
16. MARKET AND OTHER RISK FACTORS
Due to the nature of the Company's investment strategy, the Company's portfolio of investments has significant market and credit risk. As a result, the Company is subject to market and other risk factors, including, but not limited to the following:
Market Risk
The market price of investments may significantly fluctuate during the period of investment. Investments may decline in value due to factors affecting securities markets generally or particular industries represented in the securities markets. The value of an investment may decline due to general market conditions which are not specifically related to such investment, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. They may also decline due to factors that affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry.
Limited Liquidity of Investments
The Company intends to invest in securities that may not be readily marketable. Illiquid investments may trade at a discount from comparable, more liquid investments, and at times there may be no market at all for such investments. Subordinate investments may be less marketable, or in some instances illiquid, because of the absence of registration under federal securities laws, contractual restrictions on transfer, the small size of the market and the small size of the issue (relative to issues of comparable interests). As a result, the Company may encounter difficulty in selling its investments or may, if required to liquidate investments to satisfy redemption requests of its investors or debt service obligations, be compelled to sell such investments at less than fair value.
Counterparty Risk
Some of the markets in which the Company may affect its transactions are over-the-counter or interdealer markets. The participants in such markets are typically not subject to credit evaluation and regulatory oversight unlike members of exchange-based markets. The lack of oversight exposes the Company to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the applicable contract (whether or not such dispute is bona fide) or because of a credit or liquidity problem, causing the Company to suffer losses. Such counterparty risk is accentuated for contracts with longer maturities where events may intervene to prevent settlement, or where the Company has concentrated its transactions with a single or small group of counterparties.
Credit Risk
There are no restrictions on the credit quality of the investments the Company intends to make. Investments may be deemed by nationally recognized rating agencies to have substantial vulnerability to default in payment of interest and/or principal. Some investments may have low-quality ratings or be unrated. Lower rated and unrated investments have major risk exposure to adverse conditions and are considered to be predominantly speculative. Generally, such investments offer a higher return potential than higher rated investments, but involve greater volatility of price and greater risk of loss of income and principal.
In general, the ratings of nationally recognized rating organizations represent the opinions of agencies as to the quality of the securities they rate. Such ratings, however, are relative and subjective; they are not absolute standards of quality and do not evaluate the market value risk of the relevant securities. It is also possible that a rating agency might not change its rating of a particular issue on a timely basis to reflect subsequent events. The Company may use these ratings as initial criteria for the selection of portfolio assets for the Company but is not required to utilize them.
Currency Risk
The Company may invest in financial instruments and enter into transactions denominated in currencies other than US dollars its functional currency. Although the Company may seek to hedge currency exposure through financial instruments, the Company may still be exposed to risks that the exchange rate of its currency relative to other foreign currencies may change in a manner that has an adverse effect on the value of that portion of the Company's assets or liabilities denominated in currencies other than the functional currency.
The Company may enter into derivative contracts to manage the risk associated with foreign currency exchange fluctuations on its non-U.S. dollar denominated holdings.
|
|||
17. EQUITY
Ares Management, L.P.
Common units represent limited partnership interests in the Company. The holders of common units are entitled to participate pro rata in distributions from the Company and to exercise the rights or privileges that are available to common unitholders under the Company's partnership agreement. The common unitholders have limited voting rights and have no right to remove the Company's general partner, Ares Management GP LLC, or, except in limited circumstances, to elect the directors of the general partner.
At December 31, 2014, Ares Management, L.P. owns a 38.14% direct interest, or 80,667,664 AOG Units, in each of the Ares Operating Group entities; Ares Owners Holding L.P. owns a 55.95% direct interest, or 118,358,662 AOG Units, in each of the Ares Operating Group entities; and an affiliate of Alleghany owns a 5.91% direct interest, or 12,500,000 AOG units, in each of the Ares Operating Group entities. For the period of May 1 to December 31, 2014, the daily average ownership of AOG Units in each of the Ares Operating Group entities by Ares Owners Holding L.P., Alleghany and Ares Management, L.P. was 56.06%, 5.92% and 38.02%, respectively.
The Company's ownership percentage of the AOG Units will continue to change upon: (i) the vesting of restricted units and exercise of options that were granted under the Equity Incentive Plan; (ii) the exchange of AOG Units for common units; and (iii) the cancellation of AOG Units in connection with certain individuals' forfeiture of AOG Units upon termination of employment. Holders of the AOG Units may exchange their AOG Units for common units on a one-for-one basis up to four times each year after the second anniversary of the date of the closing of the IPO. Equity is reallocated among partners upon a change in ownership to ensure each partners' capital account properly reflects their respective claim on the residual value of the Company. This change is reflected as either a reallocation of interest or as dilution in the statement of changes in equity.
Prior to the Reorganization, the Predecessor conducted its business through operating subsidiaries held directly or indirectly by AHI and AI as described below:
Ares Holdings, Inc.
AHI, a Delaware Corporation, issued Class A Common Stock and Class B Common Stock, each with a par value of $0.001 per share. Until the consummation of the Reorganization, APMC owned all of the Company's Class A Common Stock and ADIA owned all of the Company's Class B Common Stock, amounting to ownership of AHI equal to 50.1% and 49.9%, respectively. All Class A Common Stock and Class B Common Stock are identical and entitle the holders to the same rights and privileges, except that holders of Class B Common Stock do not have voting rights.
Ares Investments LLC
AI was organized as a limited liability company. AI's membership interest was comprised of multiple classes of units with varying economic rights; however only Class A-1 units possessed voting powers. The management of AI was historically vested in its manager, APMC. Class A-1 units were owned by APMC and AREC, an affiliate of ADIA, which owned approximately 80% and 20%, respectively.
AHI and AI directly or indirectly hold controlling-interests in AM LLC and AIH LLC, as well as their wholly owned subsidiaries.
In July 2013, AI and AH, a subsidiary controlled by AHI, each issued non-voting, mandatorily convertible Class D units to Alleghany in exchange for $250 million. Upon the completion of the IPO (as defined in the agreement with Alleghany), these units were mandatorily converted into 6.25% of the then-outstanding AOG Units. Prior to the conversion of the units, Alleghany was entitled to a fixed dividend of not least than 5% per year paid quarterly in arrears. In the event of liquidation of AHI prior to the IPO, Alleghany was entitled to receive its initial investment amount, plus unpaid dividends. Class D units were not redeemable at any time prior to the earlier of the 30th day after the 5th anniversary of the issue date or a sale of the Company. The redemption price was an amount equal to (1) 100% of initial investment plus (2) an amount determined based on a return of 10% per annum on the initial investment inclusive of any dividend and distribution received.
Because of Alleghany's contribution at fair value in exchange for its interest in AI and AHI exceeded the proportion of the carrying value of net assets acquired, the fair value of its contribution was immediately allocated among all members to ensure that equity is reported at carrying value of net assets attributed to each respective ownership interest after giving effect to the contribution. The allocation of $177.4 million is presented as allocation of contribution in excess of carrying value of net assets attributable to Class D units within the combined and consolidated statements of change in equity. Alleghany's residual equity of $64.3 million is presented within non-controlling interest in Ares Operating Group entities within the statement of financial condition and within the statement of changes in equity.
|
|||
18. SEGMENT REPORTING
The Company conducts its alternative asset management business through four operating segments:
|
• |
Tradable Credit Group: The Company's Tradable Credit Group is a participant in the tradable, non-investment grade corporate credit markets with approximately $32.4 billion of assets under management as of December 31, 2014. The group manages various types of investment funds, ranging from commingled and separately managed accounts for institutional investors to publicly traded vehicles and sub-advised funds for retail investors. While each of the group's approximately 70 funds is tailored to specific investment objectives, mandates can be broadly categorized between long-only credit and alternative credit investment strategies. Long-only credit funds primarily seek to outperform the corresponding performing bank loan or high yield market indices. Alternative credit funds primarily seek to deliver compelling absolute risk-adjusted returns relative to publicly traded stocks, hedge funds, distressed funds, bank loans, high yield bonds or other investment types. |
|
• |
Direct Lending Group: The Company's Direct Lending Group is a self-originating direct lender to the U.S. and European markets, with approximately $28.7 billion of assets under management across over approximately 35 funds or investment vehicles as of December 31, 2014. The group provides one-stop financing solutions to small-to-medium sized companies, which the Company believes are increasingly underserved by traditional lenders. The group launched its inaugural vehicle dedicated to direct lending, ARCC, ten years ago as a business development company. In 2007, the group extended its direct lending capabilities into Europe and raised its first dedicated fund. The group generates fees from approximately 35 funds that include separately managed accounts for large institutional investors seeking tailored investment solutions, commingled funds and joint venture lending programs with affiliates of General Electric Company. |
|
• |
Private Equity Group: The Company's Private Equity Group has approximately $10.1 billion of assets under management as of December 31, 2014. The group focuses on majority or shared-control investments in businesses with strong franchises and attractive growth opportunities in North America and Europe, as well as growth equity opportunities in China. The group manages five private equity commingled funds. |
|
• |
Real Estate Group: The Company's Real Estate Group manages comprehensive public and private equity and debt strategies, with approximately $10.6 billion of assets under management as of December 31, 2014. The group focuses on lending and investing assets that have been under-managed or need repositioning in their markets. The group provides investors access to its capabilities through its publicly traded commercial mortgage REIT, ACRE, focused on direct lending on properties owned by commercial real estate sponsors and operators, U.S. and European real estate private equity commingled funds, separately managed accounts and other fund types. |
The Company established an Operations Management Group (the "OMG") that consists of five independent, shared resource groups to support the Company's operating segments by providing infrastructure and administrative support in the areas of accounting/finance, operations, information technology, business development, legal/compliance and human resources. Additionally, the OMG provides services to certain of the Company's investment companies and partnerships, which reimburse the OMG for expenses equal to the costs of services provided. The Company's clients seek to partner with investment management firms that not only have compelling investment track records across multiple investment products but also possess seasoned infrastructure support functions. As such, significant investments have been made to develop the OMG. The Company has successfully launched new business lines, integrated acquired businesses into the operations and created scale within the OMG to support a much larger platform in the future. The OMG's expenses are not allocated to the Company's four reportable segments but the Company does consider the cost structure of the OMG when evaluating its financial performance.
Economic net income ("ENI") is a key performance indicator used in the alternative asset management industry. ENI represents net income excluding (a) income tax expense, (b) operating results of Consolidated Funds, (c) depreciation expense, (d) the effects of changes arising from corporate actions and (e) certain other items that the Company does not believe are indicative of its core performance. Changes arising from corporate actions include equity-based compensation expenses, the amortization of intangible assets, transaction costs associated with acquisitions and capital transactions, placement fees and underwriting costs and expenses incurred in connection with corporate reorganization. The Company believes the exclusion of these items provides investors with a meaningful indication of the Company's core operating performance. ENI is evaluated regularly by management as a decision tool for deployment of resources and assess performances of each of the business segments. The Company believes that reporting ENI is helpful in understanding its business and that investors should review the same supplemental non-GAAP financial measures that management uses to analyze the segment performance. These measures supplement and should be considered in addition to, and not in lieu of, the Consolidated Statements of Operations prepared in accordance with GAAP.
Fee related earnings ("FRE") is a component of ENI and is used to assess the ability of the business to cover direct base compensation and operating expenses from management fees. FRE differs from income before taxes computed in accordance with GAAP as it adjusts for the items included in the calculation of ENI and excludes performance fees, performance fee compensation and investment income from Consolidated Funds and certain other items.
Performance related earnings ("PRE") is a measure used to assess the Company's investment performance and its ability to cover performance fee compensation from performance fees and total investment income. PRE differs from income before taxes computed in accordance with GAAP as it only includes performance fees, performance fee compensation and total investment and other income (expense) earned from Consolidated Funds and non-consolidated funds.
Distributable earnings ("DE") is a pre-income tax measure that is used to assess amounts potentially available for distributions to stakeholders. Distributable earnings is calculated as the sum of FRE, realized performance fees, realized performance fee compensation and realized net investment and other income, and further adjusts for expenses arising from transaction costs associated with acquisitions, placement fees, underwriting costs, expenses incurred in connection with corporate reorganization and depreciation. DE differs from income before taxes computed in accordance with GAAP as it is presented before giving effect to unrealized performance fees, unrealized performance fee compensation, unrealized net investment income, amortization of intangibles, equity compensation expense and is further adjusted by certain items described in the reconciling table (d) following our segment results.
Management makes operating decisions and assesses the performance of each of the Company's business segments based on financial and operating metrics and other data that is presented before giving effect to the consolidation of any of the Consolidated Funds. Consequently, all segment data excludes the assets, liabilities and operating results related to the Consolidated Funds and non-consolidated funds.
The following table presents the financial results for the Company's operating segments, as well as the OMG, as of and for the year ended December 31, 2014:
|
|
|
Tradable |
|
Direct |
|
Private |
|
Real |
|
Total |
|
OMG |
|
Total |
|
||||||||||||||||||||||||||||||
|
Management fees (includes ARCC part I fees at $118,537) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Recurring fees |
|
$ |
144,102 |
|
$ |
275,571 |
|
$ |
90,690 |
|
$ |
87,683 |
|
$ |
598,046 |
|
$ |
— |
|
$ |
598,046 |
|
|||||||||||||||||||||||
|
Previously deferred fees |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total management fees |
|
|
144,102 |
|
|
275,571 |
|
|
90,690 |
|
|
87,683 |
|
|
598,046 |
|
|
— |
|
|
598,046 |
|
|||||||||||||||||||||||
|
Administrative fees and other income |
|
|
636 |
|
|
556 |
|
|
219 |
|
|
4,889 |
|
|
6,300 |
|
|
22,147 |
|
|
28,447 |
|
|||||||||||||||||||||||
|
Compensation and benefits |
|
|
(43,607 |
) |
|
(138,945 |
) |
|
(34,386 |
) |
|
(47,174 |
) |
|
(264,112 |
) |
|
(109,030 |
) |
|
(373,142 |
) |
|||||||||||||||||||||||
|
General, administrative and other expenses |
|
|
(13,909 |
) |
|
(11,196 |
) |
|
(9,166 |
) |
|
(15,632 |
) |
|
(49,903 |
) |
|
(56,184 |
) |
|
(106,087 |
) |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Fee related earnings (loss) |
|
|
87,222 |
|
|
125,986 |
|
|
47,357 |
|
|
29,766 |
|
|
290,331 |
|
|
(143,067 |
) |
|
147,264 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Performance fees—realized |
|
|
96,985 |
|
|
24,878 |
|
|
22,775 |
|
|
1,856 |
|
|
146,494 |
|
|
— |
|
|
146,494 |
|
|||||||||||||||||||||||
|
Performance fees—unrealized |
|
|
(71,825 |
) |
|
11,447 |
|
|
137,853 |
|
|
17,408 |
|
|
94,883 |
|
|
— |
|
|
94,883 |
|
|||||||||||||||||||||||
|
Performance fee compensation—realized |
|
|
(47,441 |
) |
|
(14,938 |
) |
|
(18,220 |
) |
|
— |
|
|
(80,599 |
) |
|
— |
|
|
(80,599 |
) |
|||||||||||||||||||||||
|
Performance fee compensation—unrealized |
|
|
29,017 |
|
|
(6,740 |
) |
|
(108,876 |
) |
|
(2,830 |
) |
|
(89,429 |
) |
|
— |
|
|
(89,429 |
) |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net performance fees |
|
|
6,736 |
|
|
14,647 |
|
|
33,532 |
|
|
16,434 |
|
|
71,349 |
|
|
— |
|
|
71,349 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Investment income (loss)—realized |
|
|
44,616 |
|
|
918 |
|
|
4,701 |
|
|
2,344 |
|
|
52,579 |
|
|
— |
|
|
52,579 |
|
|||||||||||||||||||||||
|
Investment income (loss)—unrealized |
|
|
(28,629 |
) |
|
5,305 |
|
|
34,318 |
|
|
(61 |
) |
|
10,933 |
|
|
— |
|
|
10,933 |
|
|||||||||||||||||||||||
|
Interest and other investment income |
|
|
10,086 |
|
|
606 |
|
|
4,741 |
|
|
265 |
|
|
15,698 |
|
|
— |
|
|
15,698 |
|
|||||||||||||||||||||||
|
Interest expense |
|
|
(2,017 |
) |
|
(1,538 |
) |
|
(3,925 |
) |
|
(1,137 |
) |
|
(8,617 |
) |
|
— |
|
|
(8,617 |
) |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net investment income (loss) |
|
|
24,056 |
|
|
5,291 |
|
|
39,835 |
|
|
1,411 |
|
|
70,593 |
|
|
— |
|
|
70,593 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Performance related earnings (loss) |
|
|
30,792 |
|
|
19,938 |
|
|
73,367 |
|
|
17,845 |
|
|
141,942 |
|
|
— |
|
|
141,942 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Economic net income (loss) |
|
$ |
118,014 |
|
$ |
145,924 |
|
$ |
120,724 |
|
$ |
47,611 |
|
$ |
432,273 |
|
$ |
(143,067 |
) |
$ |
289,206 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Distributable earnings (loss) |
|
$ |
183,479 |
|
$ |
133,510 |
|
$ |
54,156 |
|
$ |
10,460 |
|
$ |
381,605 |
|
$ |
(148,849 |
) |
$ |
232,756 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total assets |
|
$ |
501,883 |
|
$ |
290,252 |
|
$ |
657,185 |
|
$ |
224,686 |
|
$ |
1,674,006 |
|
$ |
15,206 |
|
$ |
1,689,212 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
The following table presents the financial results for the Company's operating segments, as well as the OMG, as of and for the year ended December 31, 2013:
|
|
|
Tradable |
|
Direct |
|
Private |
|
Real |
|
Total |
|
OMG |
|
Total |
|
||||||||||||||||||||||||||||||
|
Management fees (includes ARCC part I fees at $110,511) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Recurring fees |
|
$ |
129,745 |
|
$ |
238,389 |
|
$ |
93,440 |
|
$ |
40,051 |
|
$ |
501,625 |
|
$ |
— |
|
$ |
501,625 |
|
|||||||||||||||||||||||
|
Previously deferred fees |
|
|
15,032 |
|
|
— |
|
|
— |
|
|
— |
|
|
15,032 |
|
|
— |
|
|
15,032 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total management fees |
|
|
144,777 |
|
|
238,389 |
|
|
93,440 |
|
|
40,051 |
|
|
516,657 |
|
|
— |
|
|
516,657 |
|
|||||||||||||||||||||||
|
Administrative fees and other income |
|
|
286 |
|
|
400 |
|
|
663 |
|
|
4,138 |
|
|
5,487 |
|
|
18,468 |
|
|
23,955 |
|
|||||||||||||||||||||||
|
Compensation and benefits |
|
|
(38,289 |
) |
|
(122,082 |
) |
|
(30,595 |
) |
|
(30,812 |
) |
|
(221,778 |
) |
|
(83,288 |
) |
|
(305,066 |
) |
|||||||||||||||||||||||
|
General, administrative and other expenses |
|
|
(12,296 |
) |
|
(8,836 |
) |
|
(11,536 |
) |
|
(12,844 |
) |
|
(45,512 |
) |
|
(37,372 |
) |
|
(82,884 |
) |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Fee related earnings (loss) |
|
|
94,478 |
|
|
107,871 |
|
|
51,972 |
|
|
533 |
|
|
254,854 |
|
|
(102,192 |
) |
|
152,662 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Performance fees—realized |
|
|
121,414 |
|
|
17,385 |
|
|
85,067 |
|
|
317 |
|
|
224,183 |
|
|
— |
|
|
224,183 |
|
|||||||||||||||||||||||
|
Performance fees—unrealized |
|
|
15,431 |
|
|
2,326 |
|
|
48,402 |
|
|
5,824 |
|
|
71,983 |
|
|
— |
|
|
71,983 |
|
|||||||||||||||||||||||
|
Performance fee compensation—realized |
|
|
(55,758 |
) |
|
(10,258 |
) |
|
(68,145 |
) |
|
(26 |
) |
|
(134,187 |
) |
|
— |
|
|
(134,187 |
) |
|||||||||||||||||||||||
|
Performance fee compensation—unrealized |
|
|
(21,428 |
) |
|
(1,488 |
) |
|
(37,191 |
) |
|
— |
|
|
(60,107 |
) |
|
— |
|
|
(60,107 |
) |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net performance fees |
|
|
59,659 |
|
|
7,965 |
|
|
28,133 |
|
|
6,115 |
|
|
101,872 |
|
|
— |
|
|
101,872 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Investment income (loss)—realized |
|
|
75,467 |
|
|
8,180 |
|
|
6,590 |
|
|
(13,215 |
) |
|
77,022 |
|
|
— |
|
|
77,022 |
|
|||||||||||||||||||||||
|
Investment income (loss)—unrealized |
|
|
(32,976 |
) |
|
(3,793 |
) |
|
14,306 |
|
|
12,134 |
|
|
(10,329 |
) |
|
— |
|
|
(10,329 |
) |
|||||||||||||||||||||||
|
Interest and other income |
|
|
3,706 |
|
|
4,539 |
|
|
8,974 |
|
|
1,596 |
|
|
18,815 |
|
|
— |
|
|
18,815 |
|
|||||||||||||||||||||||
|
Interest expense |
|
|
(2,349 |
) |
|
(2,974 |
) |
|
(4,395 |
) |
|
(1,619 |
) |
|
(11,337 |
) |
|
— |
|
|
(11,337 |
) |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net investment income (loss) |
|
|
43,848 |
|
|
5,952 |
|
|
25,475 |
|
|
(1,104 |
) |
|
74,171 |
|
|
— |
|
|
74,171 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Performance related earnings |
|
|
103,507 |
|
|
13,917 |
|
|
53,608 |
|
|
5,011 |
|
|
176,043 |
|
|
— |
|
|
176,043 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Economic net income (loss) |
|
$ |
197,985 |
|
$ |
121,788 |
|
$ |
105,580 |
|
$ |
5,544 |
|
$ |
430,897 |
|
$ |
(102,192 |
) |
$ |
328,705 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Distributable earnings (loss) |
|
$ |
228,572 |
|
$ |
122,059 |
|
$ |
79,151 |
|
$ |
(20,338 |
) |
$ |
409,444 |
|
$ |
(103,725 |
) |
$ |
305,719 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total assets |
|
$ |
583,426 |
|
$ |
209,064 |
|
$ |
464,469 |
|
$ |
178,107 |
|
$ |
1,435,066 |
|
$ |
9,716 |
|
$ |
1,444,782 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
The following table presents the financial results for the Company's operating segments, as well as the OMG, as of and for the year ended December 31, 2012:
|
|
|
Tradable |
|
Direct |
|
Private |
|
Real |
|
Total |
|
OMG |
|
Total |
|
||||||||||||||||||||||||||||||
|
Management fees (includes ARCC part I fees at $95,182) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Recurring fees |
|
$ |
120,538 |
|
$ |
190,129 |
|
$ |
69,252 |
|
$ |
9,814 |
|
$ |
389,733 |
|
$ |
— |
|
$ |
389,733 |
|
|||||||||||||||||||||||
|
Previously deferred fees |
|
|
24,957 |
|
|
— |
|
|
— |
|
|
— |
|
|
24,957 |
|
|
— |
|
|
24,957 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total management fees |
|
|
145,495 |
|
|
190,129 |
|
|
69,252 |
|
|
9,814 |
|
|
414,690 |
|
|
— |
|
|
414,690 |
|
|||||||||||||||||||||||
|
Administrative fees and other income |
|
|
250 |
|
|
202 |
|
|
673 |
|
|
206 |
|
|
1,331 |
|
|
17,674 |
|
|
19,005 |
|
|||||||||||||||||||||||
|
Compensation and benefits |
|
|
(32,936 |
) |
|
(101,519 |
) |
|
(26,330 |
) |
|
(15,209 |
) |
|
(175,994 |
) |
|
(61,352 |
) |
|
(237,346 |
) |
|||||||||||||||||||||||
|
General, administrative and other expenses |
|
|
(14,295 |
) |
|
(5,773 |
) |
|
(7,960 |
) |
|
(4,008 |
) |
|
(32,036 |
) |
|
(26,445 |
) |
|
(58,481 |
) |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Fee related earnings (loss) |
|
|
98,514 |
|
|
83,039 |
|
|
35,635 |
|
|
(9,197 |
) |
|
207,991 |
|
|
(70,123 |
) |
|
137,868 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Performance fees—realized |
|
|
57,536 |
|
|
11,523 |
|
|
321,686 |
|
|
— |
|
|
390,745 |
|
|
— |
|
|
390,745 |
|
|||||||||||||||||||||||
|
Performance fees—unrealized |
|
|
110,112 |
|
|
2,194 |
|
|
(78,289 |
) |
|
— |
|
|
34,017 |
|
|
— |
|
|
34,017 |
|
|||||||||||||||||||||||
|
Performance fee compensation—realized |
|
|
(29,911 |
) |
|
(6,913 |
) |
|
(258,782 |
) |
|
— |
|
|
(295,606 |
) |
|
— |
|
|
(295,606 |
) |
|||||||||||||||||||||||
|
Performance fee compensation—unrealized |
|
|
(31,031 |
) |
|
(1,097 |
) |
|
60,009 |
|
|
— |
|
|
27,881 |
|
|
— |
|
|
27,881 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net performance fees |
|
|
106,706 |
|
|
5,707 |
|
|
44,624 |
|
|
— |
|
|
157,037 |
|
|
— |
|
|
157,037 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Investment income (loss)—realized |
|
|
46,048 |
|
|
(1,308 |
) |
|
36,817 |
|
|
(49 |
) |
|
81,508 |
|
|
— |
|
|
81,508 |
|
|||||||||||||||||||||||
|
Investment income (loss)—unrealized |
|
|
26,733 |
|
|
10,324 |
|
|
(10,923 |
) |
|
(6,451 |
) |
|
19,683 |
|
|
— |
|
|
19,683 |
|
|||||||||||||||||||||||
|
Interest and other income |
|
|
4,455 |
|
|
4,583 |
|
|
7,742 |
|
|
1,203 |
|
|
17,983 |
|
|
— |
|
|
17,983 |
|
|||||||||||||||||||||||
|
Interest expense |
|
|
(4,051 |
) |
|
(3,060 |
) |
|
(3,709 |
) |
|
(891 |
) |
|
(11,711 |
) |
|
— |
|
|
(11,711 |
) |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net investment income (loss) |
|
|
73,185 |
|
|
10,539 |
|
|
29,927 |
|
|
(6,188 |
) |
|
107,463 |
|
|
— |
|
|
107,463 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Performance related earnings |
|
|
179,891 |
|
|
16,246 |
|
|
74,551 |
|
|
(6,188 |
) |
|
264,500 |
|
|
— |
|
|
264,500 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Economic net income (loss) |
|
$ |
278,405 |
|
$ |
99,285 |
|
$ |
110,186 |
|
$ |
(15,385 |
) |
$ |
472,491 |
|
$ |
(70,123 |
) |
$ |
402,368 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Distributable earnings (loss) |
|
$ |
163,781 |
|
$ |
86,944 |
|
$ |
137,284 |
|
$ |
(14,596 |
) |
$ |
373,413 |
|
$ |
(71,040 |
) |
$ |
302,373 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total assets |
|
$ |
640,949 |
|
$ |
220,181 |
|
$ |
389,420 |
|
$ |
52,793 |
|
$ |
1,303,343 |
|
$ |
9,145 |
|
$ |
1,312,488 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
The following reconciliations contain rounded values that are presented elsewhere within the financial statements. Consequently, the sum of certain values may not match the totals presented herein.
|
|
|
For the Year Ended December 31, 2014 |
|
|||||||
|
|
|
Total |
|
Consolidation |
|
Consolidated |
|
|||
|
Revenues |
|
$ |
845,723 |
(1) |
$ |
(241,834 |
)(a) |
$ |
603,889 |
|
|
Expenses |
|
|
484,046 |
(2) |
|
375,993 |
(b) |
|
860,039 |
|
|
Other income (expense) |
|
|
70,593 |
(3) |
|
742,471 |
(c) |
|
813,065 |
|
|
Economic net income / Income before taxes |
|
|
432,273 |
|
|
124,640 |
(d) |
|
556,915 |
|
|
Total assets |
|
|
1,674,006 |
|
|
19,967,247 |
(e) |
|
21,641,253 |
|
|
|
|
For the Year Ended December 31, 2013 |
|
|||||||
|
|
|
Total |
|
Consolidation |
|
Consolidated |
|
|||
|
Revenues |
|
$ |
818,310 |
(1) |
$ |
(339,655 |
)(a) |
$ |
478,655 |
|
|
Expenses |
|
|
461,584 |
(2) |
|
340,313 |
(b) |
|
801,897 |
|
|
Other income (expense) |
|
|
74,171 |
(3) |
|
1,121,712 |
(c) |
|
1,195,883 |
|
|
Economic net income |
|
|
430,897 |
|
|
441,744 |
(d) |
|
872,641 |
|
|
Total assets |
|
|
1,435,066 |
|
|
22,270,318 |
(e) |
|
23,705,384 |
|
|
|
|
For the Year Ended December 31, 2012 |
|
|||||||
|
|
|
Total |
|
Consolidation |
|
Consolidated |
|
|||
|
Revenues |
|
$ |
840,783 |
(1) |
$ |
(506,737 |
)(a) |
$ |
334,046 |
|
|
Expenses |
|
|
475,755 |
(2) |
|
282,776 |
(b) |
|
758,531 |
|
|
Other income (expense) |
|
|
107,463 |
(3) |
|
1,578,856 |
(c) |
|
1,686,327 |
|
|
Economic net income |
|
|
472,491 |
|
|
789,351 |
(d) |
|
1,261,842 |
|
|
Total assets |
|
|
1,303,343 |
|
|
23,192,534 |
(e) |
|
24,495,877 |
|
|
(1) |
Segment revenues consist of management fees, administrative fees and other income, as well as realized and unrealized performance fees. |
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||||
|
Management fees |
|
$ |
598,046 |
|
$ |
516,657 |
|
$ |
414,690 |
|
|||||||||||||
|
Administrative fees and other income |
|
|
6,300 |
|
|
5,487 |
|
|
1,331 |
|
|||||||||||||
|
Performance fees—realized |
|
|
146,494 |
|
|
224,183 |
|
|
390,745 |
|
|||||||||||||
|
Performance fees—unrealized |
|
|
94,883 |
|
|
71,983 |
|
|
34,017 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total segment revenue |
|
$ |
845,723 |
|
$ |
818,310 |
|
$ |
840,783 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
(2) |
Segment expenses consist of compensation and benefits, and general, administrative and other expenses, as well as realized and unrealized performance fee expenses. |
||||||||||||||||||||||
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||||
|
Compensation and benefits |
|
$ |
264,112 |
|
$ |
221,778 |
|
$ |
175,994 |
|
|||||||||||||
|
General, administrative and other expenses |
|
|
49,903 |
|
|
45,512 |
|
|
32,036 |
|
|||||||||||||
|
Performance fee compensation—realized |
|
|
80,599 |
|
|
134,187 |
|
|
295,606 |
|
|||||||||||||
|
Performance fee compensation—unrealized |
|
|
89,429 |
|
|
60,107 |
|
|
(27,881 |
) |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total segment expense |
|
$ |
484,046 |
|
$ |
461,584 |
|
$ |
475,755 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
(3) |
Segment net investment income consists of realized and unrealized investment income and expenses, interest and other income and interest expenses. |
||||||||||||||||||||||
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||||
|
Investment income (loss)—realized |
|
$ |
52,579 |
|
$ |
77,022 |
|
$ |
81,508 |
|
|||||||||||||
|
Investment Income (loss)—unrealized |
|
|
10,933 |
|
|
(10,329 |
) |
|
19,683 |
|
|||||||||||||
|
Interest, dividend and other investment income |
|
|
15,698 |
|
|
18,815 |
|
|
17,983 |
|
|||||||||||||
|
Interest expense |
|
|
(8,617 |
) |
|
(11,337 |
) |
|
(11,711 |
) |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Net investment income |
|
$ |
70,593 |
|
$ |
74,171 |
|
$ |
107,463 |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
(a) |
The revenues adjustment principally represents management and performance fees earned from Consolidated Funds which were eliminated in consolidation to arrive at Ares consolidated revenues. |
||||||||||||||||||||||
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Consolidated Fund income eliminated in consolidation |
|
$ |
(249,394 |
) |
$ |
(351,983 |
) |
$ |
(524,411 |
) |
|||||||||||
|
Administrative fees and other income attributable to OMG |
|
|
22,147 |
|
|
18,468 |
|
|
17,674 |
|
|||||||||||
|
Performance fees—realized reclass(1) |
|
|
(1,856 |
) |
|
— |
|
|
— |
|
|||||||||||
|
Performance fees—unrealized reclass(1) |
|
|
(12,731 |
) |
|
(6,141 |
) |
|
— |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total consolidated adjustments and reconciling items |
|
$ |
(241,834 |
) |
$ |
(339,655 |
) |
$ |
(506,737 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
(1) |
Related to performance fees for AREA Sponsor Holdings LLC, an investment pool. Changes in value of this investment are reflected within other income (expense) in the Company's Consolidated Statements of Operations. |
|
(b) |
The expenses adjustment represents the addition of expenses of the Consolidated Funds to the Ares unconsolidated expenses, depreciation expense, equity-based compensation and expenses associated with acquisitions and corporate actions necessary to arrive at Ares consolidated expenses. |
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Consolidated Fund expenses added in consolidation |
|
$ |
187,494 |
|
$ |
317,083 |
|
$ |
345,048 |
|
|||||||||||
|
Consolidated Fund expenses eliminated in consolidation |
|
|
(120,694 |
) |
|
(182,104 |
) |
|
(228,543 |
) |
|||||||||||
|
OMG expenses |
|
|
165,214 |
|
|
120,660 |
|
|
87,797 |
|
|||||||||||
|
Acquisition related expenses |
|
|
11,043 |
|
|
6,235 |
|
|
(684 |
) |
|||||||||||
|
Equity compensation expense |
|
|
83,230 |
|
|
28,837 |
|
|
52,035 |
|
|||||||||||
|
Income tax expenses(1) |
|
|
— |
|
|
546 |
|
|
579 |
|
|||||||||||
|
Placement fees and underwriting costs |
|
|
14,753 |
|
|
8,403 |
|
|
13,240 |
|
|||||||||||
|
Amortization of intangibles |
|
|
27,610 |
|
|
34,399 |
|
|
8,682 |
|
|||||||||||
|
Depreciation expense |
|
|
7,347 |
|
|
6,255 |
|
|
4,603 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total consolidation adjustments and reconciling items |
|
$ |
375,993 |
|
$ |
340,313 |
|
$ |
282,776 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
(1) |
Relates to income taxes paid by subsidiary operating entities included in general, administrative and other expenses. |
|
|
(c) |
The other income adjustment represents the addition of net investment income (loss) and net interest income (expense) to arrive at Ares consolidated other income. |
|
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Consolidated Funds other income added in consolidation, net |
|
$ |
785,152 |
|
$ |
1,175,864 |
|
$ |
1,664,489 |
|
|||||||||||
|
Other income from Consolidated Funds eliminated in consolidation, net |
|
|
(53,883 |
) |
|
(60,291 |
) |
|
(85,643 |
) |
|||||||||||
|
Performance fee reclass(1) |
|
|
14,587 |
|
|
6,141 |
|
|
— |
|
|||||||||||
|
Loss on disposal of fixed assets |
|
|
(3,062 |
) |
|
— |
|
|
— |
|
|||||||||||
|
Non-cash other expense |
|
|
(324 |
) |
|
— |
|
|
— |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total consolidation adjustments and reconciling items |
|
$ |
742,471 |
|
$ |
1,121,712 |
|
$ |
1,578,856 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
(1) |
Related to performance fees for AREA Sponsor Holdings LLC. Changes in value of this investment are reflected within other (income) expense in the Company's Consolidated Statements of Operations. |
|
(d) |
The reconciliation of income before taxes as reported in the Consolidated Statements of Operations to segment results of economic net income, fee related earnings, performance related earnings and distributable earnings consists of the following: |
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Economic net income |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Income before taxes |
|
$ |
556,915 |
|
$ |
872,641 |
|
$ |
1,261,842 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Amortization of intangibles |
|
|
27,610 |
|
|
34,399 |
|
|
8,682 |
|
|||||||||||
|
Depreciation expense |
|
|
7,347 |
|
|
6,255 |
|
|
4,603 |
|
|||||||||||
|
Equity compensation expenses |
|
|
83,230 |
|
|
28,837 |
|
|
52,035 |
|
|||||||||||
|
Income tax expense(2) |
|
|
— |
|
|
546 |
|
|
579 |
|
|||||||||||
|
Acquisition-related expenses(1) |
|
|
11,043 |
|
|
6,235 |
|
|
(684 |
) |
|||||||||||
|
Placement fees and underwriting costs |
|
|
14,753 |
|
|
8,403 |
|
|
13,240 |
|
|||||||||||
|
OMG expenses, net |
|
|
143,067 |
|
|
102,192 |
|
|
70,123 |
|
|||||||||||
|
Loss on fixed asset disposal |
|
|
3,062 |
|
|
— |
|
|
— |
|
|||||||||||
|
Non-cash other expense |
|
|
324 |
|
|
— |
|
|
— |
|
|||||||||||
|
Income (loss) of non-controlling interests in Consolidated Funds |
|
|
(420,358 |
) |
|
(586,771 |
) |
|
(933,592 |
) |
|||||||||||
|
Income tax expense (benefit) of non-controlling interests in Consolidated Funds |
|
|
5,283 |
|
|
(41,840 |
) |
|
(4,338 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total consolidation adjustments and reconciling items |
|
|
(124,640 |
) |
|
(441,744 |
) |
|
(789,351 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Economic net income |
|
$ |
432,273 |
|
$ |
430,897 |
|
$ |
472,491 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Fee related earnings |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Income before taxes |
|
$ |
556,915 |
|
$ |
872,641 |
|
$ |
1,261,842 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Amortization of intangibles |
|
|
27,610 |
|
|
34,399 |
|
|
8,682 |
|
|||||||||||
|
Depreciation expense |
|
|
7,347 |
|
|
6,255 |
|
|
4,603 |
|
|||||||||||
|
Equity compensation expenses |
|
|
83,230 |
|
|
28,837 |
|
|
52,035 |
|
|||||||||||
|
Income tax expense(1) |
|
|
— |
|
|
546 |
|
|
579 |
|
|||||||||||
|
Acquisition-related expenses |
|
|
11,043 |
|
|
6,235 |
|
|
(684 |
) |
|||||||||||
|
Placement fees and underwriting costs |
|
|
14,753 |
|
|
8,403 |
|
|
13,240 |
|
|||||||||||
|
OMG expenses, net |
|
|
143,067 |
|
|
102,192 |
|
|
70,123 |
|
|||||||||||
|
Loss on fixed asset disposal |
|
|
3,062 |
|
|
— |
|
|
— |
|
|||||||||||
|
Non-cash other expense |
|
|
324 |
|
|
— |
|
|
— |
|
|||||||||||
|
Income of non-controlling interests in Consolidated Funds |
|
|
(420,358 |
) |
|
(586,771 |
) |
|
(933,592 |
) |
|||||||||||
|
Income tax expense (benefit) of non-controlling interests in Consolidated Funds |
|
|
5,283 |
|
|
(41,840 |
) |
|
(4,338 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total consolidation adjustments and reconciling items |
|
|
(124,640 |
) |
|
(441,744 |
) |
|
(789,351 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Economic net income |
|
|
432,273 |
|
|
430,897 |
|
|
472,491 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total performance fees income—realized |
|
|
(146,494 |
) |
|
(224,183 |
) |
|
(390,745 |
) |
|||||||||||
|
Total performance fees income—unrealized |
|
|
(94,883 |
) |
|
(71,983 |
) |
|
(34,017 |
) |
|||||||||||
|
Total performance fee compensation—realized |
|
|
80,599 |
|
|
134,187 |
|
|
295,606 |
|
|||||||||||
|
Total performance fee compensation—unrealized |
|
|
89,429 |
|
|
60,107 |
|
|
(27,881 |
) |
|||||||||||
|
Total investment income |
|
|
(70,593 |
) |
|
(74,171 |
) |
|
(107,463 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Fee related earnings |
|
$ |
290,331 |
|
$ |
254,854 |
|
$ |
207,991 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Management fees |
|
$ |
598,046 |
|
$ |
516,657 |
|
$ |
414,690 |
|
|||||||||||
|
Administrative fees and other income |
|
|
6,300 |
|
|
5,487 |
|
|
1,331 |
|
|||||||||||
|
Compensation and benefits |
|
|
(264,112 |
) |
|
(221,778 |
) |
|
(175,994 |
) |
|||||||||||
|
General, administrative and other expenses |
|
|
(49,903 |
) |
|
(45,512 |
) |
|
(32,036 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Fee related earnings |
|
$ |
290,331 |
|
$ |
254,854 |
|
$ |
207,991 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Performance related earnings: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Income before taxes |
|
$ |
556,915 |
|
$ |
872,641 |
|
$ |
1,261,842 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Amortization of intangibles |
|
|
27,610 |
|
|
34,399 |
|
|
8,682 |
|
|||||||||||
|
Depreciation expense |
|
|
7,347 |
|
|
6,255 |
|
|
4,603 |
|
|||||||||||
|
Equity compensation expenses |
|
|
83,230 |
|
|
28,837 |
|
|
52,035 |
|
|||||||||||
|
Income tax expense(1) |
|
|
— |
|
|
546 |
|
|
579 |
|
|||||||||||
|
Acquisition-related expenses |
|
|
11,043 |
|
|
6,235 |
|
|
(684 |
) |
|||||||||||
|
Placement fees and underwriting costs |
|
|
14,753 |
|
|
8,403 |
|
|
13,240 |
|
|||||||||||
|
OMG expenses, net |
|
|
143,067 |
|
|
102,192 |
|
|
70,123 |
|
|||||||||||
|
Loss on fixed asset disposal |
|
|
3,062 |
|
|
— |
|
|
— |
|
|||||||||||
|
Non-cash other expense |
|
|
324 |
|
|
— |
|
|
— |
|
|||||||||||
|
Income (loss) of non-controlling interests in Consolidated Funds |
|
|
(420,358 |
) |
|
(586,771 |
) |
|
(933,592 |
) |
|||||||||||
|
Income tax expense (benefit) of non-controlling interests in Consolidated Funds |
|
|
5,283 |
|
|
(41,840 |
) |
|
(4,338 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Economic net income |
|
|
432,273 |
|
|
430,897 |
|
|
472,491 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total management fees |
|
|
(598,046 |
) |
|
(516,657 |
) |
|
(414,690 |
) |
|||||||||||
|
Administrative fees and other income |
|
|
(6,300 |
) |
|
(5,487 |
) |
|
(1,331 |
) |
|||||||||||
|
Compensation and benefits |
|
|
264,112 |
|
|
221,778 |
|
|
175,994 |
|
|||||||||||
|
General, administrative and other expenses |
|
|
49,903 |
|
|
45,512 |
|
|
32,036 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Performance related earnings |
|
$ |
141,942 |
|
$ |
176,043 |
|
$ |
264,500 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total performance fees—realized |
|
$ |
146,494 |
|
|
224,183 |
|
|
390,745 |
|
|||||||||||
|
Total performance fees—unrealized |
|
|
94,883 |
|
|
71,983 |
|
|
34,017 |
|
|||||||||||
|
Total performance fee compensation—realized |
|
|
(80,599 |
) |
|
(134,187 |
) |
|
(295,606 |
) |
|||||||||||
|
Total performance fee compensation—unrealized |
|
|
(89,429 |
) |
|
(60,107 |
) |
|
27,881 |
|
|||||||||||
|
Net investment income (loss) |
|
|
70,593 |
|
|
74,171 |
|
|
107,463 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Performance related earnings |
|
$ |
141,942 |
|
$ |
176,043 |
|
$ |
264,500 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
(1) |
Relates to income taxes paid by subsidiary operating entities included in general, administrative and other expenses. |
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Distributable earnings |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Income (loss) before taxes |
|
$ |
556,915 |
|
$ |
872,641 |
|
$ |
1,261,842 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Amortization of intangibles |
|
|
27,610 |
|
|
34,399 |
|
|
8,682 |
|
|||||||||||
|
Equity compensation expenses |
|
|
83,230 |
|
|
28,837 |
|
|
52,035 |
|
|||||||||||
|
OMG distributable loss(1) |
|
|
148,849 |
|
|
103,725 |
|
|
71,040 |
|
|||||||||||
|
Non-cash acquisition-related expenses |
|
|
— |
|
|
— |
|
|
(684 |
) |
|||||||||||
|
Taxes paid(2) |
|
|
(2,335 |
) |
|
— |
|
|
— |
|
|||||||||||
|
Other non-cash items |
|
|
(1,201 |
) |
|
— |
|
|
— |
|
|||||||||||
|
Income (loss) of non-controlling interests in Consolidated Funds |
|
|
(420,358 |
) |
|
(586,771 |
) |
|
(933,592 |
) |
|||||||||||
|
Income tax (expense) benefit of non-controlling interests in Consolidated Funds |
|
|
5,283 |
|
|
(41,840 |
) |
|
(4,338 |
) |
|||||||||||
|
Unrealized performance fees |
|
|
(94,883 |
) |
|
(71,983 |
) |
|
(34,017 |
) |
|||||||||||
|
Unrealized performance fee compensation |
|
|
89,429 |
|
|
60,107 |
|
|
(27,881 |
) |
|||||||||||
|
Unrealized investment and other income (loss) |
|
|
(10,933 |
) |
|
10,329 |
|
|
(19,683 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Distributable earnings |
|
$ |
381,605 |
|
$ |
409,444 |
|
$ |
373,413 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Fee related earnings |
|
$ |
290,331 |
|
$ |
254,854 |
|
$ |
207,991 |
|
|||||||||||
|
Performance fees—realized |
|
|
146,494 |
|
|
224,183 |
|
|
390,745 |
|
|||||||||||
|
Performance fee compensation—realized |
|
|
(80,599 |
) |
|
(134,187 |
) |
|
(295,606 |
) |
|||||||||||
|
Investment and other income realized, net |
|
|
59,659 |
|
|
84,500 |
|
|
87,788 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Net performance related earnings—realized |
|
|
125,554 |
|
|
174,496 |
|
|
182,927 |
|
|||||||||||
|
Less: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
One-time acquisition costs(3) |
|
|
(8,446 |
) |
|
(6,235 |
) |
|
— |
|
|||||||||||
|
Income tax expense(4) |
|
|
(1,722 |
) |
|
(546 |
) |
|
(579 |
) |
|||||||||||
|
Non-cash income items |
|
|
(1,525 |
) |
|
— |
|
|
— |
|
|||||||||||
|
Placement fees and underwriting costs |
|
|
(14,753 |
) |
|
(8,403 |
) |
|
(13,240 |
) |
|||||||||||
|
Non-cash depreciation and amortization(5) |
|
|
(7,832 |
) |
|
(4,722 |
) |
|
(3,686 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Distributable earnings |
|
$ |
381,605 |
|
$ |
409,444 |
|
$ |
373,413 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
(1) |
Represents OMG distributable earnings which includes depreciation expense. |
|
|
(2) |
Represents current portion of income tax expense of subsidiary operating entities. |
|
|
(3) |
One-time acquisition costs are reduced by the amounts attributable to OMG, equal to $2,597 and $0 for the years ended December 31, 2014 and 2013, respectively. |
|
|
(4) |
Represents current tax expense of subsidiary operating entities. Taxes attributable to OMG equal $613, $0 and $0 for the years ended December 31, 2014, 2013, and 2012 respectively. |
|
|
(5) |
Depreciation and amortization includes loss on disposal of assets, and is reduced by the amounts attributed to OMG equal to $2,577, $1,533 and $917 for the years ended December 31, 2014, 2013 and 2012. |
|
|
(e) |
The reconciliation of total segment assets to total assets reported in the Consolidated Statements of Financial Condition consists of the following: |
|
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Total assets from Consolidated Funds eliminated in consolidation |
|
$ |
(806,765 |
) |
$ |
(805,908 |
) |
$ |
(841,351 |
) |
|||||||||||
|
Total assets from Consolidated Funds added in consolidation |
|
|
20,758,806 |
|
|
23,066,510 |
|
|
24,024,740 |
|
|||||||||||
|
OMG assets |
|
|
15,206 |
|
|
9,716 |
|
|
9,145 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total consolidation adjustments and reconciling items |
|
$ |
19,967,247 |
|
$ |
22,270,318 |
|
$ |
23,192,534 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|||
19. CONSOLIDATING SCHEDULES
The following supplemental financial information illustrates the consolidating effects of the Consolidated Funds on the Company's financial condition as of December 31, 2014 and 2013 and results from operations for the years ended December 31, 2014, 2013 and 2012.
|
|
|
As of December 31, 2014 |
|
||||||||||||||||||||||||
|
|
|
Consolidated |
|
Consolidated Funds |
|
Eliminations |
|
Consolidated |
|
||||||||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Cash and cash equivalents |
|
$ |
148,858 |
|
$ |
— |
|
$ |
— |
|
$ |
148,858 |
|
||||||||||||||
|
Restricted cash and cash equivalents |
|
|
32,734 |
|
|
— |
|
|
— |
|
|
32,734 |
|
||||||||||||||
|
Investments, at fair value |
|
|
594,346 |
|
|
— |
|
|
(424,022 |
) |
|
170,324 |
|
||||||||||||||
|
Derivative assets, at fair value |
|
|
7,623 |
|
|
— |
|
|
— |
|
|
7,623 |
|
||||||||||||||
|
Performance fees receivable |
|
|
548,098 |
|
|
— |
|
|
(361,039 |
) |
|
187,059 |
|
||||||||||||||
|
Due from affiliates |
|
|
166,225 |
|
|
— |
|
|
(19,691 |
) |
|
146,534 |
|
||||||||||||||
|
Other assets |
|
|
64,798 |
|
|
— |
|
|
(93 |
) |
|
64,705 |
|
||||||||||||||
|
Intangible assets, net |
|
|
40,948 |
|
|
— |
|
|
— |
|
|
40,948 |
|
||||||||||||||
|
Goodwill |
|
|
85,582 |
|
|
— |
|
|
— |
|
|
85,582 |
|
||||||||||||||
|
Assets of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Cash and cash equivalents |
|
|
— |
|
|
1,314,397 |
|
|
— |
|
|
1,314,397 |
|
||||||||||||||
|
Investments, at fair value |
|
|
— |
|
|
19,123,950 |
|
|
— |
|
|
19,123,950 |
|
||||||||||||||
|
Loans held for investment, net |
|
|
— |
|
|
77,514 |
|
|
— |
|
|
77,514 |
|
||||||||||||||
|
Due from affiliates |
|
|
— |
|
|
13,262 |
|
|
(1,920 |
) |
|
11,342 |
|
||||||||||||||
|
Dividends and interest receivable |
|
|
— |
|
|
81,331 |
|
|
— |
|
|
81,331 |
|
||||||||||||||
|
Receivable for securities sold |
|
|
— |
|
|
132,753 |
|
|
— |
|
|
132,753 |
|
||||||||||||||
|
Derivative assets, at fair value |
|
|
— |
|
|
3,126 |
|
|
— |
|
|
3,126 |
|
||||||||||||||
|
Other assets |
|
|
— |
|
|
12,473 |
|
|
— |
|
|
12,473 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total assets |
|
$ |
1,689,212 |
|
$ |
20,758,806 |
|
$ |
(806,765 |
) |
$ |
21,641,253 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Accounts payable and accrued expenses |
|
$ |
101,912 |
|
$ |
— |
|
$ |
(602 |
) |
$ |
101,310 |
|
||||||||||||||
|
Accrued compensation |
|
|
129,433 |
|
|
— |
|
|
— |
|
|
129,433 |
|
||||||||||||||
|
Derivative liabilities, at fair value |
|
|
2,850 |
|
|
— |
|
|
— |
|
|
2,850 |
|
||||||||||||||
|
Due to affiliates |
|
|
19,881 |
|
|
— |
|
|
(851 |
) |
|
19,030 |
|
||||||||||||||
|
Performance fee compensation payable |
|
|
381,164 |
|
|
— |
|
|
(896 |
) |
|
380,268 |
|
||||||||||||||
|
Debt obligations |
|
|
245,752 |
|
|
— |
|
|
— |
|
|
245,752 |
|
||||||||||||||
|
Equity compensation put option liability |
|
|
20,000 |
|
|
— |
|
|
— |
|
|
20,000 |
|
||||||||||||||
|
Deferred tax liability, net |
|
|
19,861 |
|
|
— |
|
|
— |
|
|
19,861 |
|
||||||||||||||
|
Liabilities of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Accounts payable, accrued expenses and other liabilities |
|
|
— |
|
|
68,674 |
|
|
(85 |
) |
|
68,589 |
|
||||||||||||||
|
Due to affiliates |
|
|
— |
|
|
63,417 |
|
|
(60,976 |
) |
|
2,441 |
|
||||||||||||||
|
Payable for securities purchased |
|
|
— |
|
|
618,902 |
|
|
— |
|
|
618,902 |
|
||||||||||||||
|
Derivative liabilities, at fair value |
|
|
— |
|
|
42,332 |
|
|
— |
|
|
42,332 |
|
||||||||||||||
|
Securities sold short, at fair value |
|
|
— |
|
|
3,763 |
|
|
— |
|
|
3,763 |
|
||||||||||||||
|
Deferred tax liability, net |
|
|
— |
|
|
22,214 |
|
|
— |
|
|
22,214 |
|
||||||||||||||
|
CLO loan obligations |
|
|
— |
|
|
12,120,842 |
|
|
(71,672 |
) |
|
12,049,170 |
|
||||||||||||||
|
Fund borrowings |
|
|
— |
|
|
777,600 |
|
|
— |
|
|
777,600 |
|
||||||||||||||
|
Mezzanine debt |
|
|
— |
|
|
378,365 |
|
|
— |
|
|
378,365 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total liabilities |
|
|
920,853 |
|
|
14,096,109 |
|
|
(135,082 |
) |
|
14,881,880 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Redeemable interest in Consolidated Funds |
|
|
— |
|
|
1,037,450 |
|
|
— |
|
|
1,037,450 |
|
||||||||||||||
|
Redeemable interest in Ares Operating Group entities |
|
|
23,988 |
|
|
— |
|
|
— |
|
|
23,988 |
|
||||||||||||||
|
Non-controlling interest in Consolidated Funds: |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
||||||||||||||
|
Non-controlling interest in Consolidated Funds |
|
|
— |
|
|
5,663,172 |
|
|
(674,443 |
) |
|
4,988,729 |
|
||||||||||||||
|
Equity appropriated for Consolidated Funds |
|
|
— |
|
|
(37,926 |
) |
|
— |
|
|
(37,926 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Non-controlling interest in Consolidated Funds |
|
|
— |
|
|
5,625,246 |
|
|
(674,443 |
) |
|
4,950,803 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Non-controlling interest in Ares Operating Group entities |
|
|
463,493 |
|
|
— |
|
|
— |
|
|
463,493 |
|
||||||||||||||
|
Controlling interest in Ares Management, L.P.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Partners' Capital (80,667,664 units issued and outstanding) |
|
|
285,025 |
|
|
— |
|
|
— |
|
|
285,025 |
|
||||||||||||||
|
Accumulated other comprehensive gain (loss) |
|
|
(4,146 |
) |
|
— |
|
|
2,760 |
|
|
(1,386 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total controlling interest in Ares Management, L.P |
|
|
280,879 |
|
|
— |
|
|
2,760 |
|
|
283,639 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total equity |
|
|
744,372 |
|
|
5,625,246 |
|
|
(671,683 |
) |
|
5,697,935 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total liabilities, redeemable interests, non-controlling interests and equity |
|
$ |
1,689,212 |
|
|
20,758,806 |
|
|
(806,765 |
) |
$ |
21,641,253 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
As of December 31, 2013 |
|
||||||||||||||||||||||||
|
|
|
Consolidated |
|
Consolidated |
|
Eliminations |
|
Consolidated |
|
||||||||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Cash and cash equivalents |
|
$ |
89,802 |
|
$ |
— |
|
$ |
— |
|
$ |
89,802 |
|
||||||||||||||
|
Restricted cash and cash equivalents |
|
|
13,344 |
|
|
— |
|
|
— |
|
|
13,344 |
|
||||||||||||||
|
Investments, at fair value |
|
|
525,596 |
|
|
— |
|
|
(436,158 |
) |
|
89,438 |
|
||||||||||||||
|
Derivative assets, at fair value |
|
|
1,164 |
|
|
— |
|
|
— |
|
|
1,164 |
|
||||||||||||||
|
Performance fees receivable |
|
|
481,751 |
|
|
— |
|
|
(344,069 |
) |
|
137,682 |
|
||||||||||||||
|
Due from affiliates |
|
|
130,625 |
|
|
— |
|
|
(21,705 |
) |
|
108,920 |
|
||||||||||||||
|
Other assets |
|
|
75,599 |
|
|
— |
|
|
(1,999 |
) |
|
73,600 |
|
||||||||||||||
|
Intangible assets, net |
|
|
68,742 |
|
|
— |
|
|
— |
|
|
68,742 |
|
||||||||||||||
|
Goodwill |
|
|
58,159 |
|
|
— |
|
|
— |
|
|
58,159 |
|
||||||||||||||
|
Assets of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Cash and cash equivalents |
|
|
— |
|
|
1,638,003 |
|
|
— |
|
|
1,638,003 |
|
||||||||||||||
|
Investments, at fair value |
|
|
— |
|
|
20,823,338 |
|
|
— |
|
|
20,823,338 |
|
||||||||||||||
|
Due from affiliates |
|
|
— |
|
|
2,010 |
|
|
— |
|
|
2,010 |
|
||||||||||||||
|
Dividends and interest receivable |
|
|
— |
|
|
133,158 |
|
|
— |
|
|
133,158 |
|
||||||||||||||
|
Receivable for securities sold |
|
|
— |
|
|
427,871 |
|
|
— |
|
|
427,871 |
|
||||||||||||||
|
Derivative assets, at fair value |
|
|
— |
|
|
14,625 |
|
|
— |
|
|
14,625 |
|
||||||||||||||
|
Other assets |
|
|
— |
|
|
27,505 |
|
|
(1,977 |
) |
|
25,528 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total assets |
|
$ |
1,444,782 |
|
$ |
23,066,510 |
|
$ |
(805,908 |
) |
$ |
23,705,384 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Accounts payable and accrued expenses |
|
$ |
69,550 |
|
$ |
— |
|
$ |
(2,064 |
) |
$ |
67,486 |
|
||||||||||||||
|
Accrued compensation |
|
|
132,917 |
|
|
— |
|
|
— |
|
|
132,917 |
|
||||||||||||||
|
Derivative liabilities, at fair value |
|
|
2,907 |
|
|
— |
|
|
— |
|
|
2,907 |
|
||||||||||||||
|
Due to affiliates |
|
|
35,149 |
|
|
— |
|
|
(2,459 |
) |
|
32,690 |
|
||||||||||||||
|
Performance fee compensation payable |
|
|
295,978 |
|
|
— |
|
|
— |
|
|
295,978 |
|
||||||||||||||
|
Debt obligations |
|
|
153,119 |
|
|
— |
|
|
— |
|
|
153,119 |
|
||||||||||||||
|
Deferred tax liability, net |
|
|
21,002 |
|
|
— |
|
|
— |
|
|
21,002 |
|
||||||||||||||
|
Liabilities of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Accounts payable, accrued expenses and other liabilities |
|
|
— |
|
|
95,839 |
|
|
— |
|
|
95,839 |
|
||||||||||||||
|
Due to affiliates |
|
|
— |
|
|
92,211 |
|
|
(89,516 |
) |
|
2,695 |
|
||||||||||||||
|
Payable for securities purchased |
|
|
— |
|
|
945,115 |
|
|
— |
|
|
945,115 |
|
||||||||||||||
|
Derivative liabilities, at fair value |
|
|
— |
|
|
75,115 |
|
|
— |
|
|
75,115 |
|
||||||||||||||
|
Securities sold short, at fair value |
|
|
— |
|
|
1,633 |
|
|
— |
|
|
1,633 |
|
||||||||||||||
|
Deferred tax liability, net |
|
|
— |
|
|
35,904 |
|
|
— |
|
|
35,904 |
|
||||||||||||||
|
CLO loan obligations |
|
|
— |
|
|
11,838,396 |
|
|
(64,239 |
) |
|
11,774,157 |
|
||||||||||||||
|
Fund borrowings |
|
|
— |
|
|
2,070,598 |
|
|
— |
|
|
2,070,598 |
|
||||||||||||||
|
Mezzanine debt |
|
|
— |
|
|
323,164 |
|
|
— |
|
|
323,164 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total liabilities |
|
|
710,622 |
|
|
15,477,975 |
|
|
(158,278 |
) |
|
16,030,319 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Redeemable interest in Consolidated Funds |
|
|
— |
|
|
1,093,770 |
|
|
— |
|
|
1,093,770 |
|
||||||||||||||
|
Redeemable interest in Ares Operating Group entities |
|
|
40,751 |
|
|
— |
|
|
— |
|
|
40,751 |
|
||||||||||||||
|
Non-controlling interest in Consolidated Funds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Non-controlling interest in Consolidated Funds |
|
|
— |
|
|
6,339,504 |
|
|
(647,630 |
) |
|
5,691,874 |
|
||||||||||||||
|
Equity appropriated for Consolidated Funds |
|
|
— |
|
|
155,261 |
|
|
— |
|
|
155,261 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Non-controlling interest in Consolidated Funds |
|
|
— |
|
|
6,494,765 |
|
|
(647,630 |
) |
|
5,847,135 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Non-controlling interest in Ares Operating Group entities |
|
|
167,731 |
|
|
— |
|
|
— |
|
|
167,731 |
|
||||||||||||||
|
Members' equity and common stock of Predecessor |
|
|
525,678 |
|
|
— |
|
|
— |
|
|
525,678 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total equity |
|
|
693,409 |
|
|
6,494,765 |
|
|
(647,630 |
) |
|
6,540,544 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total liabilities, redeemable interests, non-controlling interests and equity |
|
$ |
1,444,782 |
|
$ |
23,066,510 |
|
$ |
(805,908 |
) |
$ |
23,705,384 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
For the Year Ended December 31, 2014 |
|
||||||||||||||||||||||||
|
|
|
Consolidated |
|
Consolidated |
|
Eliminations |
|
Consolidated |
|
||||||||||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Management fees (includes ARCC Part I Fees of $118,537) |
|
$ |
598,046 |
|
$ |
— |
|
$ |
(111,569 |
) |
$ |
486,477 |
|
||||||||||||||
|
Performance fees |
|
|
226,790 |
|
|
— |
|
|
(135,378 |
) |
|
91,412 |
|
||||||||||||||
|
Other fees |
|
|
28,447 |
|
|
— |
|
|
(2,447 |
) |
|
26,000 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total revenues |
|
|
853,283 |
|
|
— |
|
|
(249,394 |
) |
|
603,889 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Compensation and benefits |
|
|
456,372 |
|
|
— |
|
|
— |
|
|
456,372 |
|
||||||||||||||
|
Performance fee compensation |
|
|
170,028 |
|
|
— |
|
|
— |
|
|
170,028 |
|
||||||||||||||
|
General, administrative and other expense |
|
|
166,839 |
|
|
— |
|
|
— |
|
|
166,839 |
|
||||||||||||||
|
Consolidated Fund expenses |
|
|
— |
|
|
187,494 |
|
|
(120,694 |
) |
|
66,800 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total expenses |
|
|
793,239 |
|
|
187,494 |
|
|
(120,694 |
) |
|
860,039 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Interest and other investment income |
|
|
15,956 |
|
|
— |
|
|
(8,712 |
) |
|
7,244 |
|
||||||||||||||
|
Interest expense |
|
|
(8,617 |
) |
|
— |
|
|
— |
|
|
(8,617 |
) |
||||||||||||||
|
Other income (expense), net |
|
|
(3,644 |
) |
|
— |
|
|
1,222 |
|
|
(2,422 |
) |
||||||||||||||
|
Net realized gain (loss) on investments |
|
|
54,434 |
|
|
— |
|
|
(46,622 |
) |
|
7,812 |
|
||||||||||||||
|
Net change in unrealized appreciation (depreciation) on investments |
|
|
23,667 |
|
|
— |
|
|
649 |
|
|
24,316 |
|
||||||||||||||
|
Interest and other investment income of Consolidated Funds |
|
|
— |
|
|
939,735 |
|
|
(1,900 |
) |
|
937,835 |
|
||||||||||||||
|
Interest expense of Consolidated Funds |
|
|
— |
|
|
(674,373 |
) |
|
8,000 |
|
|
(666,373 |
) |
||||||||||||||
|
Net realized gain (loss) on investments of Consolidated Funds |
|
|
— |
|
|
44,781 |
|
|
— |
|
|
44,781 |
|
||||||||||||||
|
Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds |
|
|
— |
|
|
475,009 |
|
|
(6,520 |
) |
|
468,489 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total other income (expense) |
|
|
81,796 |
|
|
785,152 |
|
|
(53,883 |
) |
|
813,065 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Income before taxes |
|
|
141,840 |
|
|
597,658 |
|
|
(182,583 |
) |
|
556,915 |
|
||||||||||||||
|
Income tax expense (benefit) |
|
|
16,536 |
|
|
(5,283 |
) |
|
— |
|
|
11,253 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Net income |
|
|
125,304 |
|
|
602,941 |
|
|
(182,583 |
) |
|
545,662 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Less: Net income attributable to redeemable interests in Consolidated Funds |
|
|
— |
|
|
3,071 |
|
|
(506 |
) |
|
2,565 |
|
||||||||||||||
|
Less: Net income attributable to non-controlling interests in Consolidated Funds |
|
|
— |
|
|
599,870 |
|
|
(182,077 |
) |
|
417,793 |
|
||||||||||||||
|
Less: Net income attributable to redeemable interests in Ares Operating Group entities |
|
|
731 |
|
|
— |
|
|
— |
|
|
731 |
|
||||||||||||||
|
Less: Net income attributable to non-controlling interests in Ares Operating Group entities |
|
|
89,585 |
|
|
— |
|
|
— |
|
|
89,585 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Net income attributable to Ares Management, L.P. |
|
$ |
34,988 |
|
$ |
— |
|
$ |
— |
|
$ |
34,988 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
For the Year Ended December 31, 2013 |
|
||||||||||||||||||||||||
|
|
|
Consolidated |
|
Consolidated |
|
Eliminations |
|
Consolidated |
|
||||||||||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Management fees (includes ARCC Part I Fees of $110,511) |
|
$ |
516,657 |
|
$ |
— |
|
$ |
(141,085 |
) |
$ |
375,572 |
|
||||||||||||||
|
Performance fees |
|
|
290,026 |
|
|
— |
|
|
(210,226 |
) |
|
79,800 |
|
||||||||||||||
|
Other fees |
|
|
23,955 |
|
|
— |
|
|
(672 |
) |
|
23,283 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total revenues |
|
|
830,638 |
|
|
— |
|
|
(351,983 |
) |
|
478,655 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Compensation and benefits |
|
|
333,902 |
|
|
— |
|
|
— |
|
|
333,902 |
|
||||||||||||||
|
Performance fee compensation |
|
|
194,294 |
|
|
— |
|
|
— |
|
|
194,294 |
|
||||||||||||||
|
General, administrative and other expense |
|
|
138,722 |
|
|
— |
|
|
(258 |
) |
|
138,464 |
|
||||||||||||||
|
Consolidated Fund expenses |
|
|
— |
|
|
317,083 |
|
|
(181,846 |
) |
|
135,237 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total expenses |
|
|
666,918 |
|
|
317,083 |
|
|
(182,104 |
) |
|
801,897 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Interest and other investment income |
|
|
18,815 |
|
|
— |
|
|
(12,819 |
) |
|
5,996 |
|
||||||||||||||
|
Interest expense |
|
|
(9,475 |
) |
|
— |
|
|
— |
|
|
(9,475 |
) |
||||||||||||||
|
Debt extinguishment expense |
|
|
(1,862 |
) |
|
— |
|
|
— |
|
|
(1,862 |
) |
||||||||||||||
|
Other income (expense), net |
|
|
(200 |
) |
|
|
|
|
|
|
|
(200 |
) |
||||||||||||||
|
Net realized gain (loss) on investments |
|
|
77,015 |
|
|
— |
|
|
(83,388 |
) |
|
(6,373 |
) |
||||||||||||||
|
Net change in unrealized appreciation (depreciation) on investments |
|
|
(3,983 |
) |
|
— |
|
|
19,278 |
|
|
15,295 |
|
||||||||||||||
|
Interest and other investment income of Consolidated Funds |
|
|
— |
|
|
1,236,720 |
|
|
(683 |
) |
|
1,236,037 |
|
||||||||||||||
|
Interest expense of Consolidated Funds |
|
|
— |
|
|
(542,587 |
) |
|
8,156 |
|
|
(534,431 |
) |
||||||||||||||
|
Debt extinguishment gain of Consolidated Funds |
|
|
— |
|
|
11,800 |
|
|
— |
|
|
11,800 |
|
||||||||||||||
|
Net realized gain (loss) on investments of Consolidated Funds |
|
|
— |
|
|
64,382 |
|
|
— |
|
|
64,382 |
|
||||||||||||||
|
Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds |
|
|
— |
|
|
405,549 |
|
|
9,165 |
|
|
414,714 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total other income (expense) |
|
|
80,310 |
|
|
1,175,864 |
|
|
(60,291 |
) |
|
1,195,883 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Income before taxes |
|
|
244,030 |
|
|
858,781 |
|
|
(230,170 |
) |
|
872,641 |
|
||||||||||||||
|
Income tax expense |
|
|
17,423 |
|
|
41,840 |
|
|
— |
|
|
59,263 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Net income |
|
|
226,607 |
|
|
816,941 |
|
|
(230,170 |
) |
|
813,378 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Less: Net income attributable to redeemable interests in Consolidated Funds |
|
|
— |
|
|
141,040 |
|
|
(3,116 |
) |
|
137,924 |
|
||||||||||||||
|
Less: Net income attributable to non-controlling interests in Consolidated Funds |
|
|
— |
|
|
675,901 |
|
|
(227,054 |
) |
|
448,847 |
|
||||||||||||||
|
Less: Net income attributable to redeemable interests in Ares Operating Group entities |
|
|
2,451 |
|
|
— |
|
|
— |
|
|
2,451 |
|
||||||||||||||
|
Less: Net income attributable to non-controlling interests in Ares Operating Group entities |
|
|
43,674 |
|
|
— |
|
|
— |
|
|
43,674 |
|
||||||||||||||
|
Less: Net income attributable to controlling interest in Predecessor |
|
|
180,482 |
|
|
— |
|
|
— |
|
|
180,482 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Net income attributable to Ares Management, L.P. |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
For the Year Ended December 31, 2012 |
|
||||||||||||||||||||||||
|
|
|
Consolidated |
|
Consolidated |
|
Eliminations |
|
Consolidated |
|
||||||||||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Management fees (includes ARCC Part I Fees of $95,182) |
|
$ |
414,690 |
|
$ |
— |
|
$ |
(165,106 |
) |
$ |
249,584 |
|
||||||||||||||
|
Performance fees |
|
|
424,762 |
|
|
— |
|
|
(355,271 |
) |
|
69,491 |
|
||||||||||||||
|
Other fees |
|
|
19,005 |
|
|
— |
|
|
(4,034 |
) |
|
14,971 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total revenues |
|
|
858,457 |
|
|
— |
|
|
(524,411 |
) |
|
334,046 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Compensation and benefits |
|
|
288,719 |
|
|
— |
|
|
— |
|
|
288,719 |
|
||||||||||||||
|
Performance fee compensation |
|
|
267,725 |
|
|
— |
|
|
— |
|
|
267,725 |
|
||||||||||||||
|
General, administrative and other expense |
|
|
85,582 |
|
|
— |
|
|
— |
|
|
85,582 |
|
||||||||||||||
|
Consolidated Fund expenses |
|
|
— |
|
|
345,048 |
|
|
(228,543 |
) |
|
116,505 |
|
||||||||||||||
|
Total expenses |
|
|
642,026 |
|
|
345,048 |
|
|
(228,543 |
) |
|
758,531 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Interest and other investment income |
|
|
17,983 |
|
|
— |
|
|
(9,559 |
) |
|
8,424 |
|
||||||||||||||
|
Interest expense |
|
|
(8,679 |
) |
|
— |
|
|
— |
|
|
(8,679 |
) |
||||||||||||||
|
Debt extinguishment expense |
|
|
(3,032 |
) |
|
— |
|
|
— |
|
|
(3,032 |
) |
||||||||||||||
|
Other income (expense), net |
|
|
7 |
|
|
— |
|
|
— |
|
|
7 |
|
||||||||||||||
|
Net realized gain (loss) on investments |
|
|
81,508 |
|
|
— |
|
|
(74,846 |
) |
|
6,662 |
|
||||||||||||||
|
Net change in unrealized appreciation (depreciation) on investments |
|
|
19,694 |
|
|
— |
|
|
(21,364 |
) |
|
(1,670 |
) |
||||||||||||||
|
Interest and other investment income of Consolidated Funds |
|
|
— |
|
|
1,407,757 |
|
|
(1,164 |
) |
|
1,406,593 |
|
||||||||||||||
|
Interest expense of Consolidated Funds |
|
|
— |
|
|
(464,073 |
) |
|
14,696 |
|
|
(449,377 |
) |
||||||||||||||
|
Net realized gain (loss) on investments of Consolidated Funds |
|
|
— |
|
|
1,794,412 |
|
|
— |
|
|
1,794,412 |
|
||||||||||||||
|
Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds |
|
|
— |
|
|
(1,073,607 |
) |
|
6,594 |
|
|
(1,067,013 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total other income (expense) |
|
|
107,481 |
|
|
1,664,489 |
|
|
(85,643 |
) |
|
1,686,327 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Income before taxes |
|
|
323,912 |
|
|
1,319,441 |
|
|
(381,511 |
) |
|
1,261,842 |
|
||||||||||||||
|
Income tax expense |
|
|
21,816 |
|
|
4,338 |
|
|
— |
|
|
26,154 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Net income |
|
|
302,096 |
|
|
1,315,103 |
|
|
(381,511 |
) |
|
1,235,688 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Less: Net income attributable to redeemable interests in Consolidated Funds |
|
|
— |
|
|
202,191 |
|
|
(3,116 |
) |
|
199,075 |
|
||||||||||||||
|
Less: Net income attributable to non-controlling interests in Consolidated Funds |
|
|
— |
|
|
1,112,912 |
|
|
(378,395 |
) |
|
734,517 |
|
||||||||||||||
|
Less: Net income attributable to redeemable interests in Ares Operating Group entities |
|
|
3,293 |
|
|
— |
|
|
— |
|
|
3,293 |
|
||||||||||||||
|
Less: Net income attributable to non-controlling interests in Ares Operating Group entities |
|
|
78,157 |
|
|
— |
|
|
— |
|
|
78,157 |
|
||||||||||||||
|
Less: Net income attributable to controlling interest in Predecessor |
|
|
220,646 |
|
|
— |
|
|
— |
|
|
220,646 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Net income attributable to Ares Management, L.P. |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|||
20. SUBSEQUENT EVENTS
In March 2015, the board of directors of our general partner declared a quarterly distribution of $0.24 per common unit to common unitholders of record at the close of business on March 16, 2015, payable on March 24, 2015.
During the first quarter of 2015, the Company granted 144,196 restricted units and 680,682 options to certain employees. The awards vest at a rate of one-third per year, beginning on the third anniversary of the grant date. The awards are forfeited upon any termination of employment; provided that if such employee's employment is terminated between the first and second year after grant by the Company without "cause," or as a result of such employee's death or disability, generally 11% of the award will vest, and if the employee's employment is so terminated between the second and third year after grant, 22% of the award will vest.
Acquisition of EIF Management, LLC
On January 1, 2015, the Company completed the acquisition of all of the outstanding membership interests of EIF Management, LLC ("EIF"), a Delaware limited liability company, in accordance with the membership interest purchase agreement entered into on October 30, 2014. EIF is an asset manager in the U.S. power and energy assets industry with approximately $4.0 billion of AUM across four commingled funds and related co-investment vehicles at December 31, 2014. As a result of the acquisition, the Company now has a new energy infrastructure equity strategy focused on generating long-term, stable cash-flowing investments in the power generation, transmission and midstream energy sector. EIF is an extension of the Company's Private Equity Group segment.
The acquisition-date fair value of the consideration transferred totaled $149.2 million, which consisted of the following:
|
Cash |
|
$ |
64,532 |
|
|||||
|
Equity (1,578,947 Ares Operating Group units) |
|
|
25,468 |
|
|||||
|
Contingent consideration |
|
|
59,171 |
|
|||||
|
|
|
|
|
|
|||||
|
Total |
|
$ |
149,171 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
The acquisition-date fair value of the 1,578,947 Ares Operating Group Units issued was determined based on the volume weighted average price of Ares common units on the New York Stock Exchange from October 17, 2014 to November 13, 2014 in accordance with the membership interest purchase agreement.
The transaction also included contingent consideration that is payable to EIF's former membership interest holders if Ares successfully launches a new fund ("Fund V") that meets certain revenue and fee paying commitment targets during the commitment period.
The fair value of the liability for contingent consideration as of the acquisition date was $78.0 million and is subject to change until the liability is settled with the related impact recorded to our consolidated statements of operations as acquisition-related and other expenses. Contingent consideration includes (i) cash and equity consideration, with fair value estimated to be approximately $59.2 million, that are not subjected to vesting or are fully vested and will be recorded as purchase price and (ii) equity consideration, with fair value estimated to be approximately $18.8 million, that will generally vest ratably over a period of two to five years after Fund V's final closing and will be recorded as equity-based compensation. Up to half of the Ares Operating Group Units issued are exchangeable from and after July 1, 2015 and all of the Ares Operating Group Units issued in the transaction from and after January 2, 2016, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications, or, at the Company's option, for cash.
The fair value of the contingent consideration was estimated using an income approach, specifically a probability-weighted discounted cash flow model. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level III measurement as defined in ASC 820. The key assumptions in applying the discounted cash flow model are as follows: discount rate of 4.1% estimated based on the short-term pre-tax cost of debt and probability adjusted revenues between $16.9 million and $45.0 million.
The following is a summary of the estimated fair values of assets acquired and liabilities assumed for the EIF acquisition as of January 1, 2015. The Company is in the process of obtaining third-party valuations of certain intangible assets; thus, the provisional measurements of contingent consideration, intangible assets, goodwill and deferred income tax are subject to change. Additionally, the Company evaluated three leases assumed in connection with the EIF acquisition as of January 1, 2015. Based upon the existing terms of the acquired leases, the Company determined that the lease payments are at current market conditions. The fair value of assets acquired and liabilities assumed are estimated to be:
|
Cash |
|
$ |
95 |
|
|||||
|
Other tangible assets |
|
|
610 |
|
|||||
|
Intangible assets: |
|
|
|
|
|||||
|
—Management contracts |
|
|
48,521 |
|
|||||
|
—Client relationships |
|
|
38,600 |
|
|||||
|
—Trade name |
|
|
3,200 |
|
|||||
|
|
|
|
|
|
|||||
|
Total intangible assets |
|
|
90,321 |
|
|||||
|
|
|
|
|
|
|||||
|
Total identifiable assets acquired |
|
|
91,026 |
|
|||||
|
|
|
|
|
|
|||||
|
Accounts payable, accrued expenses and other liabilities |
|
|
455 |
|
|||||
|
|
|
|
|
|
|||||
|
Total liabilities assumed |
|
|
455 |
|
|||||
|
Net identifiable assets acquired |
|
$ |
90,571 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|||||
|
Goodwill: |
|
|
|
|
|||||
|
—Assembled workforce |
|
|
8,300 |
|
|||||
|
—Others |
|
|
50,300 |
|
|||||
|
|
|
|
|
|
|||||
|
Total goodwill |
|
|
58,600 |
|
|||||
|
|
|
|
|
|
|||||
|
Net assets acquired |
|
$ |
149,171 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
The Company incurred $2.9 million of acquisition-related costs which are expensed as incurred and reported within general, administrative, and other expenses within the Consolidated Statements of Operations.
Supplemental information on an unaudited pro forma basis, as if the EIF acquisition had been consummated as of January 1, 2014 is as follows:
|
|
|
Year Ended |
|
May 1, 2014 - |
|
||||||||||
|
Total Revenues |
|
$ |
42,767 |
|
$ |
28,512 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Net Income Attributable to Ares Management, L.P. |
|
$ |
174 |
|
$ |
116 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Earnings Per Common Unit—Basic and Diluted |
|
$ |
0.00 |
|
$ |
0.00 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable. These results are not necessarily indicative of the Company's consolidated financial condition or statements of operations in future periods or the results that actually would have been realized had the Company and EIF been a combined entity during the period presented. These amounts have been calculated after applying the Company's accounting policies and adjusting the results of EIF to reflect the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied on January 1, 2014, together with the consequential tax effects. Prior to the Reorganization and the IPO in May 2014, the Company's businesses were conducted through multiple operating businesses rather than a single holding entity. As such, there was no single capital structure upon which to calculate historical earnings per common unit information. Accordingly, unaudited pro forma earnings per common unit information has not been presented for the period from January 1, 2014 and April 30, 2014 and for the year ended December 31, 2013. Revenues and net income attributable to Ares Management, L.P. are prorated evenly over a twelve-month period for the calculation of unaudited pro forma earnings per common unit for the period from May 1, 2014 to December 31, 2014.
Goodwill and Intangible Assets
The carrying value of goodwill was $58.6 million as of January 1, 2015 and is 100% allocated to the Private Equity Group segment. The goodwill to be recognized is attributable primarily to expected synergies and the assembled workforce of EIF. None of the goodwill is expected to be deductible for income tax purposes.
The $90.3 million acquired intangible assets are assigned to finite-lived intangible assets as follows:
|
• |
$38.6 million is provisionally assigned to client relationship and is subject to an estimated useful life of approximately 12 to 15 years; |
|
• |
$48.5 million is provisionally assigned to acquired management contracts and is subject to an estimated useful life of approximately two to four years; and |
|
• |
$3.2 million is provisionally assigned to trade name that is subject to an estimated useful life of approximately seven to eight years. |
As noted earlier, the fair value of the acquired identifiable intangible assets is provisional pending receipt of the final valuations for these assets.
Guarantees
In connection with the acquisition of EIF, AM LLC will provide credit support to a new $18 million credit facility (the "EIF Guaranteed Facility"), entered into by a wholly owned subsidiary of the Company with a national banking association on January 1, 2015. In connection with the facility, AM LLC will make payments to the lender (i) upon a triggering event under the EIF Guaranteed Facility or (ii) among other things, in the event that the Company fails to maintain an aggregate amount not less than the lesser of (a) three times the outstanding balance of EIF Guaranteed Facility and (b) $50 million from its cash, cash equivalents or availability under any revolving credit facility to which the Company is a party and that are available. The Company will receive a credit support fee of 5.0% per annum times the average amount of the loans outstanding under the EIF Guaranteed Facility. The guarantee is entered into between a parent and a subsidiary and is subject to the scope exception under ASC 460, Guarantees. No guarantee liability will be recognized by the Company. The credit support fee will be eliminated upon consolidation.
Commitments
The Company will fund any future commitment required to be provided by the general partner of Fund V. The future commitment will range from 1.5% to 2.5% of the aggregate capital commitments from the limited partners of Fund V and the amount is not reasonably determinable as of acquisition date.
|
|||
21. QUARTERLY FINANANCIAL DATA (UNAUDITED)
Unaudited quarterly information for each of the three months in the years ended December 31, 2014 and 2013 are presented below. For periods prior to the Reorganization and the Company's initial public offering in May 2014, the financial information reflects the combined and consolidated financial results of the Predecessor.
|
|
|
For the Three Months Ended |
|
||||||||||
|
|
|
March 31, |
|
June 30, |
|
September 30, |
|
December 31, |
|
||||
|
Revenues |
|
$ |
133,628 |
|
$ |
131,618 |
|
$ |
175,161 |
|
$ |
163,482 |
|
|
Expenses |
|
|
184,130 |
|
|
259,102 |
|
|
203,337 |
|
|
213,470 |
|
|
Other income (loss) |
|
|
325,177 |
|
|
318,973 |
|
|
(48,709 |
) |
|
217,624 |
|
|
Income (loss) before provision for income taxes |
|
|
274,675 |
|
|
191,489 |
|
|
(76,885 |
) |
|
167,636 |
|
|
Net income (loss) |
|
|
281,370 |
|
|
186,222 |
|
|
(79,284 |
) |
|
157,354 |
|
|
Net income (loss) attributable to Ares Management, L.P. |
|
|
N/A |
|
|
17,842 |
|
|
13,971 |
|
|
3,175 |
|
|
Net income (loss) attributable to Ares Management L.P. per common unit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
N/A |
|
$ |
0.22 |
|
$ |
0.17 |
|
$ |
0.04 |
|
|
Diluted |
|
|
N/A |
|
$ |
0.22 |
|
$ |
0.17 |
|
$ |
0.04 |
|
|
Distributions declared per common unit(1) |
|
|
N/A |
|
$ |
0.18 |
|
$ |
0.24 |
|
$ |
0.24 |
|
|
|
|
For the Three Months Ended |
|
||||||||||
|
|
|
March 31, |
|
June 30, |
|
September 30, |
|
December 31, |
|
||||
|
Revenues |
|
$ |
107,537 |
|
$ |
89,302 |
|
$ |
135,877 |
|
$ |
145,939 |
|
|
Expenses |
|
|
213,067 |
|
|
109,793 |
|
|
237,037 |
|
|
242,000 |
|
|
Other income (loss) |
|
|
353,114 |
|
|
(109,931 |
) |
|
512,147 |
|
|
440,553 |
|
|
Income (loss) before provision for income taxes |
|
|
247,584 |
|
|
(130,422 |
) |
|
410,987 |
|
|
344,492 |
|
|
Net income (loss) |
|
|
223,134 |
|
|
(136,734 |
) |
|
406,197 |
|
|
320,781 |
|
|
Net income (loss) attributable to Ares Management, L.P. |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
Net income (loss) attributable to Ares Management L.P. per common unit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
Diluted |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
Distributions declared per common unit(1) |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
(1) |
Distributions declared per common unit are reflected in the period the income is earned. |
|
|||
Principles of Consolidation
The Company consolidates those entities in which it has a direct and indirect controlling financial interest based on either a variable interest model or voting interest model. As such, the Company consolidates (a) entities in which it holds a majority voting interest or has majority ownership and control over the operational, financial and investing decisions of that entity, including Ares affiliates and affiliated funds and co-investment entities for which the Company is the general partner and is presumed to have control and (b) entities that the Company concludes are variable interest entities ("VIEs"), including limited partnerships in which the Company has a nominal economic interest and CLOs for which the Company is deemed to be the primary beneficiary.
With respect to the Consolidated Funds, which typically represent limited partnerships and single member limited liability companies, the Company earns a fixed management fee based on invested capital or a derivation thereof, and a performance fee based upon the investment returns in excess of a stated benchmark or hurdle rate. The Company, as the general partner of various funds, generally has operational discretion and control, and limited partners have no substantive rights to impact ongoing governance and operating activities of the fund. Such a fund is required to be consolidated unless the Company has a less than significant level of equity at risk. The fund is typically considered a VIE, as described below, to the extent that the Company's equity at risk is less than significant in a given fund and it has no obligation to fund any future losses. In these cases, the fund investors are generally deemed to be the primary beneficiaries, and the Company does not consolidate the fund. In cases where the Company's equity at risk is deemed to be significant, the fund is generally not considered to be a VIE, and the Company will generally consolidate the fund unless the limited partners are granted substantive rights to remove the general partner or liquidate the fund. These rights are known as kick-out rights.
Variable Interest Model
The Company consolidates entities that are determined to be VIEs where the Company is deemed to be the primary beneficiary. An entity is determined to be the primary beneficiary if it holds a controlling financial interest. A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly impact the entity's business and (b) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The consolidation rules require an analysis to determine whether (i) an entity in which the Company holds a variable interest is a VIE and (ii) the Company's involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests (e.g., management and performance related fees), would give the Company a controlling financial interest. The consolidation rules may be deferred for VIEs if the VIE and the reporting entity's interest in VIE meet deferral conditions set forth in FASB Accounting Standards Codification ("ASC") 810-10-65-2. Certain limited partnerships meet the deferral conditions if: (a) the limited partnerships generally have all the attributes of an investment company, (b) the Company does not have the obligation to fund losses of the limited partnership and (c) the limited partnership is not a securitization, asset-backed financing entity or qualifying special purpose vehicle. Where a VIE qualifies for the deferral of the consolidation rules, the analysis is based on consolidation rules prior to January 1, 2010. These rules require an analysis to determine (i) whether an entity in which the Company holds a variable interest is a VIE and (ii) whether the Company's involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests (e.g., management and performance related fees) would be expected to absorb a majority of the variability of the entity. Under either guideline, the Company determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders the conclusion at each reporting date. In evaluating whether the Company is the primary beneficiary, the Company evaluates its direct and indirect economic interests in the entity. The consolidation analysis is generally performed qualitatively; however, if the primary beneficiary is not readily determinable, a quantitative assessment may also be performed. This analysis requires judgment. These judgments include: (1) determining whether the equity investment at risk is sufficient to permit the entity to finance its activities without additional subordinated financial support, (2) evaluating whether the equity holders, as a group, can make decisions that have a significant effect on the success of the entity, (3) determining whether two or more parties' equity interests should be aggregated, (4) determining whether the equity investors have proportionate voting rights to their obligations to absorb losses or rights to receive returns from an entity, (5) evaluating the nature of relationships and activities of the parties involved in determining which party within a related-party group is most closely associated with a VIE and (6) estimating cash flows in evaluating which member within the equity group absorbs a majority of the expected losses and hence would be deemed the primary beneficiary.
As of December 31, 2014 and 2013, assets of consolidated VIEs reflected in the Consolidated Statements of Financial Condition were $14.2 billion and $14.2 billion, respectively, and are presented within "Assets of Consolidated Funds." As of December 31, 2014 and 2013, liabilities of consolidated VIEs reflected in the Consolidated Statements of Financial Condition were $13.2 billion and $13.1 billion, respectively, and are presented within "Liabilities of Consolidated Funds." The holders of the consolidated VIEs' liabilities do not have recourse to the Company other than to the assets of the consolidated VIEs. The assets and liabilities of the consolidated VIEs are comprised primarily of investment securities and loan obligations, respectively. All significant intercompany transactions and balances have been eliminated in consolidation.
As of December 31, 2014 and 2013, the Company held $193.0 million and $162.7 million of investments in these consolidated VIEs, respectively, which represents its maximum exposure to loss. The maximum exposure to loss represents the Company's total investment in these entities.
Certain funds that have historically been consolidated in the financial statements are no longer consolidated because, as of the reporting period: (a) they were liquidated or dissolved, including three and one for the years ended December 31, 2014 and 2013, respectively, (b) the Company no longer holds a majority voting interest, including four and none for the years ended December 31, 2014 and 2013, respectively, or (c) the Company is no longer deemed to be the primary beneficiary of the VIEs as it has no economic interest, no obligation to absorb losses and no significant rights to receive benefits from the VIEs, including eleven and none for the years ended December 31, 2014 and 2013, respectively. For deconsolidated funds, the Company continues as the general partner and/or investment manager until such funds are fully liquidated.
Equity Appropriated for Consolidated Funds
As of December 31, 2014 and 2013, the Company consolidated 31 and 35 CLOs, respectively. CLOs are investment vehicles created for the sole purpose of issuing collateralized loan obligations. Upon consolidation, the Company elected the fair value option for eligible liabilities to mitigate accounting mismatches between the carrying value of the assets and liabilities. The Company accounts for the excess in fair value of assets over liabilities upon initial consolidation of funds as an increase in equity appropriated for Consolidated Funds.
The loan obligations issued by the CLOs are backed by diversified collateral asset portfolios and by structured debt or equity. In exchange for managing the collateral for the CLOs, the Company earns management fees, including, in some cases, senior and subordinated management fees, and in some cases, contingent performance fees. In cases where the Company earns fees from a fund that it consolidates with the CLOs, those fees have been eliminated as intercompany transactions. The Company's holdings in these CLOs are generally subordinated to other interests in the entities and entitle the Company to receive a pro rata portion of the residual cash flows, if any, from the entities. Additionally, the Company may invest in other senior secured notes, which are repaid based on available cash flows subject to priority of payments under each Consolidated CLO's governing documents. Investors in the CLOs generally have no recourse against the Company for any losses sustained in the capital structure of each CLO.
Investments in Non-Consolidated Variable Interest Entities
The Company holds interests in certain VIEs that are not consolidated because the Company is not deemed the primary beneficiary. The Company's interest in such entities generally is in the form of direct equity interests and fixed fee arrangements. The maximum exposure to loss represents the potential loss of assets by the Company relating to these non-consolidated entities. There is no difference between the carrying value and fair value as investments in the non-consolidated VIEs are carried at fair value. The Company's interests and the Consolidated Funds' interests in these non-consolidated VIEs and their respective maximum exposure to loss relating to non-consolidated VIEs are as follows
|
|
|
As of December 31, |
|
||||
|
|
|
2014 |
|
2013 |
|
||
|
Maximum exposure to loss attributable to the Company's investment in non-consolidated VIEs |
|
$ |
14,851 |
|
$ |
12,366 |
|
|
Maximum exposure to loss attributable to Consolidated Funds' investments in non-consolidated VIEs |
|
$ |
2,519 |
|
$ |
96,223 |
|
Basis of Accounting
The accompanying consolidated financial statements are prepared in accordance with GAAP. Certain comparative amounts for prior periods have been reclassified to conform to the current year's presentation. Management has determined that the Company's Consolidated Funds are investment companies under GAAP for the purposes of financial reporting based on the following characteristics: the Consolidated Funds obtain funds from one or more investors and provide investment management services and the Consolidated Funds' business purpose and substantive activities are investing funds for returns from capital appreciation and/or investment income. Therefore, investments of Consolidated Funds are recorded at fair value and the unrealized appreciation (depreciation) in an investment's fair value is recognized on a current basis in the Consolidated Statements of Operations. Additionally, the Consolidated Funds do not consolidate their majority-owned and controlled investments in portfolio companies. In the preparation of these consolidated financial statements, the Company has retained the specialized accounting guidance for the Consolidated Funds under GAAP.
All of the investments held and CLO loan obligations issued by the Consolidated Funds are presented at their estimated fair values in the Company's Consolidated Statements of Financial Condition. The excess of the CLO assets over the CLO liabilities upon consolidation is reflected in the Company's Consolidated Statements of Financial Condition as equity appropriated for Consolidated Funds. Net income attributable to the investors in the CLOs is included in net income (loss) attributable to non-controlling interests in Consolidated Funds in the Consolidated Statements of Operations and equity appropriated for Consolidated Funds in the Consolidated Statements of Financial Condition.
Risks and Uncertainties
In the normal course of business, the Company encounters significant credit and market risk. Credit risk is the risk of default on investments in debt securities, loans and derivatives that result from a borrower's or derivative counterparty's inability or unwillingness to make required or expected payments. Credit risk is enhanced in situations where the Company or a Consolidated Fund is investing in distressed assets or unsecured or subordinate loans or in securities that are a material part of its respective business. Market risk reflects changes in the value of investments due to changes in interest rates, credit spreads or other market factors.
The Company also makes investments outside of the United States. These non-U.S. investments are subject to the same risks associated with U.S. investments as well as additional risks, such as fluctuations in foreign currency exchange rates, unexpected changes in regulatory requirements, heightened risk of political and economic instability, difficulties in managing the investments, potentially adverse tax consequences and the burden of complying with a wide variety of foreign laws.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management's estimates are based on historical experiences and other factors, including expectations of future events that management believes to be reasonable under the circumstances. These assumptions and estimates require management to exercise judgment in the process of applying the Company's accounting policies. Assumptions and estimates regarding the valuation of investments and their resulting impact on performance fee revenue and performance fee compensation involve a high degree of judgment and complexity, and these assumptions and estimates may be significant to the consolidated financial statements. Actual results could differ from these estimates and such differences could be material.
Investments
Investments include (a) fair value investments held by the Company and Consolidated Funds and (b) loans held as investments by Consolidated Funds.
The Company has retained the specialized investment company accounting guidance under GAAP with respect to substantially all of its investments. Thus, the consolidated investments are reflected in the Consolidated Statements of Financial Condition at fair value, with unrealized appreciation (depreciation) resulting from changes in fair value reflected as a component of net change in unrealized appreciation (depreciation) on investments in the Consolidated Statements of Operations. Fair value is the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date (i.e. the exit price).
Loans held as investments are recorded at the outstanding unpaid principal balance less any allowance for loan losses. Loans receivable that the Company has the intent and ability to hold for the foreseeable future are classified as held-for-investment. Interest income is recognized in the period earned to the extent that such amounts are expected to be collected. In general, interest is accrued on loans held as investments upon the earlier of the occurrence of a payment default and there being reasonable doubt that principal and interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management's judgment regarding collectability. Non-accrual loans are restored to accrual status when, in management's judgment, the loan is no longer in payment default and principal and interest is likely to be collected in full for the remainder of the term of the loan. The Company may make exceptions to this if the loan has sufficient collateral value and the conditions of the loan are improving. As of December 31, 2014, the Company had $0.8 million of loans receivable that were on non-accrual status.
Loan origination fees received for loans held as investments are deferred and recognized as income over the life of the related loan. The amortization of deferred loan origination fees is included in interest income and other investment income of Consolidated Funds. The Company also receives other various fees including fees for commitments, amendments and other services rendered by the Company to borrowers. Such fees are recognized as income when earned or the services are rendered. Any costs incurred related to such services rendered are expensed as incurred.
The Company records an allowance for loan losses based on management's judgment of the estimated potential credit impairment in the portfolio of loans held as investments individually as well as at an aggregate level. The Company monitors the performance of each borrower using a number of factors including the estimated value of any underlying collateral, compliance with financial covenants, the operating capabilities and financial trends of the borrowers, as well as overall current economic conditions affecting specific borrowers. As a result, the Company records an allowance specific to individual loans held as investments when it is probable that the Company will be unable to collect all amounts (including both contractual principal and interest) according to the contract terms of the individual loan agreement. Additionally, the Company records a general allowance for overall credit exposure related to aggregate portfolio of loans held as investments representing the Company's best estimate of credit losses inherent in the portfolio. Various inputs are used in determining the general allowance for loan losses including, but not limited to, external loss factors, internal historical loss rates as well as environmental factors such as certain industry, geographical, economic and political factors.
Goodwill and Intangible Assets
The Company's finite-lived intangible assets consist of contractual rights to earn future management fees and performance fees from investment funds it acquires. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives, ranging from approximately 1 to 10 years. Finite-lived intangible assets arise from the Company's acquisition of management contracts, which provide the right to receive future fee income. The purchase price is treated as an intangible asset and is amortized over the life of the contract. Amortization is included as part of general, administrative and other expenses in the Consolidated Statements of Operations.
The Company tests finite-lived intangible assets for impairment if certain events occur or circumstances change indicating that the carrying amount of the intangible asset may not be recoverable. The Company uses a two-step process to evaluate impairment. The first step compares the estimated undiscounted future cash flow attributable to the intangible asset being evaluated with its carrying amount. The second step, used to measure the amount of potential impairment, compares the fair value of the intangible asset with its carrying amount. If an impairment is determined to exist by management, the Company accelerates amortization expense so that the carrying value represents fair value.
Goodwill represents the excess cost over identifiable net assets of an acquired business. The Company tests goodwill annually for impairment. If, after assessing qualitative factors, the Company believes that it is more likely than not that the fair value of the reporting unit is less than its carrying value, the Company will use a two-step process to evaluate impairment. The first step compares the fair value of the reporting unit with its carrying amount, including goodwill. The second step, used to measure the amount of any potential impairment, compares the implied fair value of the reporting unit with the carrying amount of goodwill.
The Company also tests goodwill for impairment in other periods if an event occurs or circumstances change such that is more likely than not to reduce the fair value of the reporting unit below its carrying amounts. Inherent in such fair value determinations are certain judgments and estimates relating to future cash flows, including the Company's interpretation of current economic indicators and market valuations, and assumptions about the Company's strategic plans with regard to its operations. Due to the uncertainties associated with such estimates, actual results could differ from such estimates.
Goodwill is not amortized and is not deductible for income tax purposes. There have been no impairments of goodwill recorded as of December 31, 2014.
Business Combinations
The Company applies the provisions of ASC 805, Business Combinations ("ASC 805"), in the accounting for acquisitions. ASC 805 requires separate recognition of goodwill from the assets acquired and the liabilities assumed, at the acquisition date fair values. The Company accounts for business combinations using the acquisition method of accounting, under which the purchase price of the acquisition is allocated to the fair value of each asset acquired and liability assumed as of the acquisition date. Contingent consideration obligations are recognized as of the acquisition date at fair value based on the probability that contingency will be realized. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. Acquisition-related costs in connection with a business combination are expensed as incurred.
Management's determination of fair value of assets acquired and liabilities assumed at the acquisition date as well as contingent consideration are based on the best information available in the circumstances, and may incorporate management's own assumptions and involve a significant degree of judgment and estimates that are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations.
For a given acquisition, management may identify certain pre-acquisition contingencies as of the acquisition date and may extend the review and evaluation of these pre-acquisition contingencies throughout the measurement period in order to obtain sufficient information to assess whether management includes these contingencies as a part of the fair value estimates of assets acquired and liabilities assumed and, if so, to determine their estimated amounts. If management cannot reasonably determine the fair value of a pre-acquisition contingency by the end of the measurement period, which is generally the case given the nature of such matters, the Company will recognize an asset or a liability for such pre-acquisition contingency if: (i) it is probable that an asset existed or a liability had been incurred at the acquisition date and (ii) the amount of the asset or liability can be reasonably estimated. Subsequent to the measurement period, changes in the estimates of such contingencies would affect earnings and could have a material effect on the consolidated statements of operations and financial condition.
Cash and Cash Equivalents
Cash and cash equivalents for the Company includes liquid investments in money market funds and demand deposits. Cash and cash equivalents held at Consolidated Funds represents cash that, although not legally restricted, is not available to support the general liquidity needs of the Company, as the use of such amounts is generally limited to the investment activities of the Consolidated Funds.
As the servicer to certain real estate investments, certain subsidiaries of the Company collect escrow deposits from borrowers to ensure the borrowers' obligations are met. These escrow deposits are represented as restricted cash and cash equivalents for the Company and are offset by escrow cash liability within accounts payable and accrued expenses in the Consolidated Statements of Financial Condition. Restricted cash for the Consolidated Funds represents cash that is legally segregated according to the underlying fund agreements. At December 31, 2014 and 2013, the Company had cash balances with financial institutions in excess of Federal Deposit Insurance Corporation insured limits. The Company monitors the credit standing of these financial institutions.
Derivative Instruments
The Company recognizes all derivatives as either assets or liabilities in the Consolidated Statements of Financial Condition and reports them at fair value.
Fixed Assets
Fixed assets, consisting of furniture, fixtures and equipment, leasehold improvements, and computer hardware and internal use software, are recorded at cost, less accumulated depreciation and amortization.
Financial Instruments
The Company considered cash and cash equivalents, receivables, equity-method investments, accounts payable, accrued expenses, other liabilities, debt obligations and assets and liabilities of the Consolidated Funds to be financial instruments. The carrying amounts reported in the Consolidated Statements of Financial Condition for these financial instruments equal or closely approximate their fair values.
Non-Controlling Interests in Ares Operating Group Entities
Following the Reorganization, non-controlling interests in Ares Operating Group entities represent a component of equity and net income attributable to the owners of AOG Units that are not held directly or indirectly by Ares Management, L.P. These interests are adjusted for contributions to and distributions from Ares Operating Group entities during the reporting period and are allocated income from the Ares Operating Group entities based on their historical ownership percentage for the proportional number of days in the reporting period.
For the periods presented prior to the Reorganization, non-controlling interests in Ares Operating Group entities represent equity interests and net income attributable to various minority non-control oriented strategic investment partners, which were reflected as non-controlling interests in the Predecessor's historical results, as well as net income attributable to controlling interest in the Predecessor. The net income attributable to controlling interests in the Predecessor, from January 1, 2014 to April 30, 2014, is presented as net income attributable to non-controlling interests in Ares Operating Group entities within the Consolidated Statements of Operations.
Redeemable Interest in Ares Operating Group Entities
Redeemable interests in Ares Operating Group entities represent a portion of the collective ownership interest in Ares Operating Group Units granted to professionals of the Company in connection with the Company's acquisition of Indicus Advisors, LLP ("Indicus") during 2011. This ownership interest may be redeemed for a cash payment of $20.0 million provided that a portion of such interests are subject to certain conditions relating to continued employment. Income is allocated in proportion to the redeemable interests ownership percentage in Ares Operating Group Units.
Management Fees
Management fees are generally based on a defined percentage of fair value of assets, total commitments, invested capital, net asset value ("NAV"), net investment income, total assets or par value of the investment portfolios managed by the Company. Principally all management fees are earned from affiliated funds of the Company. The contractual terms of management fees vary by fund structure and investment strategy. Management fees are recognized as revenue in the period advisory services are rendered, subject to the Company's assessment of collectability.
Management fees also include a quarterly performance fee on the investment income ("ARCC Part I Fees") from Ares Capital Corporation (NASDAQ: ARCC) ("ARCC"), a publicly traded business development company registered under the Investment Company Act and managed by a subsidiary of the Company. ARCC Part I Fees are equal to 20.0% of its net investment income (before ARCC Part I Fees and incentive fees payable based on capital gains), subject to a fixed "hurdle rate" of 1.75% per quarter, or 7.0% per annum. No fee is recognized until ARCC's net investment income exceeds a 1.75% hurdle rate, with a "catch-up" provision such that the Company receives 20% of ARCC's net investment income from the first dollar earned. Such fees from ARCC are classified as management fees as they are paid quarterly, predictable and recurring in nature, not subject to repayment (or clawback) and cash settled each quarter.
Tradable Credit Group long-only credit funds: Management fees generally range from 0.45% to 0.65% of principal par plus cash or NAV. The funds in the leveraged loan funds strategy have an average management contract term of 12.6 years as of December 31, 2014 and the fee ranges generally remain unchanged at the close of the re-investment period. The funds in the high-yield strategy generally represent open-ended managed accounts, which typically do not include investment period termination or management contract expiration dates.
Tradable Credit Group alternative credit funds: Management fees generally range from 0.50% to 1.75% of NAV, gross asset value, committed capital or invested capital. The funds in the credit opportunities strategy generally include open-ended or managed account structures, which typically do not include investment period termination or management contract expiration dates. The funds in the dynamic credit strategy are comprised of publicly traded closed-end funds, which typically do not include investment period termination or management contract termination dates. The funds in the special situations strategy are comprised of closed-end funds, with investment period termination or management contract termination dates and managed accounts, which do not include investment period termination or management contract termination dates. For certain closed-end funds in these strategies, following the expiration or termination of the investment period the management fees step down to 1.00% of the aggregate adjusted cost of unrealized portfolio investments. The funds in these strategies, excluding Ares Dynamic Credit Allocation Fund, Inc. (NYSE:ARDC) ("ARDC") and Ares Multi-Strategy Credit Fund, Inc. (NYSE:ARMF) ("ARMF") which have no investment periods, have an average management contract term of 10.1 years as of December 31, 2014.
Direct Lending Group funds: Management fees generally range from 0.75% to 2.00% of invested capital, NAV or total assets. Following the expiration or termination of the investment period the management fees for certain closed end funds and managed accounts in this strategy generally step down to between 0.50% and 1.50% of the aggregate cost or market value of the portfolio investments. In addition, management fees include the ARCC Part I Fees. The funds in this strategy, excluding ARCC which has no investment period termination, have an average management contract term of 8.8 years as of December 31, 2014.
Private Equity Group funds: As of December 31, 2014, management fees generally range from 1.50% to 2.00% of total capital commitments during the investment period. The management fees for such funds generally step down to between 0.75% and 1.125% of the aggregate adjusted cost of unrealized portfolio investments following the earlier to occur of: (i) the expiration or termination of the investment period or (ii) the launch of a successor fund. The funds in this strategy have an average management contract term of 12.5 years as of December 31, 2014.
Real Estate Group funds: Management fees generally range from 0.50% to 1.50% of invested capital, stockholders' equity or total capital commitments. Following the expiration or termination of the investment period, the basis on which management fees are earned for certain closed-end funds, managed accounts and co-investment vehicles in this strategy changes from committed capital to invested capital with no change in the management fee rate. The funds in this strategy, excluding Ares Commercial Real Estate Corporation (NYSE:ACRE) ("ACRE") which has no investment period termination, have an average management contract term of 10.8 years as of December 31, 2014.
Performance Fees
Performance fees are based on certain specific hurdle rates as defined in the applicable investment management agreements or governing documents. Substantially all performance fees are earned from affiliated funds of the Company. Performance fees are recorded on an accrual basis to the extent such amounts are contractually due.
The Company has elected to adopt Method 2 of ASC 605-20, Revenue Recognition ("ASC 605") for revenue based on a formula. Under this method, the Company records revenue when it is entitled to performance-based fees, subject to certain hurdles or benchmarks. Performance-based fees are assessed as a percentage of the investment performance of the fund. The performance fees for any period are based upon an assumed liquidation of the fund's net assets on the reporting date, and distribution of the net proceeds in accordance with the fund's income allocation provisions. The performance fees may be subject to reversal to the extent that the performance fees recorded exceed the amount due to the general partner or investment manager based on a fund's cumulative investment returns. As presented below, the terms of performance fees vary by fund structure and investment strategy; furthermore, the Company is not eligible to receive performance fees from every fund that it manages.
Tradable Credit Group long-only credit funds: Performance fees generally represent 10% to 20% of each incentive eligible fund's profits, subject to a preferred return of approximately 7% to 12% per annum.
Tradable Credit Group alternative credit funds: Performance fees generally represent 10% to 20% of each incentive eligible fund's profits, subject to a preferred return of approximately 5% to 9% per annum.
Direct Lending Group funds: Performance fees generally represent 10% to 20% of each incentive eligible fund's profits or cumulative realized capital gains (net of realized capital losses and unrealized capital depreciation). Some funds are also subject to a preferred return of approximately 5% to 8% per annum.
Private Equity Group funds: Performance fees represent 20% of each incentive eligible fund's profits, subject to a preferred return of approximately 8% per annum.
Real Estate Group funds: Performance fees generally represent 10% to 25% of each incentive eligible fund's profits, subject to a preferred return of approximately 8% to 10% per annum.
Performance fees receivable is presented separately in the Consolidated Statements of Financial Condition and represents performance fees recognized but not yet collected. The timing of the payment of performance fees due to the general partner or investment manager varies depending on the terms of the applicable fund agreements. As of December 31, 2014, the Company had no accrued clawback obligations that would need to be paid if the funds were liquidated at their current fair values at that date.
Other Fees
The Company also provides administrative services to certain of its affiliated funds that are reported within other fees. These fees are recognized as revenue in the period administrative services are rendered. These fees are generally based on expense reimbursements that represent the portion of overhead and other expenses incurred by certain Operations Management Group professionals directly attributable to the fund, but may also be based on a fund's NAV for certain funds domiciled outside the U.S. Other fees also includes revenues associated primarily with Real Estate Group activities such as development and construction.
Equity-Based Compensation
The Company recognizes expense related to equity-based compensation transactions in which it receives employee services in exchange for (a) equity instruments of the Company, (b) derivatives based on the Company's common units or (c) liabilities that are based on the fair value of the Company's equity instruments.
Equity-based compensation expense represents expenses associated with the following:
|
(a) |
granting of: (i) direct and indirect profit interests; (ii) put options to sell certain interests at a minimum value; (iii) purchase (or call) options to acquire additional membership interests; and (iv) restricted units, options and phantom units granted under the Ares Management, L.P. 2014 Equity Incentive Plan ("Equity Incentive Plan"); and |
|
(b) |
conversion of and acceleration in vesting of certain existing interests. |
Equity-based compensation expense is determined based on the fair value of the respective equity award on the grant date and is recognized on a straight-line basis over the requisite service period, with a corresponding increase in partners' capital. Fair value of the restricted units and phantom units was determined to be the most recent closing price of common units. Certain restricted units are subject to a lock up provision that expires on the fifth anniversary of the IPO. The Company used Finnerty's average strike-price put option model to estimate the discount associated with this lack of marketability. The Company estimated the fair value of the options as of the grant date using Black-Scholes option pricing model.
The Company is required to estimate the equity-based awards that management ultimately expects to vest and to reduce equity-based compensation expense for the effects of estimated forfeitures of awards over the expense recognition period. The rate of future forfeitures is estimated based upon historical experience. Actual forfeitures may differ from management's estimate. Equity-based compensation expense is adjusted, as necessary, for actual forfeitures so as to reflect expenses only for the portion of the award that ultimately vests. Management considers on a quarterly basis whether there have been any significant changes in facts and circumstances that would affect the expected forfeiture rate.
The Company records deferred tax assets or liabilities for equity compensation plan awards based on deductions for income tax purposes of equity- based compensation recognized at the statutory tax rate in the jurisdiction in which the Company is expected to receive a tax deduction. In addition, differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on the Company's income tax returns are recorded as adjustments to partners' capital. If the tax deduction is less than the deferred tax asset, the calculated shortfall reduces the pool of excess tax benefits. If the pool of excess tax benefits is reduced to zero, then subsequent shortfalls would increase the income tax expense.
Equity-based compensation expense is presented within compensation and benefits in the Consolidated Statements of Operations.
Performance Fee Compensation
The Company has agreed to pay a portion of the performance fees earned from certain funds, including income from Consolidated Funds that is eliminated in consolidation, to investment and non-investment professionals. Depending on the nature of each fund, the performance fee allocation may be structured as a fixed percentage subject to vesting based on continued employment or service (generally over a period of five years) or as an annual award that is fully vested for the particular year. Other limitations may apply to performance fee allocation as set forth in the applicable governing documents of the fund or award documentation. Performance fee compensation is recognized in the same period that the related performance fee is recognized. Performance fee compensation can be reversed during periods when there is a decline in performance fees that were previously recognized.
Performance fee compensation payable represents the amounts payable to professionals who are entitled to a proportionate share of performance fees in one or more funds. The liability is calculated based upon the changes to realized and unrealized performance fees but not payable until the performance fee itself is realized.
Depreciation and Amortization
Depreciation and amortization expense is recognized on a straight-line method over an asset's estimated useful life, which for leasehold improvements is the lesser of the lease terms and the life of the asset, and for other fixed assets is generally between three and seven years. Fixed assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Internal Use Software
Direct costs associated with developing, purchasing or otherwise acquiring software for internal use ("Internal Use Software") are capitalized and amortized on a straight-line basis over the expected useful life of the software, beginning when the software is implemented. Costs incurred for upgrades and enhancements that will not result in additional functionality are expensed as incurred. Useful lives of Internal Use Software generally vary from three to seven years.
Interest Income
Interest income is recognized on an accrual basis to the extent that such amounts are expected to be collected and includes interest, dividend, and investment income. Interest income earned by the Company was $3.3 million, $0.4 million and $2.6 million for the years ended December 31, 2014, 2013 and 2012, respectively, and is included in interest and other investment income in the accompanying Consolidated Statements of Operations. For the three years ended December 31, 2014, 2013 and 2012, interest income of the Consolidated Funds was $0.7 billion, $1.1 billion and $1.3 billion, respectively, and is included in interest and other investment income of Consolidated Funds in the accompanying Consolidated Statements of Operations.
Investment Income (Loss)
Investment income (loss) represents the unrealized and realized appreciation (depreciation) resulting from the investments of the Company and the Consolidated Funds. Investment income (loss) is realized when the Company redeems all or a portion of its investment or when the Company receives cash income, such as dividends or distributions. Realized investment income (loss) is presented within other investment income and within net realized gain (loss) on investments in the Consolidated Statements of Operations. Unrealized investment income (loss) results from changes in the fair value of the underlying investment as well as the reversal of unrealized appreciation (depreciation) at the time an investment is realized and is presented within net change in unrealized appreciation (depreciation) on investments in the Consolidated Statements of Operations.
Foreign Currency
The U.S. dollar is the Company's functional currency; however, certain transactions of the Company may not be denominated in U.S. dollars. Foreign exchange appreciation (depreciation) arising from these transactions are recognized within interest and other investment income in the Consolidated Statements of Operations. For the years ended December 31, 2014, 2013 and 2012, the Company recognized $0.3 million, $(0.6) million and $0.1 million, respectively, in transaction gains (losses) related to foreign currencies revaluation.
In addition, the combined and consolidated results include certain foreign subsidiaries and Consolidated Funds that use functional currencies other than the U.S. dollar. Assets and liabilities of these foreign subsidiaries are translated to U.S. dollars at the prevailing exchange rates as of the reporting date. Income and expense and gain and loss transactions denominated in foreign currencies are generally translated into U.S. dollars monthly using the average exchange rates during the respective transaction period. Translation adjustments resulting from this process are recorded to foreign currency translation adjustment in accumulated other comprehensive income.
Income Taxes
A substantial portion of the Company's earnings flow through to owners of the Company without being subject to entity level income taxes. Consequently, a significant portion of the Company's earnings reflects no provision for income taxes except those for foreign, city and local income taxes incurred at the entity level. A portion of the Company's operations is held through AHI and Domestic Holdings, which are U.S. corporations for tax purposes. Their income is subject to U.S. federal, state and local income taxes and certain of their foreign subsidiaries are subject to foreign income taxes (for which a foreign tax credit can generally offset U.S. corporate taxes imposed on the same income). A provision for corporate level income taxes imposed on AHI's and Domestic Holdings' earnings is included in the Company's tax provision. The Company's tax provision also includes entity level income taxes incurred by certain affiliated funds and co-investment entities that are consolidated in these financial statements.
Income taxes are accounted for using the liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis, using tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred assets and liabilities of a change in tax rates is recognized as income in the period when the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current and deferred tax liabilities are reflected on a net basis in the Consolidated Statements of Financial Condition.
The Company analyzes its tax filing positions in all U.S. federal, state, local and foreign tax jurisdictions where it is required to file income tax returns for all open tax years in these jurisdictions. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position. The tax benefit recognized in the financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized. The amount of unrecognized tax benefits ("UTBs") is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by the taxing authorities, new information obtained during a tax examination, or resolution of an examination. The Company recognizes both accrued interest and penalties, where appropriate, related to UTBs in general, administrative and other expenses in the Consolidated Statements of Operations.
Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining tax expense and in evaluating tax positions, including evaluating uncertainties under GAAP. The Company reviews its tax positions quarterly and adjusts its tax balances as new information becomes available.
Income Allocation
Income (loss) before taxes is allocated based on each partner's average daily ownership of the Ares Operating Group entities for each year presented. The net income attributable to Ares Management, L.P. for the year ended December 31, 2014 represents its average daily ownership of 38.02% from May 1, 2014, the effective date of the Reorganization, to December 31, 2014.
Earnings Per Common Unit
Basic earnings per common unit are computed by dividing income available to common unitholders by the weighted-average number of common units outstanding during the period. Income available to common unitholders represents net income applicable to Ares Management, L.P.
Diluted earnings per unit is computed by dividing income available to common unitholders by the weighted-average number of common units outstanding during the period, increased to include the number of additional common units that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding options to acquire units, unvested restricted units and AOG Units exchangeable for common units. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per unit by application of the treasury stock method and the two-class method. Unvested share-based payment awards that contain non-forfeitable rights to distribution or distribution equivalents (whether paid or unpaid) are participating securities and shall be considered in the computation of earnings per unit pursuant to the two-class method. Unvested restricted units that pay distribution equivalents are deemed participating securities and are included in basic and diluted earnings per unit calculation under the two-class method.
Under the treasury stock method, if the average market price of a common unit increases above the option's exercise price, the proceeds that would be assumed to be realized from the exercise of the option would be used to acquire outstanding common units. The dilutive effect of awards is directly correlated with the fair value of the common units. However, the awards may be antidilutive when the market price of the underlying unit exceeds the option's exercise price. This result is possible because the compensation expense attributed to future services, but not yet recognized, is included as a component of the assumed proceeds upon exercise.
Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income (loss) and other appreciation (depreciation) affecting partners' capital that, under U.S. GAAP, are excluded from net income (loss). The Company's other comprehensive income (loss) includes foreign currency translation adjustments.
Recent Accounting Pronouncements
In June 2013, FASB issued guidance to clarify the characteristics of an investment company and to provide guidance for assessing whether an entity is an investment company. Consistent with existing guidance for investment companies, all investments are to be measured at fair value including non-controlling ownership interests in other investment companies. There are no changes to the current requirements relating to the retention of specialized accounting in the consolidated financial statements of a non-investment company parent. The guidance is effective for interim and annual periods beginning after December 15, 2013 and early application is prohibited. The adoption of this guidance did not have a material impact on the Company's financial statements.
The Company primarily invests in certain partnerships, or funds, managed by its affiliates. These fund investments are based on contractual capital commitments and, in accordance with the terms of the underlying partnership agreements, require the Company to provide capital upon written notice. In connection with these capital commitments, during the year ended December 31, 2014, the Company provided capital of approximately $75.2 million to Consolidated Funds. As of December 31, 2014, the Company had unfunded contractual commitments to various Consolidated Funds of $38.3 million. The Company maintains sufficient liquidity to fund such commitments when the need arises.
In July 2013, FASB issued guidance to eliminate the diversity in practice on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. Under the new guidance, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carry forward, with exceptions as defined. The guidance does not require new recurring disclosures. The guidance applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists at the reporting date. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The guidance should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of this guidance did not have a material impact on the Company's financial statements.
In January 2014, FASB amended its guidance to allow the use of the simplified hedge accounting approach to account for swaps that are entered into for the purpose of economically converting a variable-rate borrowing into a fixed-rate borrowing. Alternatively, that entity may continue to follow the current guidance in ASC Topic 815: Derivatives and Hedging. The amendments in this update allow the swap to be measured at its settlement value instead of fair value when applying the simplified hedge accounting approach. The guidance is effective for interim and annual periods beginning after December 15, 2014. The Company does not expect the adoption of this guidance to have a material impact on its financial statements.
In May 2014, the FASB issued guidance for recognizing revenue from contracts with customers. The guidance in this update supersedes the revenue recognition requirements in Topic 605, "Revenue Recognition." Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The Company continues to evaluate the impact this guidance will have on its financial statements.
In June 2014, FASB issued guidance to bring clarification to the accounting for share-based payment awards that require a specific performance target to be achieved in order for the award to vest even after the requisite service period. Under the new guidance, performance targets that could affect vesting and be achieved after the requisite service period will be treated as a performance condition and should not be reflected in estimating the fair value of the award at grant date. Compensation expense should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation expense attributable to the period(s) for which the requisite service has already been rendered. The guidance is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. Early application is permitted. The Company does not believe this guidance will have a material impact on its financial statements.
In August 2014, the FASB issued guidance to provide an alternative to fair value measurement for measuring the financial assets and the financial liabilities of a collateralized financing entity that is consolidated under Topic 810, "Consolidation." The guidance in this update was issued to address the fact that the fair value of a collateralized financing entity's financial assets may differ from the fair value of its financial liabilities even though the financial liabilities have recourse only to the financial assets. Under the new guidance, a reporting entity can elect to measure both the financial assets and the financial liabilities of that collateralized financing entity in its consolidated financial statements using the more observable of the fair value of the financial assets and the fair value of the financial liabilities. The amendments are effective for annual reporting periods, including interim periods within those reporting periods, beginning after December 15, 2015. Early adoption is permitted as of the beginning of an annual period. The Company continues to evaluate the impact this guidance will have on its consolidated financial statements.
In August 2014, the FASB issued guidance on management's responsibility in evaluating whether there is substantial doubt about a company's ability to continue as a going concern. For each reporting period, management will be required to evaluate whether conditions or events exist that raise substantial doubt about a company's ability to continue as a going concern within one year from the date the financial statements are issued. The amendments are effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early application is permitted. The Company does not believe this guidance will have a material impact on its consolidated financial statements.
In November 2014, the FASB issued guidance for determining whether the host contract in a hybrid financial instrument issued in the form of a share is more akin to debt or to equity. There are currently two methods predominately used in practice in evaluating whether the nature of the host contract within a hybrid financial instrument is more akin to debt or equity. The guidance was issued to address the fact that use of different methods can result in different accounting outcomes for economically similar hybrid financial instruments and provides for elimination of the use of different methods in practice. The amendments are effective for public companies for annual reporting periods, and interim periods within those reporting periods, beginning after December 15, 2015. The Company continues to evaluate the impact this guidance will have on its consolidated financial statements.
In January 2015, the FASB issued guidance simplifying the income statement presentation by eliminating the concept of extraordinary items. Extraordinary items are events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. Eliminating the extraordinary classification simplifies income statement presentation by altogether removing the concept of extraordinary items from consideration. The amendments are effective for annual reporting periods, including interim periods within those reporting periods, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the annual reporting period. The Company does not believe this guidance will have a material impact on its consolidated financial statements.
In February 2015, the FASB amended the consolidation standards for reporting entities that are required to evaluate whether they should consolidate certain legal entities. Under the new guidance, all legal entities are subject to reevaluation under the revised consolidation model. Specifically, the guidance (i) modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities; (ii) eliminates the presumption that a general partner should consolidate a limited partnership; (iii) affects the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; and (iv) provides a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act for registered money market funds. The amendments are effective for annual reporting periods, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
|
|||
|
|
|
As of December 31, |
|
||||
|
|
|
2014 |
|
2013 |
|
||
|
Maximum exposure to loss attributable to the Company's investment in non-consolidated VIEs |
|
$ |
14,851 |
|
$ |
12,366 |
|
|
Maximum exposure to loss attributable to Consolidated Funds' investments in non-consolidated VIEs |
|
$ |
2,519 |
|
$ |
96,223 |
|
|
|||
|
|
|
As of December 31, |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Finite-lived intangible assets |
|
$ |
114,102 |
|
$ |
114,855 |
|
||||||||
|
Less accumulated amortization |
|
|
(73,154 |
) |
|
(46,113 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Finite-lived intangible assets, net |
|
|
40,948 |
|
|
68,742 |
|
||||||||
|
Goodwill |
|
|
85,582 |
|
|
58,159 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total intangible assets and goodwill, net |
|
$ |
126,530 |
|
$ |
126,901 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
As of December 31, |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Previously acquired management contracts(1) |
|
$ |
79,002 |
|
$ |
79,755 |
|
||||||||
|
AREA acquired management contracts |
|
|
35,100 |
|
|
35,100 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total intangible assets acquired |
|
$ |
114,102 |
|
$ |
114,855 |
|
||||||||
|
Less: accumulated amortization |
|
$ |
(73,154 |
) |
$ |
(46,113 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Intangible assets, net |
|
$ |
40,948 |
|
$ |
68,742 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
(1) |
Intangibles relating to London based asset manager are recorded in Pounds Sterling and are translated at spot rate at each reporting date. |
|
Year |
|
Amortization |
|
||||||
|
2015 |
|
$ |
19,943 |
|
|||||
|
2016 |
|
|
9,896 |
|
|||||
|
2017 |
|
|
6,530 |
|
|||||
|
2018 |
|
|
1,802 |
|
|||||
|
2019 |
|
|
1,172 |
|
|||||
|
Thereafter |
|
|
1,605 |
|
|||||
|
|
|
|
|
|
|||||
|
Total |
|
$ |
40,948 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|||||
|
|||
|
|
|
Fair value at |
|
Fair value as a percentage |
|
||||||||||||||||||||||
|
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
|
||||||||||||||||||
|
Private Investment Partnership Interests: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
AREA European Property Enhancement Program L.P. |
|
$ |
1,760 |
|
$ |
1,735 |
|
|
1.0 |
% |
|
1.9 |
% |
||||||||||||||
|
AREA Sponsor Holdings LLC |
|
|
40,296 |
|
|
31,560 |
|
|
23.6 |
% |
|
35.4 |
% |
||||||||||||||
|
Ares Capital Europe II (D), L.P. |
|
|
15,592 |
|
|
— |
|
|
9.2 |
% |
|
— |
|
||||||||||||||
|
Ares Capital Europe II (E), L.P.(2) |
|
|
31 |
|
|
— |
|
|
0.0 |
% |
|
— |
|
||||||||||||||
|
Ares Centre Street Partnership, L.P. |
|
|
256 |
|
|
— |
|
|
0.2 |
% |
|
— |
|
||||||||||||||
|
Ares Corporate Opportunities Fund, L.P.(1) |
|
|
777 |
|
|
1,009 |
|
|
0.5 |
% |
|
1.1 |
% |
||||||||||||||
|
Ares Corporate Opportunities Fund IV, L.P. |
|
|
21,836 |
|
|
— |
|
|
12.8 |
% |
|
— |
|
||||||||||||||
|
Ares Credit Strategies Fund II, L.P. |
|
|
627 |
|
|
1,998 |
|
|
0.4 |
% |
|
2.2 |
% |
||||||||||||||
|
Ares Credit Strategies Fund III, L.P. |
|
|
19 |
|
|
— |
|
|
0.0 |
% |
|
— |
|
||||||||||||||
|
Ares Enhanced Loan Investment Strategy IX, L.P. |
|
|
— |
|
|
512 |
|
|
— |
|
|
0.6 |
% |
||||||||||||||
|
Ares European Credit Strategies Fund (C) L.P(2). |
|
|
497 |
|
|
301 |
|
|
0.3 |
% |
|
0.3 |
% |
||||||||||||||
|
Ares European Real Estate Fund IV L.P. |
|
|
2,455 |
|
|
— |
|
|
1.4 |
% |
|
— |
|
||||||||||||||
|
Ares Multi-Strategy Credit Fund V (H), L.P. |
|
|
1,068 |
|
|
1,022 |
|
|
0.6 |
% |
|
1.1 |
% |
||||||||||||||
|
Ares Special Situations Fund I-B, L.P. |
|
|
2 |
|
|
— |
|
|
0.0 |
% |
|
— |
|
||||||||||||||
|
Ares Special Situations Fund III, L.P. |
|
|
26,867 |
|
|
24,253 |
|
|
15.8 |
% |
|
27.2 |
% |
||||||||||||||
|
Ares SSF Riopelle, L.P. |
|
|
4,211 |
|
|
— |
|
|
2.5 |
% |
|
— |
|
||||||||||||||
|
Ares Strategic Investment Partners, L.P. |
|
|
75 |
|
|
— |
|
|
0.0 |
% |
|
— |
|
||||||||||||||
|
Ares Strategic Investment Partners III, L.P. |
|
|
2,672 |
|
|
2,714 |
|
|
1.6 |
% |
|
3.0 |
% |
||||||||||||||
|
Ares Strategic Real Estate Program—HHC, LLC |
|
|
3,094 |
|
|
1,227 |
|
|
1.8 |
% |
|
1.4 |
% |
||||||||||||||
|
Ares US Real Estate Fund VIII, L.P. |
|
|
1,574 |
|
|
— |
|
|
0.9 |
% |
|
— |
|
||||||||||||||
|
Resolution Life L.P. |
|
|
45,348 |
|
|
21,846 |
|
|
26.6 |
% |
|
24.4 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total private investment partnership interests (cost: $128,756 and $68,580 at December 31, 2014 and 2013, respectively) |
|
|
169,057 |
|
|
88,177 |
|
|
99.2 |
% |
|
98.6 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Ares Multi-Strategy Credit Fund, Inc. |
|
|
89 |
|
|
89 |
|
|
0.1 |
% |
|
0.1 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total common stock (cost: $108 and $100 at December 31, 2014 and 2013, respectively) |
|
|
89 |
|
|
89 |
|
|
0.1 |
% |
|
0.1 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Corporate Bonds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Ares Commercial Real Estate Corporation Convertible Senior Notes |
|
|
1,178 |
|
|
1,172 |
|
|
0.7 |
% |
|
1.3 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total corporate bond (cost: $1,150 and $1,150, at December 31, 2014 and 2013, respectively) |
|
|
1,178 |
|
|
1,172 |
|
|
0.7 |
% |
|
1.3 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total fair value investments (cost: $130,014 and $69,830 at December 31, 2014 and 2013, respectively) |
|
$ |
170,324 |
|
$ |
89,438 |
|
|
100.0 |
% |
|
100.0 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
(1) |
Security represents the sole investment held by ACOF Co-Investors LLC |
|
(2) |
Denominated in foreign currency; fair value is translated into U.S. Dollars |
|
|
|
Fair value at |
|
Fair value as a |
|
||||||||
|
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
|
||||
|
United States: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer discretionary |
|
$ |
3,136,899 |
|
$ |
4,146,611 |
|
|
16.3 |
% |
|
20.0 |
% |
|
Consumer staples |
|
|
221,708 |
|
|
338,735 |
|
|
1.2 |
% |
|
1.6 |
% |
|
Energy |
|
|
416,861 |
|
|
535,857 |
|
|
2.2 |
% |
|
2.6 |
% |
|
Financials |
|
|
401,673 |
|
|
544,879 |
|
|
2.1 |
% |
|
2.6 |
% |
|
Healthcare, education and childcare |
|
|
1,191,619 |
|
|
1,176,418 |
|
|
6.2 |
% |
|
5.6 |
% |
|
Industrials |
|
|
1,717,523 |
|
|
2,038,390 |
|
|
9.0 |
% |
|
9.8 |
% |
|
Information technology |
|
|
745,920 |
|
|
542,377 |
|
|
3.9 |
% |
|
2.6 |
% |
|
Materials |
|
|
393,569 |
|
|
463,864 |
|
|
2.1 |
% |
|
2.2 |
% |
|
Partnership and LLC interests |
|
|
16,256 |
|
|
— |
|
|
0.1 |
% |
|
0.0 |
% |
|
Telecommunication services |
|
|
1,287,688 |
|
|
1,153,691 |
|
|
6.7 |
% |
|
5.5 |
% |
|
Utilities |
|
|
223,553 |
|
|
222,410 |
|
|
1.2 |
% |
|
1.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed income securities (cost: $9,928,006 and $11,071,982, at December 31, 2014 and 2013, respectively) |
|
|
9,753,269 |
|
|
11,163,232 |
|
|
51.0 |
% |
|
53.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer discretionary |
|
|
2,852,369 |
|
|
2,464,520 |
|
|
14.9 |
% |
|
11.9 |
% |
|
Consumer staples |
|
|
443,711 |
|
|
201,059 |
|
|
2.3 |
% |
|
1.0 |
% |
|
Energy |
|
|
150,755 |
|
|
193,946 |
|
|
0.8 |
% |
|
1.0 |
% |
|
Financials |
|
|
8,272 |
|
|
6,172 |
|
|
0.0 |
% |
|
0.0 |
% |
|
Healthcare, education and childcare |
|
|
464,159 |
|
|
296,817 |
|
|
2.4 |
% |
|
1.5 |
% |
|
Industrials |
|
|
128,247 |
|
|
134,544 |
|
|
0.7 |
% |
|
0.6 |
% |
|
Materials |
|
|
— |
|
|
31 |
|
|
— |
|
|
0.0 |
% |
|
Partnership and LLC interests |
|
|
89,105 |
|
|
41,001 |
|
|
0.5 |
% |
|
0.2 |
% |
|
Telecommunication services |
|
|
16,576 |
|
|
51,921 |
|
|
0.1 |
% |
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities (cost: $2,964,900 and $2,733,448 at December 31, 2014 and 2013, respectively) |
|
|
4,153,194 |
|
|
3,390,011 |
|
|
21.7 |
% |
|
16.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value at |
|
Fair value as a |
|
||||||||
|
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
|
||||
|
Europe: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer discretionary |
|
|
1,080,270 |
|
|
1,858,364 |
|
|
5.6 |
% |
|
8.9 |
% |
|
Consumer staples |
|
|
126,766 |
|
|
175,440 |
|
|
0.7 |
% |
|
0.8 |
% |
|
Energy |
|
|
16,509 |
|
|
4,906 |
|
|
0.1 |
% |
|
0.0 |
% |
|
Financials |
|
|
345,811 |
|
|
322,355 |
|
|
1.8 |
% |
|
1.5 |
% |
|
Healthcare, education and childcare |
|
|
303,116 |
|
|
410,726 |
|
|
1.6 |
% |
|
2.0 |
% |
|
Industrials |
|
|
526,214 |
|
|
485,243 |
|
|
2.8 |
% |
|
2.3 |
% |
|
Information technology |
|
|
130,504 |
|
|
140,976 |
|
|
0.7 |
% |
|
0.7 |
% |
|
Materials |
|
|
326,659 |
|
|
328,867 |
|
|
1.7 |
% |
|
1.6 |
% |
|
Telecommunication services |
|
|
833,015 |
|
|
944,800 |
|
|
4.4 |
% |
|
4.5 |
% |
|
Utilities |
|
|
2,516 |
|
|
37,001 |
|
|
0.0 |
% |
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed income securities (cost: $3,813,343 and $4,747,808 at December 31, 2014 and 2013, respectively) |
|
|
3,691,380 |
|
|
4,708,678 |
|
|
19.4 |
% |
|
22.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer discretionary |
|
|
2,940 |
|
|
10,686 |
|
|
0.0 |
% |
|
0.1 |
% |
|
Consumer staples |
|
|
862 |
|
|
668 |
|
|
0.0 |
% |
|
0.0 |
% |
|
Healthcare, education and childcare |
|
|
27,774 |
|
|
28,607 |
|
|
0.1 |
% |
|
0.1 |
% |
|
Industrials |
|
|
76 |
|
|
8,595 |
|
|
0.0 |
% |
|
0.0 |
% |
|
Materials |
|
|
— |
|
|
773 |
|
|
— |
|
|
0.0 |
% |
|
Partnership and LLC interests |
|
|
17,107 |
|
|
— |
|
|
0.1 |
% |
|
— |
|
|
Telecommunication services |
|
|
4,686 |
|
|
1,524 |
|
|
0.0 |
% |
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities (cost: $98,913 and $83,277 at December 31, 2014 and 2013, respectively) |
|
|
53,445 |
|
|
50,853 |
|
|
0.2 |
% |
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia and other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer discretionary |
|
|
73,250 |
|
|
43,538 |
|
|
0.4 |
% |
|
0.2 |
% |
|
Financials |
|
|
493,618 |
|
|
456,463 |
|
|
2.6 |
% |
|
2.2 |
% |
|
Healthcare, education and childcare |
|
|
41,536 |
|
|
14,556 |
|
|
0.2 |
% |
|
0.1 |
% |
|
Information technology |
|
|
— |
|
|
22,012 |
|
|
— |
|
|
0.1 |
% |
|
Materials |
|
|
— |
|
|
15,885 |
|
|
— |
|
|
0.1 |
% |
|
Telecommunication services |
|
|
30,777 |
|
|
81,978 |
|
|
0.2 |
% |
|
0.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed income securities (cost: $579,436 and $593,188, at December 31, 2014 and 2013, respectively) |
|
|
639,181 |
|
|
634,432 |
|
|
3.4 |
% |
|
3.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer discretionary |
|
|
89,897 |
|
|
— |
|
|
0.5 |
% |
|
— |
|
|
Consumer staples |
|
|
62,467 |
|
|
77,572 |
|
|
0.3 |
% |
|
0.4 |
% |
|
Healthcare, education and childcare |
|
|
33,610 |
|
|
23,493 |
|
|
0.2 |
% |
|
0.1 |
% |
|
Materials |
|
|
52,947 |
|
|
52,947 |
|
|
0.3 |
% |
|
0.3 |
% |
|
Partnership and LLC interests |
|
|
13,478 |
|
|
— |
|
|
0.1 |
% |
|
— |
|
|
Utilities |
|
|
8,994 |
|
|
4,724 |
|
|
0.0 |
% |
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity securities (cost: $184,022 and $135,631 at December 31, 2014 and 2013, respectively) |
|
|
261,393 |
|
|
158,736 |
|
|
1.4 |
% |
|
0.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value at |
|
Fair value as a |
|
||||||||||||||||||||||
|
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
|
||||||||||||||||||
|
Canada: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Consumer discretionary |
|
|
71,379 |
|
|
121,132 |
|
|
0.4 |
% |
|
0.6 |
% |
||||||||||||||
|
Energy |
|
|
60,605 |
|
|
87,469 |
|
|
0.3 |
% |
|
0.4 |
% |
||||||||||||||
|
Healthcare, education and childcare |
|
|
84,470 |
|
|
104,464 |
|
|
0.4 |
% |
|
0.5 |
% |
||||||||||||||
|
Industrials |
|
|
30,009 |
|
|
16,331 |
|
|
0.2 |
% |
|
0.1 |
% |
||||||||||||||
|
Materials |
|
|
5,625 |
|
|
— |
|
|
0.0 |
% |
|
— |
|
||||||||||||||
|
Partnership and LLC interests |
|
|
1,327 |
|
|
— |
|
|
0.0 |
% |
|
— |
|
||||||||||||||
|
Telecommunication services |
|
|
109,805 |
|
|
142,374 |
|
|
0.6 |
% |
|
0.7 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total fixed income securities (cost: $396,108 and $480,231at December 31, 2014 and 2013, respectively) |
|
|
363,220 |
|
|
471,770 |
|
|
1.9 |
% |
|
2.3 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Equity securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Consumer discretionary |
|
|
— |
|
|
892 |
|
|
— |
|
|
0.0 |
% |
||||||||||||||
|
Energy |
|
|
— |
|
|
51,187 |
|
|
— |
|
|
0.2 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total equity securities (cost: $68,249 and $75,256 at December 31, 2014 and 2013, respectively) |
|
|
— |
|
|
52,079 |
|
|
— |
|
|
0.2 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Australia: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Consumer discretionary |
|
|
— |
|
|
203 |
|
|
— |
|
|
0.0 |
% |
||||||||||||||
|
Energy |
|
|
66,150 |
|
|
— |
|
|
0.3 |
% |
|
— |
|
||||||||||||||
|
Industrials |
|
|
32,146 |
|
|
99,376 |
|
|
0.2 |
% |
|
0.5 |
% |
||||||||||||||
|
Utilities |
|
|
94,738 |
|
|
68,513 |
|
|
0.5 |
% |
|
0.3 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total fixed income securities (cost: $213,759 and $169,831 at December 31, 2014 and 2013, respectively) |
|
|
193,034 |
|
|
168,092 |
|
|
1.0 |
% |
|
0.8 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Equity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Telecommunication services |
|
|
7,547 |
|
|
16,102 |
|
|
0.0 |
% |
|
0.1 |
% |
||||||||||||||
|
Utilities |
|
|
8,287 |
|
|
9,353 |
|
|
0.0 |
% |
|
0.0 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total equity securities (cost: $22,233 and $30,140 at December 31, 2014 and 2013, respectively) |
|
|
15,834 |
|
|
25,455 |
|
|
0.0 |
% |
|
0.1 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total fixed income securities |
|
|
14,640,084 |
|
|
17,146,204 |
|
|
76.7 |
% |
|
82.3 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total equity securities |
|
|
4,483,866 |
|
|
3,677,134 |
|
|
23.3 |
% |
|
17.7 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total investments, at fair value |
|
$ |
19,123,950 |
|
$ |
20,823,338 |
|
|
100.0 |
% |
|
100.0 |
% |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Securities sold short, at fair value |
|
$ |
(3,763 |
) |
$ |
(1,633 |
) |
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|||
|
|
|
For the year ended |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Balance, beginning of period |
|
$ |
11,534,956 |
|
$ |
9,422,570 |
|
||||||||
|
Borrowings |
|
|
2,964,522 |
|
|
2,757,493 |
|
||||||||
|
Paydowns |
|
|
(1,825,322 |
) |
|
(934,620 |
) |
||||||||
|
Realized and unrealized gains, net |
|
|
(625,137 |
) |
|
289,513 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Balance, end of period |
|
$ |
12,049,019 |
|
$ |
11,534,956 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
As of December 31, 2014
|
Strategy |
|
Fair Value |
|
Unfunded |
|
Redemption |
|
||||||||||||||
|
Direct Lending Group |
|
$ |
30,501 |
|
$ |
26,854 |
|
|
(1)(3) |
|
|||||||||||
|
Real Estate Group |
|
|
49,178 |
|
|
45,239 |
|
|
(1) |
|
|||||||||||
|
Tradable Credit Group |
|
|
52,001 |
|
|
7,420 |
|
|
(1)(2)(3) |
|
|||||||||||
|
Private Equity Group |
|
|
111,719 |
|
|
97,194 |
|
|
(1) |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Totals |
|
$ |
243,399 |
|
$ |
176,707 |
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
As of December 31, 2013
|
Strategy |
|
Fair Value |
|
Unfunded |
|
Redemption |
|
||||||||||||||
|
Direct Lending Group |
|
$ |
2,298 |
|
$ |
1,045 |
|
|
(3) |
|
|||||||||||
|
Real Estate Group |
|
|
34,520 |
|
|
9,734 |
|
|
(1) |
|
|||||||||||
|
Tradable Credit Group |
|
|
28,502 |
|
|
8,664 |
|
|
(1)(2)(3) |
|
|||||||||||
|
Private Equity Group |
|
|
42,012 |
|
|
156,966 |
|
|
(1) |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Totals |
|
$ |
107,332 |
|
$ |
176,409 |
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
(1) |
Certain funds within these strategies are closed-ended and generally do not permit investors to redeem their interests. Distributions are received as the underlying investments are liquidated. |
|
(2) |
Certain funds within these strategies are open-ended and subject to a lock-up period of nine months after the closing date, after which an investor has the right to withdraw its capital. Distributions are received as the underlying investments are liquidated. |
|
(3) |
Certain funds within these strategies are separately managed investment vehicles, which may be redeemed only upon dissolution or liquidation of the fund at the discretion of a simple majority of investors. Distributions are received as the underlying investments are liquidated. |
The tables below summarize the valuation of investments and other financial instruments by fair value hierarchy levels for the Company and Consolidated Funds as of December 31, 2014:
Investments of the Company
|
|
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||||||||||||||||
|
Investments, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Equity securities |
|
$ |
89 |
|
$ |
— |
|
$ |
— |
|
$ |
89 |
|
||||||||||||||
|
Bonds |
|
|
— |
|
|
1,178 |
|
|
— |
|
|
1,178 |
|
||||||||||||||
|
Partnership interests |
|
|
— |
|
|
— |
|
|
169,057 |
|
|
169,057 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total investments, at fair value |
|
|
89 |
|
|
1,178 |
|
|
169,057 |
|
|
170,324 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Derivative assets, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Forward foreign currency contracts |
|
|
— |
|
|
5,721 |
|
|
— |
|
|
5,721 |
|
||||||||||||||
|
Purchased option contracts |
|
|
— |
|
|
1,902 |
|
|
— |
|
|
1,902 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivative assets, at fair value |
|
|
— |
|
|
7,623 |
|
|
— |
|
|
7,623 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total |
|
$ |
89 |
|
$ |
8,801 |
|
$ |
169,057 |
|
$ |
177,947 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Derivative liabilities, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Forward foreign currency contracts |
|
|
— |
|
|
(2,003 |
) |
|
— |
|
|
(2,003 |
) |
||||||||||||||
|
Interest rate contracts |
|
|
— |
|
|
(847 |
) |
|
— |
|
|
(847 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivative liabilities, at fair value |
|
$ |
— |
|
$ |
(2,850 |
) |
$ |
— |
|
$ |
(2,850 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
The tables below summarize the valuation of investments and other financial instruments by fair value hierarchy levels for the Company and Consolidated Funds as of December 31, 2013:
Investments of the Company
|
|
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||||||||||||||||
|
Investments, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Equity securities |
|
$ |
89 |
|
$ |
— |
|
$ |
— |
|
$ |
89 |
|
||||||||||||||
|
Bonds |
|
|
— |
|
|
1,172 |
|
|
— |
|
|
1,172 |
|
||||||||||||||
|
Partnership interests |
|
|
— |
|
|
— |
|
|
88,177 |
|
|
88,177 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total investments, at fair value |
|
|
89 |
|
|
1,172 |
|
|
88,177 |
|
|
89,438 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Derivative assets, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Forward foreign currency contracts |
|
|
— |
|
|
247 |
|
|
— |
|
|
247 |
|
||||||||||||||
|
Purchased option contracts |
|
|
— |
|
|
917 |
|
|
— |
|
|
917 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivative assets, at fair value |
|
|
— |
|
|
1,164 |
|
|
— |
|
|
1,164 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total |
|
$ |
89 |
|
$ |
2,336 |
|
$ |
88,177 |
|
$ |
90,602 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Derivative liabilities, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Forward foreign currency contracts |
|
$ |
— |
|
$ |
(1,653 |
) |
$ |
— |
|
$ |
(1,653 |
) |
||||||||||||||
|
Interest rate contracts |
|
|
— |
|
|
(1,254 |
) |
|
— |
|
|
(1,254 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivative liabilities, at fair value |
|
$ |
— |
|
$ |
(2,907 |
) |
$ |
— |
|
$ |
(2,907 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
The following tables set forth a summary of changes in the fair value of the Level III investments for the year ended December 31, 2014:
Investments of the Company
|
|
|
Partnership |
|
||||||
|
Balance, beginning of period |
|
$ |
88,177 |
|
|||||
|
Investment in deconsolidated fund(3) |
|
|
9,951 |
|
|||||
|
Transfer in |
|
|
8,326 |
|
|||||
|
Purchases(1) |
|
|
91,646 |
|
|||||
|
Sales(2) |
|
|
(74,964 |
) |
|||||
|
Realized and unrealized appreciation (depreciation), net |
|
|
45,921 |
|
|||||
|
|
|
|
|
|
|||||
|
Balance, end of period |
|
$ |
169,057 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|||||
|
Changes in unrealized appreciation (depreciation) included in earnings related to financial assets still held at the reporting date |
|
$ |
15,448 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|||||
The following tables set forth a summary of changes in the fair value of the Level III investments for the year ended December 31, 2013:
Investments of the Company
|
|
|
Fixed Income |
|
Partnership Interests |
|
Total |
|
||||||||||||||
|
Balance, beginning of period |
|
$ |
1,170 |
|
$ |
21,695 |
|
$ |
22,865 |
|
|||||||||||
|
Transfer out |
|
|
(1,170 |
) |
|
— |
|
|
(1,170 |
) |
|||||||||||
|
Purchases |
|
|
— |
|
|
51,329 |
|
|
51,329 |
|
|||||||||||
|
Sales |
|
|
— |
|
|
(2,447 |
) |
|
(2,447 |
) |
|||||||||||
|
Realized and unrealized appreciation (depreciation), net |
|
|
— |
|
|
17,600 |
|
|
17,600 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Balance, end of period |
|
$ |
— |
|
$ |
88,177 |
|
$ |
88,177 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Changes in unrealized appreciation (depreciation) included in earnings related to financial assets still held at the reporting date |
|
$ |
— |
|
$ |
16,816 |
|
$ |
16,816 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
The following tables summarize the quantitative inputs and assumptions used for the Company's Level III inputs as of December 31, 2014:
|
Investments |
|
Fair |
|
Valuation Technique(s) |
|
Unobservable |
|
Range |
|||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
||||||||||
|
Partnership interests |
|
$ |
123,709 |
|
NAV |
|
N/A |
|
N/A |
||||||||||
|
Partnership interests |
|
|
45,348 |
|
Recent Transaction Price(1) |
|
N/A |
|
N/A |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Total |
|
$ |
169,057 |
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(1) |
Recent transaction price consists of securities purchased or restructured within six months. The Company has determined that there has been no change to the valuation based on the underlying assumptions used at the closing of such transactions. |
|
|
(2) |
Valuation technique above includes a 30% liquidity discount on an investment held by a fund within the Private Equity Group. |
|
The following tables summarize the quantitative inputs and assumptions used for the Company's Level III inputs as of December 31, 2013:
|
Investments |
|
Fair |
|
Valuation Technique(s) |
|
Unobservable |
|
Range |
|||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
||||||||||
|
Partnership interests |
|
$ |
66,331 |
|
NAV |
|
N/A |
|
N/A |
||||||||||
|
Partnership interests |
|
|
21,846 |
|
Recent Transaction Price(1) |
|
N/A |
|
N/A |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Total |
|
$ |
88,177 |
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
(1) |
Recent transaction price consists of securities purchased or restructured within six months. The Company has determined that there has been no change to the valuation based on the underlying assumptions used at the closing of such transactions. |
The tables below summarize the valuation of investments and other financial instruments by fair value hierarchy levels for the Company and Consolidated Funds as of December 31, 2014:
Investments of Consolidated Funds
|
|
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||||||||||||||||
|
Investments, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Equity securities |
|
$ |
590,095 |
|
$ |
513,771 |
|
$ |
3,263,311 |
|
$ |
4,367,177 |
|
||||||||||||||
|
Bonds |
|
|
— |
|
|
1,113,103 |
|
|
565,634 |
|
|
1,678,737 |
|
||||||||||||||
|
Loans |
|
|
— |
|
|
11,312,518 |
|
|
1,070,494 |
|
|
12,383,012 |
|
||||||||||||||
|
Collateralized loan obligations |
|
|
— |
|
|
— |
|
|
556,267 |
|
|
556,267 |
|
||||||||||||||
|
Partnership interests |
|
|
— |
|
|
— |
|
|
137,272 |
|
|
137,272 |
|
||||||||||||||
|
Other |
|
|
— |
|
|
336 |
|
|
1,149 |
|
|
1,485 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total investments, at fair value |
|
$ |
590,095 |
|
$ |
12,939,728 |
|
$ |
5,594,127 |
|
$ |
19,123,950 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Derivative assets, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Credit contracts |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
||||||||||||||
|
Foreign exchange contracts |
|
|
— |
|
|
2,070 |
|
|
— |
|
|
2,070 |
|
||||||||||||||
|
Other |
|
|
— |
|
|
1,056 |
|
|
— |
|
|
1,056 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivative assets, at fair value |
|
|
— |
|
|
3,126 |
|
|
— |
|
|
3,126 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total |
|
$ |
590,095 |
|
$ |
12,942,854 |
|
$ |
5,594,127 |
|
$ |
19,127,076 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Derivative liabilities, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Forward foreign currency contracts |
|
$ |
— |
|
$ |
(6,906 |
) |
|
— |
|
$ |
(6,906 |
) |
||||||||||||||
|
Credit contracts |
|
|
— |
|
|
(13,263 |
) |
|
— |
|
|
(13,263 |
) |
||||||||||||||
|
Interest rate swaps |
|
|
— |
|
|
(21 |
) |
|
— |
|
|
(21 |
) |
||||||||||||||
|
Other |
|
|
— |
|
|
— |
|
|
(22,142 |
) |
|
(22,142 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivative liabilities, at fair value |
|
|
— |
|
|
(20,190 |
) |
|
(22,142 |
) |
|
(42,332 |
) |
||||||||||||||
|
Loan obligations of CLOs(1) |
|
|
— |
|
|
— |
|
|
(12,049,019 |
) |
|
(12,049,019 |
) |
||||||||||||||
|
Securities sold short, at fair value |
|
|
— |
|
|
(3,763 |
) |
|
— |
|
|
(3,763 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total |
|
$ |
— |
|
$ |
(23,953 |
) |
$ |
(12,071,161 |
) |
$ |
(12,095,114 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
(1) |
Ares Enhanced Loan Investment Strategy II, Ltd. has not elected to fair value its loan obligation and is therefore carried at cost of $151. |
The tables below summarize the valuation of investments and other financial instruments by fair value hierarchy levels for the Company and Consolidated Funds as of December 31, 2013:
Investments of Consolidated Funds
|
|
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
||||||||||||||||||
|
Investments, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Equity securities |
|
$ |
166,535 |
|
$ |
482,568 |
|
$ |
2,958,232 |
|
$ |
3,607,335 |
|
||||||||||||||
|
Bonds |
|
|
— |
|
|
1,576,942 |
|
|
2,052,984 |
|
|
3,629,926 |
|
||||||||||||||
|
Loans |
|
|
— |
|
|
11,868,584 |
|
|
1,058,635 |
|
|
12,927,219 |
|
||||||||||||||
|
Collateralized loan obligations |
|
|
— |
|
|
65,405 |
|
|
515,534 |
|
|
580,939 |
|
||||||||||||||
|
Partnership interests |
|
|
— |
|
|
— |
|
|
41,001 |
|
|
41,001 |
|
||||||||||||||
|
Other |
|
|
— |
|
|
34,546 |
|
|
2,372 |
|
|
36,918 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total investments, at fair value |
|
|
166,535 |
|
|
14,028,045 |
|
|
6,628,758 |
|
|
20,823,338 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Derivative assets, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Interest rate contracts |
|
|
— |
|
|
8 |
|
|
— |
|
|
8 |
|
||||||||||||||
|
Credit contracts |
|
|
— |
|
|
2,651 |
|
|
— |
|
|
2,651 |
|
||||||||||||||
|
Equity contracts |
|
|
— |
|
|
179 |
|
|
— |
|
|
179 |
|
||||||||||||||
|
Foreign exchange contracts |
|
|
— |
|
|
8,652 |
|
|
— |
|
|
8,652 |
|
||||||||||||||
|
Other financial instruments |
|
|
— |
|
|
— |
|
|
3,135 |
|
|
3,135 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivative assets, at fair value |
|
|
— |
|
|
11,490 |
|
|
3,135 |
|
|
14,625 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total |
|
$ |
166,535 |
|
$ |
14,039,535 |
|
$ |
6,631,893 |
|
$ |
20,837,963 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Derivative liabilities, at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Forward foreign currency contracts |
|
$ |
— |
|
$ |
(38,594 |
) |
$ |
(899 |
) |
$ |
(39,493 |
) |
||||||||||||||
|
Written options |
|
|
— |
|
|
(34 |
) |
|
— |
|
|
(34 |
) |
||||||||||||||
|
Credit contracts |
|
|
— |
|
|
(25,754 |
) |
|
(1,633 |
) |
|
(27,387 |
) |
||||||||||||||
|
Interest rate swaps |
|
|
— |
|
|
(3,703 |
) |
|
(371 |
) |
|
(4,074 |
) |
||||||||||||||
|
Other financial instruments |
|
|
— |
|
|
(175 |
) |
|
(3,952 |
) |
|
(4,127 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivative liabilities, at fair value |
|
|
— |
|
|
(68,260 |
) |
|
(6,855 |
) |
|
(75,115 |
) |
||||||||||||||
|
Loan obligations of CLOs(1) |
|
|
— |
|
|
— |
|
|
(11,534,956 |
) |
|
(11,534,956 |
) |
||||||||||||||
|
Securities sold short, at fair value |
|
|
— |
|
|
(1,633 |
) |
|
— |
|
|
(1,633 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total |
|
$ |
— |
|
$ |
(69,893 |
) |
$ |
(11,541,811 |
) |
$ |
(11,611,704 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
(1) |
Ares Enhanced Loan Investment Strategy II, Ltd. has not elected to fair value its loan obligation and is therefore carried at cost of $239,201. |
The following tables set forth a summary of changes in the fair value of the Level III investments for the year ended December 31, 2014:
Investments of Consolidated Funds
|
|
|
Equity |
|
Fixed Income |
|
Partnership |
|
Other |
|
Total |
|
||||||||||||||||||||||
|
Balance, beginning of period |
|
$ |
2,958,232 |
|
$ |
3,627,153 |
|
$ |
41,001 |
|
$ |
(1,348 |
) |
$ |
6,625,038 |
|
|||||||||||||||||
|
Deconsolidation of funds(3) |
|
|
(140 |
) |
|
(378,397 |
) |
|
8,292 |
|
|
— |
|
|
(370,245 |
) |
|||||||||||||||||
|
Transfer in |
|
|
— |
|
|
334,015 |
|
|
— |
|
|
— |
|
|
334,015 |
|
|||||||||||||||||
|
Transfer out |
|
|
(226,897 |
) |
|
(300,930 |
) |
|
(8,326 |
) |
|
— |
|
|
(536,153 |
) |
|||||||||||||||||
|
Purchases(1) |
|
|
544,994 |
|
|
503,948 |
|
|
87,221 |
|
|
254 |
|
|
1,136,417 |
|
|||||||||||||||||
|
Sales(2) |
|
|
(240,596 |
) |
|
(1,492,608 |
) |
|
(1,251 |
) |
|
(3,733 |
) |
|
(1,738,188 |
) |
|||||||||||||||||
|
Accrued discounts/premiums |
|
|
12,370 |
|
|
16,630 |
|
|
— |
|
|
— |
|
|
29,000 |
|
|||||||||||||||||
|
Realized and unrealized appreciation (depreciation), net |
|
|
215,348 |
|
|
(117,416 |
) |
|
10,335 |
|
|
(16,166 |
) |
|
92,101 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Balance, end of period |
|
$ |
3,263,311 |
|
$ |
2,192,395 |
|
$ |
137,272 |
|
$ |
(20,993 |
) |
$ |
5,571,985 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Changes in unrealized appreciation (depreciation) included in earnings related to financial assets still held at the reporting date |
|
$ |
284,280 |
|
|
(48,456 |
) |
$ |
9,657 |
|
|
(19,861 |
) |
$ |
225,620 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
(1) |
Purchases include paid-in-kind interest and securities received in connection with restructurings. |
|
(2) |
Sales include paid-in-kind interest, principal redemptions and securities disposed of in connection with restructurings. |
|
(3) |
Represents investment in Consolidated Fund that was deconsolidated during the period. Balance was previously eliminated upon consolidation and not reported as Level III investment. |
The following tables set forth a summary of changes in the fair value of the Level III investments for the year ended December 31, 2013:
Investments of Consolidated Funds
|
|
|
Equity Securities |
|
Fixed Income |
|
Partnership |
|
Other |
|
Total |
|
||||||||||||||||||||||
|
Balance, beginning of period |
|
$ |
1,978,138 |
|
$ |
3,920,451 |
|
$ |
6,177 |
|
$ |
5,202 |
|
$ |
5,909,968 |
|
|||||||||||||||||
|
Initial consolidation of new funds |
|
|
— |
|
|
29,570 |
|
|
— |
|
|
— |
|
|
29,570 |
|
|||||||||||||||||
|
Transfer in |
|
|
74,438 |
|
|
237,312 |
|
|
— |
|
|
(29 |
) |
|
311,721 |
|
|||||||||||||||||
|
Transfer out |
|
|
(52,573 |
) |
|
(249,763 |
) |
|
— |
|
|
— |
|
|
(302,336 |
) |
|||||||||||||||||
|
Purchases |
|
|
555,589 |
|
|
1,313,850 |
|
|
34,369 |
|
|
1,135 |
|
|
1,904,943 |
|
|||||||||||||||||
|
Sales |
|
|
(43,695 |
) |
|
(1,704,939 |
) |
|
(851 |
) |
|
(23,743 |
) |
|
(1,773,228 |
) |
|||||||||||||||||
|
Accrued discounts/premiums |
|
|
— |
|
|
27,149 |
|
|
— |
|
|
88 |
|
|
27,237 |
|
|||||||||||||||||
|
Realized and unrealized appreciation (depreciation), net |
|
|
446,335 |
|
|
53,523 |
|
|
1,306 |
|
|
15,999 |
|
|
517,163 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Balance, end of period |
|
$ |
2,958,232 |
|
$ |
3,627,153 |
|
$ |
41,001 |
|
$ |
(1,348 |
) |
$ |
6,625,038 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Changes in unrealized appreciation (depreciation) included in earnings related to financial assets still held at the reporting date |
|
$ |
417,659 |
|
$ |
(26,038 |
) |
$ |
1,306 |
|
$ |
(4,896 |
) |
$ |
388,031 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
The following tables summarize the quantitative inputs and assumptions used for the Consolidated Funds' Level III inputs as of December 31, 2014:
|
Investments |
|
Fair Value |
|
Valuation Technique(s) |
|
Unobservable Input(s) |
|
Range |
|
Weighted |
|||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Consumer discretionary |
|
$ |
2,940 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
9.4x |
|
9.4x |
||||||||||||
|
|
|
|
208,498 |
|
Market approach (comparable companies) |
|
Book value multiple |
|
1.7x - 2.0x |
|
1.9x |
||||||||||||
|
|
|
|
2,121,864 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
7.0x - 15.0x |
|
10.7x |
||||||||||||
|
|
|
|
979 |
|
Other |
|
Future distribution estimates |
|
18.7x |
|
18.7x |
||||||||||||
|
|
|
|
5,140 |
|
Other |
|
Illiquidity discount |
|
15.0% |
|
15.0% |
||||||||||||
|
Consumer staples |
|
|
862 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
7.9x |
|
7.9x |
||||||||||||
|
|
|
|
10,349 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
7.0x |
|
7.0x |
||||||||||||
|
|
|
|
44,553 |
|
Market approach (comparable companies)(2) |
|
Net income multiple |
|
11.0x |
|
11.0x |
||||||||||||
|
Energy |
|
|
136,045 |
|
Discounted Cash Flow |
|
Discount rate |
|
9.0% |
|
9.0% |
||||||||||||
|
|
|
|
|
|
|
|
EBITDA multiple |
|
7.5x |
|
7.5x |
||||||||||||
|
Financials |
|
|
8,272 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
10.5x |
|
10.5x |
||||||||||||
|
Healthcare, education, and childcare |
|
|
27,774 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
1.6x - 7.1x |
|
5.4x |
||||||||||||
|
|
|
|
463,075 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
8.0x - 13.0x |
|
11.2x |
||||||||||||
|
|
|
|
33,610 |
|
Market approach (comparable companies) |
|
Net income multiple |
|
35.0x |
|
35.0x |
||||||||||||
|
Industrials |
|
|
76 |
|
Recent transaction price(1) |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
128,182 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
8.0x - 12.0x |
|
9.8x |
||||||||||||
|
Materials |
|
|
52,947 |
|
Market approach (comparable companies) |
|
Net income multiple |
|
9.0x |
|
9.0x |
||||||||||||
|
Telecommunication services |
|
|
331 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
533 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
10.0x |
|
10.0x |
||||||||||||
|
Utilities |
|
|
17,281 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Fixed Income securities |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Consumer discretionary |
|
|
256,994 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
18,205 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
9.0x - 11.0x |
|
9.3x |
||||||||||||
|
|
|
|
69,418 |
|
Income approach (other) |
|
Yield |
|
2.5% - 18.7% |
|
12.8% |
||||||||||||
|
|
|
|
120,658 |
|
Market approach (comparable companies) |
|
Book value multiple |
|
1.7x - 2.0x |
|
1.9x |
||||||||||||
|
|
|
|
15,400 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
7.5x |
|
7.5x |
||||||||||||
|
|
|
|
5,923 |
|
Recent transaction price(1) |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Consumer staples |
|
|
540 |
|
Discounted cash flow |
|
Discount Rate |
|
20.0% |
|
20.0% |
||||||||||||
|
|
|
|
776 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
6.5x |
|
6.5x |
||||||||||||
|
|
|
|
28,965 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Energy |
|
|
33,687 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Financials |
|
|
470,417 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
8,551 |
|
Discounted cash flow |
|
Discount rate and Cumulative loss rate |
|
13.3% / 10.0% |
|
13.3% / 10.0% |
||||||||||||
|
|
|
|
85,851 |
|
Discounted cash flow |
|
Discount rate |
|
11.5% |
|
11.5% |
||||||||||||
|
|
|
|
|
|
|
|
Constant prepayment rate |
|
0.0% - 50.0% |
|
21.5% |
||||||||||||
|
|
|
|
|
|
|
|
Constant default rate |
|
2.0% - 10.0% |
|
2.2% |
||||||||||||
|
|
|
|
|
|
|
|
Recovery rate |
|
10.0% - 80.0% |
|
73.8% |
||||||||||||
|
|
|
|
2,541 |
|
Income Approach (Other) |
|
Cash flow % of book value |
|
8.7% |
|
8.7% |
||||||||||||
|
|
|
|
224,245 |
|
Income Approach (Other) |
|
Yield |
|
9.5% - 11.5% |
|
10.5% |
||||||||||||
|
Healthcare, education, and childcare |
|
|
168,371 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
20,104 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
1.6x - 7.1x |
|
5.6x |
||||||||||||
|
|
|
|
25,549 |
|
Income approach (Other) |
|
Yield |
|
6.0% |
|
6.0% |
||||||||||||
|
Industrials |
|
|
196,725 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
43,614 |
|
Income approach (other) |
|
Yield |
|
2.5% - 13.5% |
|
12.1% |
||||||||||||
|
|
|
|
32,315 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
9.0x - 12.0x |
|
10.5x |
||||||||||||
|
Information technology |
|
|
137,042 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Materials |
|
|
212,022 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Telecommunication services |
|
|
14,482 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Partnership and LLC interests |
|
|
119,690 |
|
NAV |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Financials |
|
|
17,582 |
|
Recent transaction price(1) |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Other |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Healthcare, education, and childcare |
|
|
1,084 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
8.8x |
|
8.8x |
||||||||||||
|
Industrials |
|
|
65 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Total assets |
|
$ |
5,594,127 |
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Investments |
|
Fair Value |
|
Valuation Technique(s) |
|
Unobservable Input(s) |
|
Range |
|
Weighted |
|||||||||||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Loans payable of Consolidated Funds: |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Fixed income |
|
$ |
11,273,923 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
499,305 |
|
Recent transaction price(1) |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
258,096 |
|
Discounted cash flow |
|
Discount rate |
|
11.5% |
|
11.5% |
||||||||||||
|
|
|
|
|
|
|
|
Constant prepayment rate |
|
0.0% - 50.0% |
|
20.4% |
||||||||||||
|
|
|
|
|
|
|
|
Constant default rate |
|
2.0% - 10.0% |
|
2.1% |
||||||||||||
|
|
|
|
|
|
|
|
Recovery rate |
|
10.0% - 80.0% |
|
74.6% |
||||||||||||
|
|
|
|
17,079 |
|
Discounted cash flow |
|
Discount margin |
|
300 - 800 |
|
482.5 |
||||||||||||
|
|
|
|
|
|
|
|
Constant prepayment rate |
|
0% - 50.0% |
|
23.0% |
||||||||||||
|
|
|
|
|
|
|
|
Constant default rate |
|
2.0% - 10.0% |
|
2.0% |
||||||||||||
|
|
|
|
|
|
|
|
Recovery rate |
|
10.0% - 80.0% |
|
75.0% |
||||||||||||
|
|
|
|
616 |
|
Market approach (other) |
|
Other |
|
N/A |
|
N/A |
||||||||||||
|
Derivatives instruments of Consolidated Funds |
|
|
22,142 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Total liabilities |
|
$ |
12,071,161 |
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
(1) |
Recent transaction price consists of securities purchased or restructured within the last six months. The Company has determined that there has been no change to the valuation based on the underlying assumptions used at the closing of such transactions. |
|
(2) |
Valuation technique above includes a 30% liquidity discount on an investment held by a fund within the Private Equity Group. |
The following tables summarize the quantitative inputs and assumptions used for the Consolidated Funds' Level III inputs as of December 31, 2013:
|
Investments |
|
Fair Value |
|
Valuation Technique(s) |
|
Unobservable Input(s) |
|
Range |
|
Weighted |
|||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Consumer discretionary |
|
$ |
13,044 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
6,146 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
6.2x - 18.0x |
|
9.3x |
||||||||||||
|
|
|
|
246,227 |
|
Market approach (comparable companies) |
|
Book value multiple |
|
1.5x - 1.8x |
|
1.6x |
||||||||||||
|
|
|
|
1,162,641 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
7.5x - 15.0x |
|
10.6x |
||||||||||||
|
|
|
|
42,080 |
|
Market approach (comparable companies) |
|
Net income multiple |
|
9.6x |
|
9.6x |
||||||||||||
|
|
|
|
1,114 |
|
Market approach (comparable companies) |
|
Yield to worst |
|
5.0% |
|
5.0% |
||||||||||||
|
|
|
|
1,557 |
|
Market approach (other) |
|
Other |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
1,729 |
|
Other |
|
Other |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
8,466 |
|
Other |
|
Volume weighted average price |
|
25.2x |
|
25.2x |
||||||||||||
|
|
|
|
1,418 |
|
Other |
|
Volume weighted average price / illiquidity discount |
|
25.2x / 15% |
|
25.2x / 15% |
||||||||||||
|
|
|
|
505,270 |
|
Recent transaction price(1) |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Consumer staples |
|
|
668 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
7.9x |
|
7.9x |
||||||||||||
|
|
|
|
201,059 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
6.0x - 8.5x |
|
7.5x |
||||||||||||
|
|
|
|
25,000 |
|
Recent transaction price(1) |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Energy |
|
|
119,344 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
1.0x - 1.4x |
|
1.2x |
||||||||||||
|
|
|
|
58,987 |
|
Other |
|
Other |
|
N/A |
|
N/A |
||||||||||||
|
Financials |
|
|
6,172 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
10.5x |
|
10.5x |
||||||||||||
|
Healthcare, education, and childcare |
|
|
28,607 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
7.8x - 43.7x |
|
10.9x |
||||||||||||
|
|
|
|
296,817 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
8.0x - 12.0x |
|
10.5x |
||||||||||||
|
|
|
|
23,493 |
|
Market approach (comparable companies) |
|
Net income multiple |
|
20.0x - 25.0x |
|
22.5x |
||||||||||||
|
Industrials |
|
|
8,595 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
130,478 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
8.0x - 14.5x |
|
10.3x |
||||||||||||
|
Materials |
|
|
773 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
6.0x |
|
6.0x |
||||||||||||
|
|
|
|
52,947 |
|
Market approach (comparable companies) |
|
Net income multiple |
|
8.0x - 10.0x |
|
9.0x |
||||||||||||
|
Telecommunication services |
|
|
957 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
566 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
6.9x |
|
6.9x |
||||||||||||
|
Utilities |
|
|
14,077 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Fixed Income |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Consumer discretionary |
|
|
287,572 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
394,891 |
|
Discounted cash flow |
|
Yield to maturity |
|
7.0% - 10.0% |
|
8.5% |
||||||||||||
|
|
|
|
18,383 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
6.2x - 18.0x |
|
8.0x |
||||||||||||
|
|
|
|
628,002 |
|
Income approach (other) |
|
Yield |
|
2.5% - 17.9% |
|
9.3% |
||||||||||||
|
|
|
|
5,366 |
|
Income approach (other) |
|
Yield to worst |
|
4.8% - 5.8% |
|
5.3% |
||||||||||||
|
|
|
|
113,305 |
|
Market approach (comparable companies) |
|
Book value multiple |
|
1.5x - 1.8x |
|
1.6x |
||||||||||||
|
|
|
|
406,854 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
8.0x 10.5x |
|
9.2x |
||||||||||||
|
|
|
|
9,730 |
|
Recent transaction price(1) |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Consumer staples |
|
|
469 |
|
Discounted cash flow |
|
Other |
|
20.0% |
|
20.0% |
||||||||||||
|
|
|
|
4,032 |
|
Income approach (other) |
|
Yield |
|
4.4% |
|
4.4% |
||||||||||||
|
Energy |
|
|
112,362 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
7,327 |
|
Recent transaction price(1) |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Financials |
|
|
561,569 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
942 |
|
Discounted cash flow |
|
Weighted average collection rate |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
13,177 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
2.4x |
|
2.4x |
||||||||||||
|
|
|
|
214,719 |
|
Income approach (other) |
|
Yield |
|
3.8% - 13.5% |
|
9.3% |
||||||||||||
|
Healthcare, education, and childcare |
|
|
100,868 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
5,919 |
|
EV market multiple analysis |
|
EBITDA multiple |
|
7.8x - 43.7x |
|
10.9x |
||||||||||||
|
|
|
|
3,916 |
|
Income approach (other) |
|
Discount rate |
|
4.1% - 4.2% |
|
4.2% |
||||||||||||
|
|
|
|
146,983 |
|
Income approach (other) |
|
Yield |
|
6.0% - 10.0% |
|
7.7% |
||||||||||||
|
Industrials |
|
|
89,817 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
71,088 |
|
Income approach (other) |
|
Yield |
|
4.4% - 5.8% |
|
4.6% |
||||||||||||
|
|
|
|
30,579 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
9.7x - 14.5x |
|
12.1x |
||||||||||||
|
|
|
|
4,760 |
|
Market approach (comparable companies) |
|
Illiquidity premium |
|
2.0% - 2.5% |
|
2.3% |
||||||||||||
|
Information technology |
|
|
51,357 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
6,851 |
|
Recent transaction price(1) |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
38,317 |
|
Income approach (other) |
|
Yield |
|
5.3% - 14.0% |
|
11.5% |
||||||||||||
|
Materials |
|
|
39,743 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
20,259 |
|
Discounted cash flow |
|
Discount rate |
|
13.0% |
|
13.0% |
||||||||||||
|
|
|
|
14,056 |
|
Market approach (comparable companies) |
|
EBITDA multiple |
|
6.0x - 10.0x |
|
9.0x |
||||||||||||
|
|
|
|
54,714 |
|
Income approach (other) |
|
Yield |
|
6.0% - 13.0% |
|
7.7% |
||||||||||||
|
Telecommunication services |
|
|
112,901 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
52,989 |
|
Income approach (other) |
|
Yield |
|
8.8% |
|
8.8% |
||||||||||||
|
Utilities |
|
|
3,336 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Partnership and LLC interests |
|
|
41,001 |
|
NAV |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Other |
|
|
2,372 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
Derivative instruments of Consolidated Funds |
|
|
3,135 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Total assets |
|
$ |
6,631,893 |
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Loans payable of Consolidated Funds: |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Fixed income |
|
$ |
11,439,512 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
41,920 |
|
Discounted cash flow |
|
Discount rate |
|
10.7% |
|
10.7% |
||||||||||||
|
|
|
|
53,524 |
|
Market approach (other) |
|
Other |
|
N/A |
|
N/A |
||||||||||||
|
Derivatives instruments of Consolidated Funds |
|
|
6,855 |
|
Broker quotes and/or 3rd party pricing services |
|
N/A |
|
N/A |
|
N/A |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Total liabilities |
|
$ |
11,541,811 |
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
(1) |
Recent transaction price consists of securities purchased or restructured within six months. The Company has determined that there has been no change to the valuation based on the underlying assumptions used at the closing of such transactions. |
|
|||
|
|
|
Level I |
|
Level II |
|
Level III |
|
Total |
|
Carrying |
|
||||||||||||||||||||||
|
Loans held for investments |
|
$ |
— |
|
$ |
— |
|
$ |
78,895 |
|
$ |
78,895 |
|
$ |
77,514 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Balance at acquisition date (June 3, 2014) |
|
$ |
— |
|
|||||
|
Loan acquisition and origination |
|
|
580,954 |
|
|||||
|
Allowance for loan losses |
|
|
(1,185 |
) |
|||||
|
Principal repayment |
|
|
(502,255 |
) |
|||||
|
|
|
|
|
|
|||||
|
Balance as of December 31, 2014 |
|
$ |
77,514 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
Balance at acquisition date (June 3, 2014) |
|
$ |
— |
|
|||||
|
Increase in allowance for loan losses |
|
|
1,185 |
|
|||||
|
|
|
|
|
|
|||||
|
Balance as of December 31, 2014 |
|
$ |
1,185 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
Loan receivables—unpaid principal balance |
|
$ |
79,018 |
|
|||||
|
Unamortized loan origination fees |
|
|
(196 |
) |
|||||
|
Deferred interest on non-accrual loans |
|
|
(123 |
) |
|||||
|
Allowance for loan losses |
|
|
(1,185 |
) |
|||||
|
|
|
|
|
|
|||||
|
Balance as of December 31, 2014 |
|
$ |
77,514 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|||
|
|
|
As of December 31, 2014 |
|
||||||||||||||||||||||||
|
|
|
Assets |
|
Liabilities |
|
||||||||||||||||||||||
|
The Company |
|
Notional(1) |
|
Fair Value |
|
Notional(1) |
|
Fair Value |
|
||||||||||||||||||
|
Interest rate contracts |
|
$ |
— |
|
$ |
— |
|
$ |
250,000 |
|
$ |
847 |
|
||||||||||||||
|
Foreign exchange contracts |
|
|
161,890 |
|
|
7,623 |
|
|
102,231 |
|
|
2,003 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivatives, at fair value |
|
$ |
161,890 |
|
$ |
7,623 |
|
$ |
352,231 |
|
$ |
2,850 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
(1) |
Represents the total contractual amount of derivative assets and liabilities outstanding. |
|
|
|
As of December 31, 2013 |
|
||||||||||||||||||||||||
|
|
|
Assets |
|
Liabilities |
|
||||||||||||||||||||||
|
The Company |
|
Notional(1) |
|
Fair Value |
|
Notional(1) |
|
Fair Value |
|
||||||||||||||||||
|
Interest rate contracts |
|
$ |
— |
|
$ |
— |
|
$ |
250,000 |
|
$ |
1,254 |
|
||||||||||||||
|
Foreign exchange contracts |
|
|
66,733 |
|
|
1,164 |
|
|
76,419 |
|
|
1,653 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivatives, at fair value |
|
$ |
66,733 |
|
$ |
1,164 |
|
$ |
326,419 |
|
$ |
2,907 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
(1) |
Represents the total contractual amount of derivative assets and liabilities outstanding. |
|
|
|
For the year ended |
|
||||||||||||||||||
|
The Company |
|
Interest |
|
Foreign |
|
Total |
|
||||||||||||||
|
Net realized gain (loss) on investments |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Swaps |
|
$ |
(1,368 |
) |
$ |
— |
|
$ |
(1,368 |
) |
|||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
3,330 |
|
|
3,330 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Net realized gain (loss) on investments |
|
$ |
(1,368 |
) |
$ |
3,330 |
|
$ |
1,962 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Net change in unrealized appreciation (depreciation) on investments |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
1,076 |
|
$ |
1,076 |
|
|||||||||||
|
Swaps |
|
|
407 |
|
|
— |
|
|
407 |
|
|||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
5,034 |
|
|
5,034 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total net change in unrealized appreciation (depreciation) on investments |
|
$ |
407 |
|
$ |
6,110 |
|
$ |
6,517 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
As of December 31, 2013 |
|
||||||||||||||||||
|
The Company |
|
Interest |
|
Foreign |
|
Total |
|
||||||||||||||
|
Net realized gain (loss) on investments |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
(147 |
) |
$ |
(147 |
) |
|||||||||||
|
Swaps |
|
|
(1,259 |
) |
|
— |
|
|
(1,259 |
) |
|||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
(2,165 |
) |
|
(2,165 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Net realized gain (loss) on investments |
|
$ |
(1,259 |
) |
$ |
(2,312 |
) |
$ |
(3,571 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Net change in unrealized appreciation (depreciation) on investments |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
(392 |
) |
$ |
(392 |
) |
|||||||||||
|
Swaps |
|
|
1,182 |
|
|
— |
|
|
1,182 |
|
|||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
(128 |
) |
|
(128 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total net change in unrealized appreciation (depreciation) on investments |
|
$ |
1,182 |
|
$ |
(520 |
) |
$ |
662 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
As of December 31, 2012 |
|
||||||||||||||||||
|
The Company |
|
Interest |
|
Foreign |
|
Total |
|
||||||||||||||
|
Net realized gain (loss) on investments |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
112 |
|
$ |
112 |
|
|||||||||||
|
Swaps |
|
|
(601 |
) |
|
— |
|
|
(601 |
) |
|||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
66 |
|
|
66 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total net realized gain (loss) on investments |
|
$ |
(601 |
) |
$ |
178 |
|
$ |
(423 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Net change in unrealized appreciation (depreciation) on investments |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
(982 |
) |
$ |
(982 |
) |
|||||||||||
|
Written options |
|
|
— |
|
|
139 |
|
|
139 |
|
|||||||||||
|
Swaps |
|
|
(2,436 |
) |
|
— |
|
|
(2,436 |
) |
|||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
(1,259 |
) |
|
(1,259 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total net change in unrealized appreciation (depreciation) on investments |
|
$ |
(2,436 |
) |
$ |
(2,102 |
) |
$ |
(4,538 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Derivative and Other Instruments of the Company as of December 31, 2014
|
|
|
|
|
|
|
|
|
Gross Amounts |
|
|
|
||||||||||||||||||||||
|
|
|
Gross Amounts |
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
|
|
Gross Amounts |
|
Net Amounts of |
|
Financial |
|
Net Amount |
|
||||||||||||||||||||||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Derivatives |
|
$ |
7,623 |
|
$ |
— |
|
$ |
7,623 |
|
$ |
1,056 |
|
$ |
6,567 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total |
|
|
7,623 |
|
|
— |
|
|
7,623 |
|
|
1,056 |
|
|
6,567 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Derivatives |
|
|
(2,850 |
) |
|
— |
|
|
(2,850 |
) |
|
(1,056 |
) |
|
(1,794 |
) |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total |
|
|
(2,850 |
) |
|
— |
|
|
(2,850 |
) |
|
(1,056 |
) |
|
(1,794 |
) |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Grand Total |
|
$ |
4,773 |
|
$ |
— |
|
$ |
4,773 |
|
$ |
— |
|
$ |
4,773 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Derivative and Other Instruments of the Company as of December 31, 2013
|
|
|
|
|
|
|
|
|
Gross Amounts |
|
|
|
||||||||||||||||||||||
|
|
|
Gross Amounts |
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
|
|
Gross Amounts |
|
Net Amounts of |
|
Financial |
|
Net Amount |
|
||||||||||||||||||||||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Derivatives |
|
$ |
1,164 |
|
$ |
— |
|
$ |
1,164 |
|
$ |
338 |
|
$ |
826 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total |
|
|
1,164 |
|
|
— |
|
|
1,164 |
|
|
338 |
|
|
826 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Derivatives |
|
|
(2,907 |
) |
|
— |
|
|
(2,907 |
) |
|
(338 |
) |
|
(2,569 |
) |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total |
|
|
(2,907 |
) |
|
— |
|
|
(2,907 |
) |
|
(338 |
) |
|
(2,569 |
) |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Grand Total |
|
$ |
(1,743 |
) |
$ |
— |
|
$ |
(1,743 |
) |
$ |
— |
|
$ |
(1,743 |
) |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
As of December 31, 2014 |
|
||||||||||||||||||||||||
|
|
|
Assets |
|
Liabilities |
|
||||||||||||||||||||||
|
Consolidated Funds |
|
Notional(1) |
|
Fair Value |
|
Notional(1) |
|
Fair Value |
|
||||||||||||||||||
|
Interest rate contracts |
|
$ |
34,000 |
|
$ |
0 |
|
$ |
10,000 |
|
$ |
21 |
|
||||||||||||||
|
Credit contracts |
|
|
— |
|
|
— |
|
|
385,296 |
|
|
13,265 |
|
||||||||||||||
|
Foreign exchange contracts |
|
|
43,303 |
|
|
2,070 |
|
|
207,577 |
|
|
9,991 |
|
||||||||||||||
|
Other financial instruments |
|
|
4,542 |
|
|
1,056 |
|
|
90,302 |
|
|
19,055 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivatives, at fair value |
|
|
81,845 |
|
|
3,126 |
|
|
693,175 |
|
|
42,332 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Other—equity(2) |
|
|
79,551 |
|
|
3,866 |
|
|
— |
|
|
— |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
TOTAL |
|
$ |
161,396 |
|
$ |
6,992 |
|
$ |
693,175 |
|
$ |
42,332 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
(1) |
Represents the total contractual amount of derivative assets and liabilities outstanding. |
|
(2) |
Includes the fair value of warrants and equity distribution rights which are presented within investments, at fair value in the Consolidated Statements of Financial Condition. |
|
|
|
As of December 31, 2013 |
|
||||||||||||||||||||||||
|
|
|
Assets |
|
Liabilities |
|
||||||||||||||||||||||
|
Consolidated Funds |
|
Notional(1) |
|
Fair Value |
|
Notional(1) |
|
Fair Value |
|
||||||||||||||||||
|
Interest rate contracts |
|
$ |
70,000 |
|
$ |
8 |
|
$ |
623,225 |
|
$ |
3,878 |
|
||||||||||||||
|
Credit contracts |
|
|
25,437 |
|
|
4,489 |
|
|
537,921 |
|
|
28,385 |
|
||||||||||||||
|
Equity contracts |
|
|
50 |
|
|
179 |
|
|
— |
|
|
— |
|
||||||||||||||
|
Foreign exchange contracts |
|
|
211,324 |
|
|
8,653 |
|
|
813,997 |
|
|
38,631 |
|
||||||||||||||
|
Other financial instruments |
|
|
6,174 |
|
|
1,296 |
|
|
83,662 |
|
|
4,221 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total derivatives, at fair value |
|
|
312,985 |
|
|
14,625 |
|
|
2,058,805 |
|
|
75,115 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Other—equity(2) |
|
|
68,253 |
|
|
46,802 |
|
|
— |
|
|
— |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
TOTAL |
|
$ |
381,238 |
|
$ |
61,427 |
|
$ |
2,058,805 |
|
$ |
75,115 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
(1) |
Represents the total contractual amount of derivative assets and liabilities outstanding. |
|
(2) |
Includes the fair value of warrants which is presented within investments, at fair value in the Consolidated Statements of Financial Condition. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2014 |
|
||||||||||||||||||||||||||||||||||||
|
Consolidated Funds |
|
Interest |
|
Credit |
|
Equity |
|
Foreign |
|
Other |
|
Total |
|
||||||||||||||||||||||||||
|
Net realized gain (loss) on investments of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
— |
|
$ |
(8,952 |
) |
$ |
341 |
|
$ |
— |
|
$ |
(8,611 |
) |
||||||||||||||||||||
|
Written options |
|
|
— |
|
|
— |
|
|
— |
|
|
(116 |
) |
|
— |
|
|
(116 |
) |
||||||||||||||||||||
|
Swaps |
|
|
(513 |
) |
|
(24,092 |
) |
|
— |
|
|
|
|
|
(2,463 |
) |
|
(27,068 |
) |
||||||||||||||||||||
|
Interest rate caps/floor |
|
|
276 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
276 |
|
||||||||||||||||||||
|
Warrants(1) |
|
|
— |
|
|
— |
|
|
3,583 |
|
|
— |
|
|
— |
|
|
3,583 |
|
||||||||||||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
— |
|
|
— |
|
|
(15,763 |
) |
|
— |
|
|
(15,763 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total net realized gain (loss) on investments of Consolidated Funds |
|
$ |
(237 |
) |
$ |
(24,092 |
) |
$ |
(5,369 |
) |
$ |
(15,538 |
) |
$ |
(2,463 |
) |
$ |
(47,699 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
— |
|
$ |
611 |
|
$ |
1,668 |
|
$ |
16 |
|
$ |
2,295 |
|
||||||||||||||||||||
|
Written options |
|
|
— |
|
|
— |
|
|
— |
|
|
(402 |
) |
|
— |
|
|
(402 |
) |
||||||||||||||||||||
|
Swaps |
|
|
1,471 |
|
|
9,421 |
|
|
— |
|
|
842 |
|
|
(1,142 |
) |
|
10,592 |
|
||||||||||||||||||||
|
Interest rate caps/floor |
|
|
269 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
269 |
|
||||||||||||||||||||
|
Warrants(1) |
|
|
— |
|
|
— |
|
|
(13,190 |
) |
|
— |
|
|
— |
|
|
(13,190 |
) |
||||||||||||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
— |
|
|
(1,906 |
) |
|
11,775 |
|
|
|
|
|
9,869 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total net change in unrealized appreciation (depreciation) on investments of Consolidated Funds |
|
$ |
1,740 |
|
$ |
9,421 |
|
$ |
(14,485 |
) |
$ |
13,883 |
|
$ |
(1,126 |
) |
$ |
9,433 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
(1) |
Realized and unrealized gains (losses) on warrants are also reflected in the changes presented within the investment, at fair value. |
|
|
|
As of December 31, 2013 |
|
||||||||||||||||||||||||||||||||||||
|
Consolidated Funds |
|
Interest |
|
Credit |
|
Equity |
|
Foreign |
|
Other |
|
Total |
|
||||||||||||||||||||||||||
|
Net realized gain (loss) on investments of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
— |
|
$ |
(7,308 |
) |
$ |
(536 |
) |
$ |
— |
|
$ |
(7,844 |
) |
||||||||||||||||||||
|
Written options |
|
|
— |
|
|
— |
|
|
— |
|
|
3,063 |
|
|
— |
|
|
3,063 |
|
||||||||||||||||||||
|
Swaps |
|
|
(2,317 |
) |
|
(53,566 |
) |
|
|
|
|
(3,219 |
) |
|
6,735 |
|
|
(52,367 |
) |
||||||||||||||||||||
|
Interest rate caps/floor |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(879 |
) |
|
(879 |
) |
||||||||||||||||||||
|
Warrants(1) |
|
|
— |
|
|
(4 |
) |
|
2,519 |
|
|
— |
|
|
— |
|
|
2,515 |
|
||||||||||||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
— |
|
|
— |
|
|
(476 |
) |
|
15,008 |
|
|
14,532 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total net realized gain (loss) on investments of Consolidated Funds |
|
$ |
(2,317 |
) |
$ |
(53,570 |
) |
$ |
(4,789 |
) |
$ |
(1,168 |
) |
$ |
20,864 |
|
$ |
(40,980 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
— |
|
$ |
(697 |
) |
$ |
2,122 |
|
$ |
(400 |
) |
$ |
1,025 |
|
||||||||||||||||||||
|
Written options |
|
|
— |
|
|
— |
|
|
— |
|
|
287 |
|
|
— |
|
|
287 |
|
||||||||||||||||||||
|
Swaps |
|
|
2,512 |
|
|
2,456 |
|
|
— |
|
|
1,586 |
|
|
(1,740 |
) |
|
4,814 |
|
||||||||||||||||||||
|
Interest rate caps/floor |
|
|
(1,162 |
) |
|
— |
|
|
— |
|
|
— |
|
|
246 |
|
|
(916 |
) |
||||||||||||||||||||
|
Warrants(1) |
|
|
— |
|
|
— |
|
|
21,403 |
|
|
829 |
|
|
— |
|
|
22,232 |
|
||||||||||||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
— |
|
|
— |
|
|
(14,294 |
) |
|
(8,887 |
) |
|
(23,181 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total net change in unrealized appreciation (depreciation) on investments of Consolidated Funds |
|
$ |
1,350 |
|
$ |
2,456 |
|
$ |
20,706 |
|
$ |
(9,470 |
) |
$ |
(10,781 |
) |
$ |
4,261 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
(1) |
Realized and unrealized gains (losses) on warrants are also reflected in the changes presented on the investment footnote table. |
|
|
|
As of December 31, 2012 |
|
||||||||||||||||||||||||||||||||||||
|
Consolidated Funds |
|
Interest |
|
Credit |
|
Equity |
|
Foreign |
|
Other |
|
Total |
|
||||||||||||||||||||||||||
|
Net realized gain (loss) on investments of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
— |
|
$ |
(5,918 |
) |
$ |
(3,626 |
) |
$ |
— |
|
$ |
(9,544 |
) |
||||||||||||||||||||
|
Written options |
|
|
— |
|
|
— |
|
|
— |
|
|
2,075 |
|
|
— |
|
|
2,075 |
|
||||||||||||||||||||
|
Swaps |
|
|
(28,023 |
) |
|
(3,522 |
) |
|
(6,070 |
) |
|
3,615 |
|
|
— |
|
|
(34,000 |
) |
||||||||||||||||||||
|
Interest rate caps/floor |
|
|
— |
|
|
— |
|
|
— |
|
|
5,821 |
|
|
— |
|
|
5,821 |
|
||||||||||||||||||||
|
Warrants(1) |
|
|
— |
|
|
— |
|
|
358 |
|
|
— |
|
|
— |
|
|
358 |
|
||||||||||||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
— |
|
|
— |
|
|
(9,215 |
) |
|
— |
|
|
(9,215 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total net realized gain (loss) on investments of Consolidated Funds |
|
$ |
(28,023 |
) |
$ |
(3,522 |
) |
$ |
(11,630 |
) |
$ |
(1,330 |
) |
$ |
— |
|
$ |
(44,505 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Purchased options |
|
$ |
— |
|
$ |
— |
|
$ |
(145 |
) |
$ |
667 |
|
$ |
— |
|
$ |
522 |
|
||||||||||||||||||||
|
Written options |
|
|
— |
|
|
— |
|
|
— |
|
|
(550 |
) |
|
— |
|
|
(550 |
) |
||||||||||||||||||||
|
Swaps |
|
|
4,049 |
|
|
(17,245 |
) |
|
(391 |
) |
|
(2,915 |
) |
|
(706 |
) |
|
(17,208 |
) |
||||||||||||||||||||
|
Interest rate caps/floor |
|
|
(76 |
) |
|
— |
|
|
— |
|
|
(4,751 |
) |
|
— |
|
|
(4,827 |
) |
||||||||||||||||||||
|
Warrants(1) |
|
|
(479 |
) |
|
— |
|
|
(8,668 |
) |
|
(4 |
) |
|
— |
|
|
(9,151 |
) |
||||||||||||||||||||
|
Foreign currency forward contracts |
|
|
— |
|
|
— |
|
|
— |
|
|
(174 |
) |
|
— |
|
|
(174 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total net change in unrealized appreciation (depreciation) on investments of Consolidated Funds |
|
$ |
3,494 |
|
$ |
(17,245 |
) |
$ |
(9,204 |
) |
$ |
(7,727 |
) |
$ |
(706 |
) |
$ |
(31,388 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
(1) |
Realized and unrealized gains (losses) on warrants are also reflected in the changes presented on the investment footnote table. |
Derivative and Other Instruments of the Consolidated Funds as of December 31, 2014
|
|
|
|
|
|
|
|
|
Gross Amounts |
|
|
|
||||||||||||||||||||||||||||
|
|
|
Gross Amounts |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
|
|
|
Gross Amounts |
|
Net Amounts of |
|
Financial |
|
Cash Collateral |
|
Net |
|
||||||||||||||||||||||||||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Derivatives |
|
$ |
4,940 |
|
$ |
1,814 |
|
$ |
3,126 |
|
$ |
989 |
|
$ |
(2,295 |
) |
$ |
4,432 |
|
||||||||||||||||||||
|
Reverse repurchase, securities borrowing, and similar arrangements(1) |
|
|
4,150 |
|
|
|
|
|
4,150 |
|
|
|
|
|
|
|
|
4,150 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total |
|
$ |
9,090 |
|
$ |
1,814 |
|
$ |
7,276 |
|
$ |
989 |
|
$ |
(2,295 |
) |
$ |
8,582 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Derivatives |
|
$ |
(44,146 |
) |
$ |
(1,814 |
) |
$ |
(42,332 |
) |
$ |
(989 |
) |
$ |
(12,386 |
) |
$ |
(28,957 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total |
|
|
(44,146 |
) |
$ |
(1,814 |
) |
$ |
(42,332 |
) |
$ |
(989 |
) |
|
(12,386 |
) |
$ |
(28,957 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Grand Total |
|
$ |
(35,056 |
) |
$ |
— |
|
$ |
(35,056 |
) |
$ |
— |
|
$ |
(14,681 |
) |
$ |
(20,375 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Derivative and Other Instruments of the Consolidated Funds as of December 31, 2013
|
|
|
|
|
|
|
|
|
Gross Amounts |
|
|
|
||||||||||||||||||||||||||||
|
|
|
Gross Amounts |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
|
|
|
Gross Amounts |
|
Net Amounts of |
|
Financial |
|
Cash Collateral |
|
Net |
|
||||||||||||||||||||||||||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Derivatives |
|
$ |
27,081 |
|
$ |
12,456 |
|
$ |
14,625 |
|
$ |
9,642 |
|
$ |
4,675 |
|
$ |
308 |
|
||||||||||||||||||||
|
Reverse repurchase, securities borrowing, and similar arrangements(1) |
|
|
1,695 |
|
|
— |
|
|
1,695 |
|
|
— |
|
|
— |
|
|
1,695 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total |
|
|
28,776 |
|
|
12,456 |
|
|
16,320 |
|
|
9,642 |
|
|
4,675 |
|
|
2,003 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Derivatives |
|
|
(87,571 |
) |
|
(12,456 |
) |
|
(75,115 |
) |
|
(9,642 |
) |
|
(42,903 |
) |
|
(22,570 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total |
|
|
(87,571 |
) |
|
(12,456 |
) |
|
(75,115 |
) |
|
(9,642 |
) |
|
(42,903 |
) |
|
(22,570 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Grand Total |
|
$ |
(58,795 |
) |
$ |
— |
|
$ |
(58,795 |
) |
$ |
— |
|
$ |
(38,228 |
) |
$ |
(20,567 |
) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
(1) |
Included within investments, at fair value in the Consolidated Statements of Financial Condition. |
|
|||
|
|
|
As of December 31, 2014 |
|
|||||||
|
|
|
Loan |
|
Market |
|
Weighted |
|
|||
|
Senior secured notes(1) |
|
$ |
11,394,820 |
|
$ |
11,062,501 |
|
|
9.02 |
|
|
Subordinated notes / preferred shares(2) |
|
|
1,523,670 |
|
|
894,795 |
|
|
9.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loan obligations of Consolidated CLOs |
|
|
12,918,490 |
|
|
11,957,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type of Facility |
|
Total |
|
Loan |
|
Market |
|
Effective |
|
Commitment |
|
Maturity |
|
||||||||||||||||||||||||||
|
Revolvers of Consolidated CLOs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Revolving credit line |
|
$ |
44,113 |
|
$ |
44,113 |
|
$ |
43,980 |
|
|
0.49 |
% |
|
0.17 |
% |
|
04/16/21 |
|
||||||||||||||||||||
|
Revolving credit line |
|
|
48,510 |
|
|
48,510 |
|
|
47,894 |
|
|
0.43 |
% |
|
0.17 |
% |
|
10/11/21 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total revolvers of Consolidated CLOs |
|
|
|
|
|
92,623 |
|
|
91,874 |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total notes payable and credit facilities of Consolidated CLOs |
|
|
|
|
$ |
13,011,113 |
|
$ |
12,049,170 |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
(1) |
Weighted average interest rate of 2.62%. |
|
(2) |
The subordinated notes do not have contractual interest rates, but instead receive distributions from the excess cash flows generated by each Consolidated CLO. |
|
|
|
As of December 31, 2013 |
|
|||||||
|
|
|
Loan |
|
Market |
|
Weighted |
|
|||
|
Senior secured notes(1) |
|
$ |
10,967,524 |
|
$ |
10,679,878 |
|
|
8.92 |
|
|
Subordinated notes / preferred shares(2) |
|
|
1,325,446 |
|
|
962,098 |
|
|
8.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loan obligations of Consolidated CLOs |
|
|
12,292,970 |
|
|
11,641,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type of Facility |
|
Total |
|
Loan |
|
Market |
|
Effective |
|
Commitment |
|
Maturity |
|
||||||||||||||||||||||||||
|
Revolvers of Consolidated CLOs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Revolving credit line |
|
$ |
48,949 |
|
$ |
48,949 |
|
$ |
48,119 |
|
|
0.43 |
% |
|
0.17 |
% |
|
04/16/21 |
|
||||||||||||||||||||
|
Revolving credit line |
|
|
1,035 |
|
|
1,035 |
|
|
1,034 |
|
|
0.51 |
% |
|
0.19 |
% |
|
02/24/18 |
|
||||||||||||||||||||
|
Revolving credit line |
|
|
23,567 |
|
|
23,567 |
|
|
23,351 |
|
|
0.52 |
% |
|
0.18 |
% |
|
03/12/18 |
|
||||||||||||||||||||
|
Revolving credit line |
|
|
48,510 |
|
|
48,510 |
|
|
46,812 |
|
|
0.45 |
% |
|
0.17 |
% |
|
10/11/21 |
|
||||||||||||||||||||
|
Revolving credit line |
|
|
12,865 |
|
|
12,865 |
|
|
12,865 |
|
|
0.52 |
% |
|
0.14 |
% |
|
01/26/20 |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total revolvers of Consolidated CLOs |
|
|
|
|
|
134,926 |
|
|
132,181 |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
Total notes payable and credit facilities of Consolidated CLOs |
|
|
|
|
$ |
12,427,896 |
|
$ |
11,774,157 |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
(1) |
Weighted average interest rate of 2.36%. |
|
(2) |
The subordinated notes do not have contractual interest rates, but instead receive distributions from the excess cash flows generated by each Consolidated CLO. |
The Consolidated Funds had the following revolving bank credit facilities and term loans outstanding as of December 31, 2014:
|
Type of Facility |
|
Total |
|
Outstanding |
|
Effective Rate |
|
Commitment |
|
Maturity |
|
||||||||||||||||||||
|
Short-term borrowings of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Credit facility |
|
$ |
25,000 |
|
$ |
— |
|
LIBOR + 1.75% |
|
|
0.30 |
% |
|
06/06/15 |
|
||||||||||||||||
|
Credit facility |
|
|
25,000 |
|
|
— |
|
LIBOR + 2.00% |
|
|
0.30 |
% |
|
06/30/15 |
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Total short-term borrowings of Consolidated Funds |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Long-term borrowings of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Credit facility |
|
|
150,000 |
|
|
39,300 |
|
LIBOR + 2.25% |
|
|
0.25 |
% |
|
06/04/18 |
|
||||||||||||||||
|
Notes payable |
|
|
1,500,000 |
|
|
738,300 |
|
LIBOR + 1.65% |
|
|
0.75 |
% |
|
09/19/18 |
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Total long-term borrowings of Consolidated Funds |
|
|
|
|
$ |
777,600 |
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Total borrowings of Consolidated Funds |
|
|
|
|
$ |
777,600 |
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
(1) |
The market values of the long term notes approximate the current carrying value that is tied to the LIBOR rate. |
The Consolidated Funds had the following revolving bank credit facilities and term loans outstanding as of December 31, 2013:
|
Type of Facility |
|
Total |
|
Outstanding |
|
Effective Rate |
|
Commitment |
|
Maturity |
|
||||||||||||||||||
|
Short-term borrowings of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Credit facility |
|
$ |
40,000 |
|
$ |
— |
|
LIBOR + 1.75% |
|
0.25% |
|
|
06/06/14 |
|
|||||||||||||||
|
Credit facility |
|
|
116,841 |
|
|
— |
|
LIBOR + 2.00% |
|
0.38% |
|
|
06/13/14 |
|
|||||||||||||||
|
Credit facility |
|
|
100,000 |
|
|
— |
|
LIBOR + 2.00% |
|
0.75% |
|
|
06/30/14 |
|
|||||||||||||||
|
Credit facility |
|
|
35,000 |
|
|
35,000 |
|
LIBOR + 0.50% |
|
0.50% |
|
|
07/19/14 |
|
|||||||||||||||
|
Term loan payable |
|
|
1,805,000 |
|
|
1,137,526 |
|
(2) |
|
0.50% |
|
|
07/19/14 |
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Total short-term borrowings of Consolidated Funds |
|
|
|
|
|
1,172,526 |
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Long-term borrowings of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Credit facility |
|
£ |
186,290 |
|
|
308,477 |
|
LIBOR + 1.85% |
|
N/A |
|
|
01/15/16 |
|
|||||||||||||||
|
Credit facility |
|
$ |
532,350 |
|
|
532,350 |
|
LIBOR + 2.20% |
|
N/A |
|
|
10/15/15 |
|
|||||||||||||||
|
Credit facility |
|
€ |
200,000 |
|
|
— |
|
LIBOR + 3.00% |
|
0.38% |
|
|
08/16/19 |
|
|||||||||||||||
|
Notes payable |
|
$ |
46,733 |
|
|
16,644 |
|
1.93% |
|
N/A |
|
|
09/19/15 |
|
|||||||||||||||
|
Notes payable |
|
|
114,048 |
|
|
40,601 |
|
1.93% |
|
N/A |
|
|
09/19/15 |
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Total long-term borrowings of Consolidated Funds |
|
|
|
|
|
898,072 |
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Total borrowings of Consolidated Funds |
|
|
|
|
$ |
2,070,598 |
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
(1) |
The market values of the long term notes approximate the current carrying value that is tied to the LIBOR rate. |
|
(2) |
Rate depends on the tranche of each note held. The rates during the period ranged from One Month LIBOR +0.35% to Three Month LIBOR +0.90%. |
|
(3) |
For loan maintained in a foreign currency, outstanding loan balances are converted and reported into U.S. dollars at the spot rate at each reporting date. |
|
|||
|
|
|
Non-controlling interest in Predecessor |
|
|
|
|
|
||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
Total |
|
||||||||||||||||||||||||||||||||||||||||
|
|
|
Members' |
|
Common |
|
Additional |
|
Retained |
|
Accumulated |
|
Non-Controlling |
|
||||||||||||||||||||||||||||||||
|
Balance at December 31, 2012 |
|
$ |
87,584 |
|
$ |
— |
|
$ |
54,561 |
|
$ |
(11,283 |
) |
$ |
(27 |
) |
$ |
— |
|
$ |
130,835 |
|
|||||||||||||||||||||||
|
Allocation of contributions in excess of carrying value of net assets attributable to the AREA acquisition |
|
|
2,152 |
|
|
— |
|
|
3,835 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,987 |
|
|||||||||||||||||||||||
|
Issuance of Class D units, net of offering costs |
|
|
241,735 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
241,735 |
|
|||||||||||||||||||||||
|
Allocation of contribution in excess of carrying value of net assets attributable to Class D units |
|
|
(183,820 |
) |
|
— |
|
|
6,404 |
|
|
— |
|
|
— |
|
|
— |
|
|
(177,416 |
) |
|||||||||||||||||||||||
|
Deferred tax liabilities arising from allocation of contributions |
|
|
|
|
|
— |
|
|
(12,171 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(12,171 |
) |
|||||||||||||||||||||||
|
Distributions |
|
|
(69,173 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(69,173 |
) |
|||||||||||||||||||||||
|
Net income |
|
|
30,715 |
|
|
— |
|
|
— |
|
|
12,959 |
|
|
— |
|
|
— |
|
|
43,674 |
|
|||||||||||||||||||||||
|
Revaluation of redeemable equity |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,093 |
) |
|
— |
|
|
— |
|
|
(2,093 |
) |
|||||||||||||||||||||||
|
Currency translation adjustment |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
341 |
|
|
— |
|
|
341 |
|
|||||||||||||||||||||||
|
Equity compensation |
|
|
799 |
|
|
— |
|
|
5,213 |
|
|
— |
|
|
— |
|
|
— |
|
|
6,012 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Balance at December 31, 2013 |
|
|
109,992 |
|
|
— |
|
|
57,842 |
|
|
(417 |
) |
|
314 |
|
|
— |
|
|
167,731 |
|
|||||||||||||||||||||||
|
Distributions |
|
|
(46,534 |
) |
|
— |
|
|
(3,908 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(50,442 |
) |
|||||||||||||||||||||||
|
Net income |
|
|
6,836 |
|
|
— |
|
|
— |
|
|
(3,589 |
) |
|
— |
|
|
— |
|
|
3,247 |
|
|||||||||||||||||||||||
|
Currency translation adjustment |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
404 |
|
|
— |
|
|
404 |
|
|||||||||||||||||||||||
|
Equity compensation |
|
|
3,346 |
|
|
— |
|
|
9,133 |
|
|
— |
|
|
— |
|
|
— |
|
|
12,479 |
|
|||||||||||||||||||||||
|
Tandem award compensation adjustment |
|
|
864 |
|
|
— |
|
|
608 |
|
|
(230 |
) |
|
— |
|
|
— |
|
|
1,242 |
|
|||||||||||||||||||||||
|
Net effect of Reorganization, including contribution of AOG Units for common units |
|
|
(74,504 |
) |
|
— |
|
|
(63,675 |
) |
|
4,236 |
|
|
(718 |
) |
|
332,575 |
|
|
197,914 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Equity Balance Post—Reorganization |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
332,575 |
|
|
332,575 |
|
|||||||||||||||||||||||
|
Issuance costs |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(17,581 |
) |
|
(17,581 |
) |
|||||||||||||||||||||||
|
Allocation of contributions in excess of the carrying value of the net assets (dilution) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
128,536 |
|
|
128,536 |
|
|||||||||||||||||||||||
|
Reallocation of Partners' capital for changes in ownership interest |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(611 |
) |
|
(611 |
) |
|||||||||||||||||||||||
|
Deferred tax liabilities arising from allocation of contributions and Partners' capital |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(16 |
) |
|
(16 |
) |
|||||||||||||||||||||||
|
Distributions |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(68,872 |
) |
|
(68,872 |
) |
|||||||||||||||||||||||
|
Net income |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
80,240 |
|
|
80,240 |
|
|||||||||||||||||||||||
|
Currency translation adjustment |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,285 |
) |
|
(2,285 |
) |
|||||||||||||||||||||||
|
Equity compensation |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
11,507 |
|
|
11,507 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Balance at December 31, 2014 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
463,493 |
|
$ |
463,493 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
As of December 31, |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Redeemable interests in Ares Operating Group Entities |
|
|
|
|
|
|
|
||||||||
|
Beginning balance |
|
$ |
40,751 |
|
$ |
30,488 |
|
||||||||
|
Net income |
|
|
164 |
|
|
2,451 |
|
||||||||
|
Allocation of contributions in excess of carrying value of net assets attributable to the AREA acquisition |
|
|
— |
|
|
254 |
|
||||||||
|
Allocation of contributions in excess of carrying value of net assets attributable to Class D units |
|
|
— |
|
|
3,458 |
|
||||||||
|
Distributions |
|
|
(1,313 |
) |
|
(4,641 |
) |
||||||||
|
Currency translation adjustment |
|
|
9 |
|
|
13 |
|
||||||||
|
Revaluation of redeemable interest |
|
|
— |
|
|
8,437 |
|
||||||||
|
Equity compensation |
|
|
234 |
|
|
291 |
|
||||||||
|
Tandem award compensation adjustment |
|
|
(15,898 |
) |
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Equity Balance Post Reorganization |
|
|
23,947 |
|
|
40,751 |
|
||||||||
|
Issuance cost |
|
|
(124 |
) |
|
— |
|
||||||||
|
Allocation of contributions in excess of the carrying value of the net assets (dilution) |
|
|
910 |
|
|
— |
|
||||||||
|
Reallocation of Partners' capital for change in ownership interest |
|
|
(900 |
) |
|
— |
|
||||||||
|
Distributions |
|
|
(477 |
) |
|
— |
|
||||||||
|
Net income |
|
|
567 |
|
|
— |
|
||||||||
|
Currency translation adjustment |
|
|
(16 |
) |
|
— |
|
||||||||
|
Equity compensation |
|
|
81 |
|
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Ending Balance |
|
$ |
23,988 |
|
$ |
40,751 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
As of December 31, |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Redeemable interests in Consolidated Funds |
|
|
|
|
|
|
|
||||||||
|
Redeemable non-controlling interests in Consolidated Funds, beginning of period |
|
$ |
1,093,770 |
|
$ |
1,100,108 |
|
||||||||
|
Contributions from redeemable, non-controlling interests in Consolidated Funds |
|
|
30,408 |
|
|
— |
|
||||||||
|
Distributions to redeemable, non-controlling interests in Consolidated Funds |
|
|
(61,534 |
) |
|
(143,378 |
) |
||||||||
|
Currency translation adjustment attributable to redeemable, non-controlling interests in Consolidated Funds |
|
|
— |
|
|
(884 |
) |
||||||||
|
Net income attributable to redeemable, non-controlling interests in Consolidated Funds |
|
|
33,455 |
|
|
137,924 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Equity Balance Post—Reorganization |
|
$ |
1,096,099 |
|
$ |
1,093,770 |
|
||||||||
|
Net income (loss) attributable to redeemable, non-controlling interests in Consolidated Funds |
|
|
(30,890 |
) |
|
— |
|
||||||||
|
Distributions to redeemable, non-controlling interests in Consolidated Funds |
|
|
(27,759 |
) |
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Ending Balance |
|
$ |
1,037,450 |
|
$ |
1,093,770 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|||
|
|
|
As of December 31, |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Other assets of the Company: |
|
|
|
|
|
|
|
||||||||
|
Accounts and interest receivable |
|
$ |
4,310 |
|
$ |
1,863 |
|
||||||||
|
Receivable for securities sold |
|
|
— |
|
|
11,594 |
|
||||||||
|
Fixed assets, net |
|
|
34,055 |
|
|
27,852 |
|
||||||||
|
Other assets |
|
|
26,340 |
|
|
32,291 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total other assets of Company |
|
$ |
64,705 |
|
$ |
73,600 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Other assets of Consolidated Funds: |
|
|
|
|
|
|
|
||||||||
|
Deferred debt issuance costs |
|
$ |
7,610 |
|
$ |
13,106 |
|
||||||||
|
Note receivables |
|
|
381 |
|
|
366 |
|
||||||||
|
Income tax receivable |
|
|
1,417 |
|
|
314 |
|
||||||||
|
Other receivables |
|
|
977 |
|
|
3,641 |
|
||||||||
|
Other assets |
|
|
2,088 |
|
|
8,101 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total other assets of Consolidated Funds |
|
$ |
12,473 |
|
$ |
25,528 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total other assets |
|
$ |
77,178 |
|
$ |
99,128 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
Year Ended December 31, |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Furniture |
|
$ |
6,831 |
|
$ |
9,722 |
|
||||||||
|
Office and computer equipment |
|
|
15,772 |
|
|
13,059 |
|
||||||||
|
Internal use software |
|
|
5,572 |
|
|
5,670 |
|
||||||||
|
Leasehold improvements |
|
|
37,928 |
|
|
34,484 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Fixed assets, at cost |
|
|
66,103 |
|
|
62,935 |
|
||||||||
|
Less: accumulated depreciation |
|
|
(32,048 |
) |
|
(35,083 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Fixed assets, net |
|
|
34,055 |
|
$ |
27,852 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|||
|
2015 |
|
$ |
16,214 |
|
|||||
|
2016 |
|
|
19,587 |
|
|||||
|
2017 |
|
|
19,454 |
|
|||||
|
2018 |
|
|
18,384 |
|
|||||
|
Thereafter |
|
|
79,520 |
|
|||||
|
|
|
|
|
|
|||||
|
Total |
|
$ |
153,159 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|||
|
|
|
As of December 31, |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Due from affiliates: |
|
|
|
|
|
|
|
||||||||
|
Management fees receivable from non-consolidated funds |
|
|
113,358 |
|
$ |
91,917 |
|
||||||||
|
Payments made on behalf of and amounts due from non-consolidated funds |
|
|
33,176 |
|
|
17,003 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Due from affiliates—Company |
|
$ |
146,534 |
|
$ |
108,920 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Amounts due from portfolio companies and non-consolidated funds |
|
$ |
11,342 |
|
$ |
2,010 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Due from affiliates—Consolidated Funds |
|
$ |
11,342 |
|
$ |
2,010 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Due to affiliates: |
|
|
|
|
|
|
|
||||||||
|
Management fee rebate payable to non-consolidated funds |
|
$ |
14,390 |
|
$ |
28,715 |
|
||||||||
|
Payments made by non-consolidated funds on behalf of and amounts due from the Company |
|
|
4,640 |
|
|
3,975 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Due to affiliates—Company |
|
$ |
19,030 |
|
$ |
32,690 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Amounts due to non-consolidated funds |
|
$ |
2,441 |
|
$ |
2,695 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Due to affiliates—Consolidated Funds |
|
$ |
2,441 |
|
$ |
2,695 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|||
|
|
|
Year Ended December 31, |
|
||||||||||||||||||
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Total current income tax expense |
|
$ |
24,540 |
|
$ |
30,672 |
|
$ |
27,651 |
|
|||||||||||
|
Total deferred income tax expense (benefit) |
|
|
(13,287 |
) |
|
28,591 |
|
|
(1,497 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total income tax expense |
|
$ |
11,253 |
|
$ |
59,263 |
|
$ |
26,154 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
Year Ended December 31, |
|
||||||||||||||||||
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Income tax expense at federal statutory rate |
|
|
35.0 |
% |
|
35.0 |
% |
|
35.0 |
% |
|||||||||||
|
Income passed through to non-controlling interests |
|
|
(34.9 |
) |
|
(29.2 |
) |
|
(34.3 |
) |
|||||||||||
|
State and local taxes, net of federal benefit |
|
|
0.4 |
|
|
0.8 |
|
|
0.2 |
|
|||||||||||
|
Foreign taxes |
|
|
0.1 |
|
|
0.6 |
|
|
(0.4 |
) |
|||||||||||
|
Other, net |
|
|
1.1 |
|
|
0.4 |
|
|
1.2 |
|
|||||||||||
|
Valuation allowance |
|
|
0.3 |
|
|
(0.8 |
) |
|
0.4 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total effective rate |
|
|
2.0 |
% |
|
6.8 |
% |
|
2.1 |
% |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
Year Ended December 31, |
|
||||||||||||||||||
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Current: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
U.S. federal income tax |
|
$ |
12,801 |
|
$ |
19,774 |
|
$ |
18,355 |
|
|||||||||||
|
State and local income tax |
|
|
1,719 |
|
|
3,522 |
|
|
2,714 |
|
|||||||||||
|
Foreign income tax |
|
|
1,613 |
|
|
617 |
|
|
2,339 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
16,133 |
|
|
23,913 |
|
|
23,408 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
U.S. federal income tax (benefit) |
|
|
123 |
|
|
(5,743 |
) |
|
4,029 |
|
|||||||||||
|
State and local income tax (benefit) |
|
|
210 |
|
|
(747 |
) |
|
530 |
|
|||||||||||
|
Foreign income tax (benefit) |
|
|
70 |
|
|
— |
|
|
(6,151 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
403 |
|
|
(6,490 |
) |
|
(1,592 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
U.S. federal income tax |
|
|
12,924 |
|
|
14,031 |
|
|
22,384 |
|
|||||||||||
|
State and local income tax |
|
|
1,929 |
|
|
2,775 |
|
|
3,244 |
|
|||||||||||
|
Foreign income tax (benefit) |
|
|
1,683 |
|
|
617 |
|
|
(3,812 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Income tax expense |
|
$ |
16,536 |
|
$ |
17,423 |
|
$ |
21,816 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
Year Ended |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Deferred tax assets |
|
|
|
|
|
|
|
||||||||
|
Net operating losses |
|
$ |
4,550 |
|
$ |
3,565 |
|
||||||||
|
Other, net |
|
|
— |
|
|
1,699 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total gross deferred tax assets |
|
|
4,550 |
|
|
5,264 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Valuation allowance |
|
|
(4,335 |
) |
|
(3,788 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total deferred tax assets, net |
|
|
215 |
|
|
1,476 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Deferred tax liabilities |
|
|
|
|
|
|
|
||||||||
|
Investment in partnerships |
|
|
(17,176 |
) |
|
(22,478 |
) |
||||||||
|
Other, net |
|
|
(2,900 |
) |
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total deferred tax liabilities |
|
|
(20,076 |
) |
|
(22,478 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Net deferred tax assets (liabilities) |
|
$ |
(19,861 |
) |
$ |
(21,002 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
Year Ended December 31, |
|
|||||||
|
|
|
2014 |
|
2013 |
|
2012 |
|
|||
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
U.S. federal income tax |
|
$ |
6,807 |
|
$ |
4,280 |
|
$ |
— |
|
|
State and local income tax (benefit) |
|
|
1,564 |
|
|
1,083 |
|
|
(2 |
) |
|
Foreign income tax |
|
|
36 |
|
|
1,396 |
|
|
4,245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,407 |
|
|
6,759 |
|
|
4,243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
U.S. federal income tax (benefit) |
|
|
(9,958 |
) |
|
26,368 |
|
|
78 |
|
|
State and local income tax (benefit) |
|
|
(2,832 |
) |
|
7,417 |
|
|
19 |
|
|
Foreign income tax (benefit) |
|
|
(900 |
) |
|
1,296 |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,690 |
) |
|
35,081 |
|
|
95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
|
|
|
|
|
|
|
|
|
U.S. federal income tax (benefit) |
|
|
(3,151 |
) |
|
30,648 |
|
|
78 |
|
|
State and local income tax (benefit) |
|
|
(1,268 |
) |
|
8,500 |
|
|
17 |
|
|
Foreign income tax (benefit) |
|
|
(864 |
) |
|
2,692 |
|
|
4,243 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
$ |
(5,283 |
) |
$ |
41,840 |
|
$ |
4,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
||||||||||||
|
|
|
2014 |
|
2013 |
|
||||||||||
|
Deferred tax assets |
|
|
|
|
|
|
|
||||||||
|
Net operating loss |
|
$ |
1,841 |
|
$ |
608 |
|
||||||||
|
Other, net |
|
|
435 |
|
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total gross deferred tax assets |
|
|
2,276 |
|
|
608 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Valuation allowance |
|
|
(1,635 |
) |
|
(467 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total deferred tax assets, net |
|
|
641 |
|
|
141 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Deferred tax liabilities |
|
|
|
|
|
|
|
||||||||
|
Investment in partnerships |
|
|
(22,855 |
) |
|
(36,045 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total deferred tax liabilities |
|
|
(22,855 |
) |
|
(36,045 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Net deferred tax assets (liabilities) |
|
$ |
(22,214 |
) |
$ |
(35,904 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|||
|
|
|
May 1, 2014 through |
|
||||||||||||
|
(Dollars in thousands, except unit data) |
|
Basic |
|
Diluted |
|
||||||||||
|
Net income attributable to Ares Management, L.P. |
|
$ |
34,988 |
|
$ |
34,988 |
|
||||||||
|
Earnings distributed to participating securities (restricted units) |
|
|
(417 |
) |
|
(417 |
) |
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Net income available to common unitholders |
|
$ |
34,571 |
|
$ |
34,571 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Weighted-average common units |
|
|
80,358,036 |
|
|
80,358,036 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Effect of dilutive units: |
|
|
|
|
|
|
|
||||||||
|
Restricted units |
|
|
— |
|
|
— |
|
||||||||
|
Options |
|
|
— |
|
|
— |
|
||||||||
|
Contingently issuable common units |
|
|
— |
|
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Diluted weighted-average common units |
|
|
80,358,036 |
|
|
80,358,036 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Earnings per common unit |
|
$ |
0.43 |
|
$ |
0.43 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|||
|
|
|
|
|
Equity Compensation Expenses |
|
Unrecognized |
|
||||||||||||||||||||||||||
|
|
|
|
|
Year Ended December 31, |
|
April 30, |
|
||||||||||||||||||||||||||
|
|
|
Grant Date |
|
||||||||||||||||||||||||||||||
|
|
|
2014 |
|
2013 |
|
2012 |
|
2014 |
|
||||||||||||||||||||||||
|
AEP I Profit Interest |
|
$ |
38,400 |
|
$ |
— |
|
$ |
— |
|
$ |
5,730 |
|
$ |
— |
|
|||||||||||||||||
|
AEP II Profit Interests |
|
|
33,423 |
|
|
14,714 |
|
|
6,016 |
|
|
5,923 |
|
|
12,709 |
|
|||||||||||||||||
|
AEP IV Profit Interests |
|
|
10,657 |
|
|
10,657 |
|
|
— |
|
|
— |
|
|
10,657 |
|
|||||||||||||||||
|
AEP VI Profit Interests |
|
|
9,047 |
|
|
9,047 |
|
|
— |
|
|
— |
|
|
9,047 |
|
|||||||||||||||||
|
Exchanged AEP Awards |
|
|
68,607 |
|
|
— |
|
|
12,944 |
|
|
33,584 |
|
|
— |
|
|||||||||||||||||
|
Indicus |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
—Membership Interest |
|
|
20,700 |
|
|
11,913 |
|
|
3,371 |
|
|
4,947 |
|
|
10,532 |
|
|||||||||||||||||
|
—Profit Interest |
|
|
5,464 |
|
|
(3,871 |
) |
|
1,821 |
|
|
1,851 |
|
|
— |
|
|||||||||||||||||
|
AREA Membership Interest |
|
|
25,381 |
|
|
20,678 |
|
|
4,685 |
|
|
— |
|
|
17,555 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total |
|
$ |
211,679 |
|
$ |
63,138 |
|
$ |
28,837 |
|
$ |
52,035 |
|
$ |
60,500 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
For the period from |
|
||||||
|
Restricted units |
|
$ |
8,826 |
|
|||||
|
Options |
|
|
9,869 |
|
|||||
|
Phantom units |
|
|
1,396 |
|
|||||
|
|
|
|
|
|
|||||
|
Equity-based compensation expense |
|
$ |
20,091 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|||||
|
|
|
Restricted Units |
|
Weighted Average |
|
||||||||||
|
Balance—May 1, 2014 |
|
|
— |
|
$ |
— |
|
||||||||
|
Granted—IPO |
|
|
4,936,051 |
|
|
18.08 |
|
||||||||
|
Forfeited |
|
|
(159,998 |
) |
|
18.05 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Balance—December 31, 2014 |
|
|
4,776,053 |
|
$ |
18.08 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
Options |
|
Weighted Average |
|
Weighted Average |
|
Aggregate |
|
||||||||||||||||||
|
Balance—May 1, 2014 |
|
|
— |
|
$ |
— |
|
|
— |
|
|
|
|
||||||||||||||
|
Granted—IPO |
|
|
24,835,227 |
|
|
19.00 |
|
|
9.33 |
|
|
|
|
||||||||||||||
|
Forfeited |
|
|
(604,709 |
) |
|
19.00 |
|
|
— |
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Balance—December 31, 2014 |
|
|
24,230,518 |
|
$ |
19.00 |
|
|
9.33 |
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Exercisable at December 31, 2014 |
|
|
— |
|
$ |
— |
|
|
— |
|
$ |
— |
|
||||||||||||||
|
Expected to vest after December 31, 2014 |
|
|
18,611,216 |
|
$ |
19.00 |
|
|
9.33 |
|
$ |
— |
|
||||||||||||||
|
Risk-free interest rate |
|
2.06% to 2.22% |
|
Weighted average expected dividend yield |
|
5.00% |
|
Expected volatility factor(a) |
|
34.00% to 35.00% |
|
Expected life in years |
|
6.92 to 7.00 |
|
(a) |
Expected volatility is based on comparable companies using daily stock prices. |
|
|
|
Phantom Units |
|
Weighted Average |
|
||||||||||
|
Balance May 1, 2014 |
|
|
— |
|
$ |
— |
|
||||||||
|
Granted—IPO |
|
|
686,395 |
|
|
19.00 |
|
||||||||
|
Forfeited |
|
|
(75,684 |
) |
|
— |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Balance December 31, 2014 |
|
|
610,711 |
|
$ |
19.00 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|||
The following table presents the financial results for the Company's operating segments, as well as the OMG, as of and for the year ended December 31, 2014:
|
|
|
Tradable |
|
Direct |
|
Private |
|
Real |
|
Total |
|
OMG |
|
Total |
|
||||||||||||||||||||||||||||||
|
Management fees (includes ARCC part I fees at $118,537) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Recurring fees |
|
$ |
144,102 |
|
$ |
275,571 |
|
$ |
90,690 |
|
$ |
87,683 |
|
$ |
598,046 |
|
$ |
— |
|
$ |
598,046 |
|
|||||||||||||||||||||||
|
Previously deferred fees |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total management fees |
|
|
144,102 |
|
|
275,571 |
|
|
90,690 |
|
|
87,683 |
|
|
598,046 |
|
|
— |
|
|
598,046 |
|
|||||||||||||||||||||||
|
Administrative fees and other income |
|
|
636 |
|
|
556 |
|
|
219 |
|
|
4,889 |
|
|
6,300 |
|
|
22,147 |
|
|
28,447 |
|
|||||||||||||||||||||||
|
Compensation and benefits |
|
|
(43,607 |
) |
|
(138,945 |
) |
|
(34,386 |
) |
|
(47,174 |
) |
|
(264,112 |
) |
|
(109,030 |
) |
|
(373,142 |
) |
|||||||||||||||||||||||
|
General, administrative and other expenses |
|
|
(13,909 |
) |
|
(11,196 |
) |
|
(9,166 |
) |
|
(15,632 |
) |
|
(49,903 |
) |
|
(56,184 |
) |
|
(106,087 |
) |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Fee related earnings (loss) |
|
|
87,222 |
|
|
125,986 |
|
|
47,357 |
|
|
29,766 |
|
|
290,331 |
|
|
(143,067 |
) |
|
147,264 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Performance fees—realized |
|
|
96,985 |
|
|
24,878 |
|
|
22,775 |
|
|
1,856 |
|
|
146,494 |
|
|
— |
|
|
146,494 |
|
|||||||||||||||||||||||
|
Performance fees—unrealized |
|
|
(71,825 |
) |
|
11,447 |
|
|
137,853 |
|
|
17,408 |
|
|
94,883 |
|
|
— |
|
|
94,883 |
|
|||||||||||||||||||||||
|
Performance fee compensation—realized |
|
|
(47,441 |
) |
|
(14,938 |
) |
|
(18,220 |
) |
|
— |
|
|
(80,599 |
) |
|
— |
|
|
(80,599 |
) |
|||||||||||||||||||||||
|
Performance fee compensation—unrealized |
|
|
29,017 |
|
|
(6,740 |
) |
|
(108,876 |
) |
|
(2,830 |
) |
|
(89,429 |
) |
|
— |
|
|
(89,429 |
) |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net performance fees |
|
|
6,736 |
|
|
14,647 |
|
|
33,532 |
|
|
16,434 |
|
|
71,349 |
|
|
— |
|
|
71,349 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Investment income (loss)—realized |
|
|
44,616 |
|
|
918 |
|
|
4,701 |
|
|
2,344 |
|
|
52,579 |
|
|
— |
|
|
52,579 |
|
|||||||||||||||||||||||
|
Investment income (loss)—unrealized |
|
|
(28,629 |
) |
|
5,305 |
|
|
34,318 |
|
|
(61 |
) |
|
10,933 |
|
|
— |
|
|
10,933 |
|
|||||||||||||||||||||||
|
Interest and other investment income |
|
|
10,086 |
|
|
606 |
|
|
4,741 |
|
|
265 |
|
|
15,698 |
|
|
— |
|
|
15,698 |
|
|||||||||||||||||||||||
|
Interest expense |
|
|
(2,017 |
) |
|
(1,538 |
) |
|
(3,925 |
) |
|
(1,137 |
) |
|
(8,617 |
) |
|
— |
|
|
(8,617 |
) |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net investment income (loss) |
|
|
24,056 |
|
|
5,291 |
|
|
39,835 |
|
|
1,411 |
|
|
70,593 |
|
|
— |
|
|
70,593 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Performance related earnings (loss) |
|
|
30,792 |
|
|
19,938 |
|
|
73,367 |
|
|
17,845 |
|
|
141,942 |
|
|
— |
|
|
141,942 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Economic net income (loss) |
|
$ |
118,014 |
|
$ |
145,924 |
|
$ |
120,724 |
|
$ |
47,611 |
|
$ |
432,273 |
|
$ |
(143,067 |
) |
$ |
289,206 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Distributable earnings (loss) |
|
$ |
183,479 |
|
$ |
133,510 |
|
$ |
54,156 |
|
$ |
10,460 |
|
$ |
381,605 |
|
$ |
(148,849 |
) |
$ |
232,756 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total assets |
|
$ |
501,883 |
|
$ |
290,252 |
|
$ |
657,185 |
|
$ |
224,686 |
|
$ |
1,674,006 |
|
$ |
15,206 |
|
$ |
1,689,212 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
The following table presents the financial results for the Company's operating segments, as well as the OMG, as of and for the year ended December 31, 2013:
|
|
|
Tradable |
|
Direct |
|
Private |
|
Real |
|
Total |
|
OMG |
|
Total |
|
||||||||||||||||||||||||||||||
|
Management fees (includes ARCC part I fees at $110,511) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Recurring fees |
|
$ |
129,745 |
|
$ |
238,389 |
|
$ |
93,440 |
|
$ |
40,051 |
|
$ |
501,625 |
|
$ |
— |
|
$ |
501,625 |
|
|||||||||||||||||||||||
|
Previously deferred fees |
|
|
15,032 |
|
|
— |
|
|
— |
|
|
— |
|
|
15,032 |
|
|
— |
|
|
15,032 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total management fees |
|
|
144,777 |
|
|
238,389 |
|
|
93,440 |
|
|
40,051 |
|
|
516,657 |
|
|
— |
|
|
516,657 |
|
|||||||||||||||||||||||
|
Administrative fees and other income |
|
|
286 |
|
|
400 |
|
|
663 |
|
|
4,138 |
|
|
5,487 |
|
|
18,468 |
|
|
23,955 |
|
|||||||||||||||||||||||
|
Compensation and benefits |
|
|
(38,289 |
) |
|
(122,082 |
) |
|
(30,595 |
) |
|
(30,812 |
) |
|
(221,778 |
) |
|
(83,288 |
) |
|
(305,066 |
) |
|||||||||||||||||||||||
|
General, administrative and other expenses |
|
|
(12,296 |
) |
|
(8,836 |
) |
|
(11,536 |
) |
|
(12,844 |
) |
|
(45,512 |
) |
|
(37,372 |
) |
|
(82,884 |
) |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Fee related earnings (loss) |
|
|
94,478 |
|
|
107,871 |
|
|
51,972 |
|
|
533 |
|
|
254,854 |
|
|
(102,192 |
) |
|
152,662 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Performance fees—realized |
|
|
121,414 |
|
|
17,385 |
|
|
85,067 |
|
|
317 |
|
|
224,183 |
|
|
— |
|
|
224,183 |
|
|||||||||||||||||||||||
|
Performance fees—unrealized |
|
|
15,431 |
|
|
2,326 |
|
|
48,402 |
|
|
5,824 |
|
|
71,983 |
|
|
— |
|
|
71,983 |
|
|||||||||||||||||||||||
|
Performance fee compensation—realized |
|
|
(55,758 |
) |
|
(10,258 |
) |
|
(68,145 |
) |
|
(26 |
) |
|
(134,187 |
) |
|
— |
|
|
(134,187 |
) |
|||||||||||||||||||||||
|
Performance fee compensation—unrealized |
|
|
(21,428 |
) |
|
(1,488 |
) |
|
(37,191 |
) |
|
— |
|
|
(60,107 |
) |
|
— |
|
|
(60,107 |
) |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net performance fees |
|
|
59,659 |
|
|
7,965 |
|
|
28,133 |
|
|
6,115 |
|
|
101,872 |
|
|
— |
|
|
101,872 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Investment income (loss)—realized |
|
|
75,467 |
|
|
8,180 |
|
|
6,590 |
|
|
(13,215 |
) |
|
77,022 |
|
|
— |
|
|
77,022 |
|
|||||||||||||||||||||||
|
Investment income (loss)—unrealized |
|
|
(32,976 |
) |
|
(3,793 |
) |
|
14,306 |
|
|
12,134 |
|
|
(10,329 |
) |
|
— |
|
|
(10,329 |
) |
|||||||||||||||||||||||
|
Interest and other income |
|
|
3,706 |
|
|
4,539 |
|
|
8,974 |
|
|
1,596 |
|
|
18,815 |
|
|
— |
|
|
18,815 |
|
|||||||||||||||||||||||
|
Interest expense |
|
|
(2,349 |
) |
|
(2,974 |
) |
|
(4,395 |
) |
|
(1,619 |
) |
|
(11,337 |
) |
|
— |
|
|
(11,337 |
) |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net investment income (loss) |
|
|
43,848 |
|
|
5,952 |
|
|
25,475 |
|
|
(1,104 |
) |
|
74,171 |
|
|
— |
|
|
74,171 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Performance related earnings |
|
|
103,507 |
|
|
13,917 |
|
|
53,608 |
|
|
5,011 |
|
|
176,043 |
|
|
— |
|
|
176,043 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Economic net income (loss) |
|
$ |
197,985 |
|
$ |
121,788 |
|
$ |
105,580 |
|
$ |
5,544 |
|
$ |
430,897 |
|
$ |
(102,192 |
) |
$ |
328,705 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Distributable earnings (loss) |
|
$ |
228,572 |
|
$ |
122,059 |
|
$ |
79,151 |
|
$ |
(20,338 |
) |
$ |
409,444 |
|
$ |
(103,725 |
) |
$ |
305,719 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total assets |
|
$ |
583,426 |
|
$ |
209,064 |
|
$ |
464,469 |
|
$ |
178,107 |
|
$ |
1,435,066 |
|
$ |
9,716 |
|
$ |
1,444,782 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
The following table presents the financial results for the Company's operating segments, as well as the OMG, as of and for the year ended December 31, 2012:
|
|
|
Tradable |
|
Direct |
|
Private |
|
Real |
|
Total |
|
OMG |
|
Total |
|
||||||||||||||||||||||||||||||
|
Management fees (includes ARCC part I fees at $95,182) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Recurring fees |
|
$ |
120,538 |
|
$ |
190,129 |
|
$ |
69,252 |
|
$ |
9,814 |
|
$ |
389,733 |
|
$ |
— |
|
$ |
389,733 |
|
|||||||||||||||||||||||
|
Previously deferred fees |
|
|
24,957 |
|
|
— |
|
|
— |
|
|
— |
|
|
24,957 |
|
|
— |
|
|
24,957 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total management fees |
|
|
145,495 |
|
|
190,129 |
|
|
69,252 |
|
|
9,814 |
|
|
414,690 |
|
|
— |
|
|
414,690 |
|
|||||||||||||||||||||||
|
Administrative fees and other income |
|
|
250 |
|
|
202 |
|
|
673 |
|
|
206 |
|
|
1,331 |
|
|
17,674 |
|
|
19,005 |
|
|||||||||||||||||||||||
|
Compensation and benefits |
|
|
(32,936 |
) |
|
(101,519 |
) |
|
(26,330 |
) |
|
(15,209 |
) |
|
(175,994 |
) |
|
(61,352 |
) |
|
(237,346 |
) |
|||||||||||||||||||||||
|
General, administrative and other expenses |
|
|
(14,295 |
) |
|
(5,773 |
) |
|
(7,960 |
) |
|
(4,008 |
) |
|
(32,036 |
) |
|
(26,445 |
) |
|
(58,481 |
) |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Fee related earnings (loss) |
|
|
98,514 |
|
|
83,039 |
|
|
35,635 |
|
|
(9,197 |
) |
|
207,991 |
|
|
(70,123 |
) |
|
137,868 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Performance fees—realized |
|
|
57,536 |
|
|
11,523 |
|
|
321,686 |
|
|
— |
|
|
390,745 |
|
|
— |
|
|
390,745 |
|
|||||||||||||||||||||||
|
Performance fees—unrealized |
|
|
110,112 |
|
|
2,194 |
|
|
(78,289 |
) |
|
— |
|
|
34,017 |
|
|
— |
|
|
34,017 |
|
|||||||||||||||||||||||
|
Performance fee compensation—realized |
|
|
(29,911 |
) |
|
(6,913 |
) |
|
(258,782 |
) |
|
— |
|
|
(295,606 |
) |
|
— |
|
|
(295,606 |
) |
|||||||||||||||||||||||
|
Performance fee compensation—unrealized |
|
|
(31,031 |
) |
|
(1,097 |
) |
|
60,009 |
|
|
— |
|
|
27,881 |
|
|
— |
|
|
27,881 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net performance fees |
|
|
106,706 |
|
|
5,707 |
|
|
44,624 |
|
|
— |
|
|
157,037 |
|
|
— |
|
|
157,037 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Investment income (loss)—realized |
|
|
46,048 |
|
|
(1,308 |
) |
|
36,817 |
|
|
(49 |
) |
|
81,508 |
|
|
— |
|
|
81,508 |
|
|||||||||||||||||||||||
|
Investment income (loss)—unrealized |
|
|
26,733 |
|
|
10,324 |
|
|
(10,923 |
) |
|
(6,451 |
) |
|
19,683 |
|
|
— |
|
|
19,683 |
|
|||||||||||||||||||||||
|
Interest and other income |
|
|
4,455 |
|
|
4,583 |
|
|
7,742 |
|
|
1,203 |
|
|
17,983 |
|
|
— |
|
|
17,983 |
|
|||||||||||||||||||||||
|
Interest expense |
|
|
(4,051 |
) |
|
(3,060 |
) |
|
(3,709 |
) |
|
(891 |
) |
|
(11,711 |
) |
|
— |
|
|
(11,711 |
) |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Net investment income (loss) |
|
|
73,185 |
|
|
10,539 |
|
|
29,927 |
|
|
(6,188 |
) |
|
107,463 |
|
|
— |
|
|
107,463 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Performance related earnings |
|
|
179,891 |
|
|
16,246 |
|
|
74,551 |
|
|
(6,188 |
) |
|
264,500 |
|
|
— |
|
|
264,500 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Economic net income (loss) |
|
$ |
278,405 |
|
$ |
99,285 |
|
$ |
110,186 |
|
$ |
(15,385 |
) |
$ |
472,491 |
|
$ |
(70,123 |
) |
$ |
402,368 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Distributable earnings (loss) |
|
$ |
163,781 |
|
$ |
86,944 |
|
$ |
137,284 |
|
$ |
(14,596 |
) |
$ |
373,413 |
|
$ |
(71,040 |
) |
$ |
302,373 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Total assets |
|
$ |
640,949 |
|
$ |
220,181 |
|
$ |
389,420 |
|
$ |
52,793 |
|
$ |
1,303,343 |
|
$ |
9,145 |
|
$ |
1,312,488 |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
|
For the Year Ended December 31, 2014 |
|
|||||||
|
|
|
Total |
|
Consolidation |
|
Consolidated |
|
|||
|
Revenues |
|
$ |
845,723 |
(1) |
$ |
(241,834 |
)(a) |
$ |
603,889 |
|
|
Expenses |
|
|
484,046 |
(2) |
|
375,993 |
(b) |
|
860,039 |
|
|
Other income (expense) |
|
|
70,593 |
(3) |
|
742,471 |
(c) |
|
813,065 |
|
|
Economic net income / Income before taxes |
|
|
432,273 |
|
|
124,640 |
(d) |
|
556,915 |
|
|
Total assets |
|
|
1,674,006 |
|
|
19,967,247 |
(e) |
|
21,641,253 |
|
|
|
|
For the Year Ended December 31, 2013 |
|
|||||||
|
|
|
Total |
|
Consolidation |
|
Consolidated |
|
|||
|
Revenues |
|
$ |
818,310 |
(1) |
$ |
(339,655 |
)(a) |
$ |
478,655 |
|
|
Expenses |
|
|
461,584 |
(2) |
|
340,313 |
(b) |
|
801,897 |
|
|
Other income (expense) |
|
|
74,171 |
(3) |
|
1,121,712 |
(c) |
|
1,195,883 |
|
|
Economic net income |
|
|
430,897 |
|
|
441,744 |
(d) |
|
872,641 |
|
|
Total assets |
|
|
1,435,066 |
|
|
22,270,318 |
(e) |
|
23,705,384 |
|
|
|
|
For the Year Ended December 31, 2012 |
|
|||||||
|
|
|
Total |
|
Consolidation |
|
Consolidated |
|
|||
|
Revenues |
|
$ |
840,783 |
(1) |
$ |
(506,737 |
)(a) |
$ |
334,046 |
|
|
Expenses |
|
|
475,755 |
(2) |
|
282,776 |
(b) |
|
758,531 |
|
|
Other income (expense) |
|
|
107,463 |
(3) |
|
1,578,856 |
(c) |
|
1,686,327 |
|
|
Economic net income |
|
|
472,491 |
|
|
789,351 |
(d) |
|
1,261,842 |
|
|
Total assets |
|
|
1,303,343 |
|
|
23,192,534 |
(e) |
|
24,495,877 |
|
|
|
|
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Management fees |
|
$ |
598,046 |
|
$ |
516,657 |
|
$ |
414,690 |
|
|||||||||||
|
Administrative fees and other income |
|
|
6,300 |
|
|
5,487 |
|
|
1,331 |
|
|||||||||||
|
Performance fees—realized |
|
|
146,494 |
|
|
224,183 |
|
|
390,745 |
|
|||||||||||
|
Performance fees—unrealized |
|
|
94,883 |
|
|
71,983 |
|
|
34,017 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total segment revenue |
|
$ |
845,723 |
|
$ |
818,310 |
|
$ |
840,783 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Compensation and benefits |
|
$ |
264,112 |
|
$ |
221,778 |
|
$ |
175,994 |
|
|||||||||||
|
General, administrative and other expenses |
|
|
49,903 |
|
|
45,512 |
|
|
32,036 |
|
|||||||||||
|
Performance fee compensation—realized |
|
|
80,599 |
|
|
134,187 |
|
|
295,606 |
|
|||||||||||
|
Performance fee compensation—unrealized |
|
|
89,429 |
|
|
60,107 |
|
|
(27,881 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total segment expense |
|
$ |
484,046 |
|
$ |
461,584 |
|
$ |
475,755 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Investment income (loss)—realized |
|
$ |
52,579 |
|
$ |
77,022 |
|
$ |
81,508 |
|
|||||||||||
|
Investment Income (loss)—unrealized |
|
|
10,933 |
|
|
(10,329 |
) |
|
19,683 |
|
|||||||||||
|
Interest, dividend and other investment income |
|
|
15,698 |
|
|
18,815 |
|
|
17,983 |
|
|||||||||||
|
Interest expense |
|
|
(8,617 |
) |
|
(11,337 |
) |
|
(11,711 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Net investment income |
|
$ |
70,593 |
|
$ |
74,171 |
|
$ |
107,463 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Consolidated Fund income eliminated in consolidation |
|
$ |
(249,394 |
) |
$ |
(351,983 |
) |
$ |
(524,411 |
) |
|||||||||||
|
Administrative fees and other income attributable to OMG |
|
|
22,147 |
|
|
18,468 |
|
|
17,674 |
|
|||||||||||
|
Performance fees—realized reclass(1) |
|
|
(1,856 |
) |
|
— |
|
|
— |
|
|||||||||||
|
Performance fees—unrealized reclass(1) |
|
|
(12,731 |
) |
|
(6,141 |
) |
|
— |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total consolidated adjustments and reconciling items |
|
$ |
(241,834 |
) |
$ |
(339,655 |
) |
$ |
(506,737 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
(1) |
Related to performance fees for AREA Sponsor Holdings LLC, an investment pool. Changes in value of this investment are reflected within other income (expense) in the Company's Consolidated Statements of Operations. |
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Consolidated Fund expenses added in consolidation |
|
$ |
187,494 |
|
$ |
317,083 |
|
$ |
345,048 |
|
|||||||||||
|
Consolidated Fund expenses eliminated in consolidation |
|
|
(120,694 |
) |
|
(182,104 |
) |
|
(228,543 |
) |
|||||||||||
|
OMG expenses |
|
|
165,214 |
|
|
120,660 |
|
|
87,797 |
|
|||||||||||
|
Acquisition related expenses |
|
|
11,043 |
|
|
6,235 |
|
|
(684 |
) |
|||||||||||
|
Equity compensation expense |
|
|
83,230 |
|
|
28,837 |
|
|
52,035 |
|
|||||||||||
|
Income tax expenses(1) |
|
|
— |
|
|
546 |
|
|
579 |
|
|||||||||||
|
Placement fees and underwriting costs |
|
|
14,753 |
|
|
8,403 |
|
|
13,240 |
|
|||||||||||
|
Amortization of intangibles |
|
|
27,610 |
|
|
34,399 |
|
|
8,682 |
|
|||||||||||
|
Depreciation expense |
|
|
7,347 |
|
|
6,255 |
|
|
4,603 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total consolidation adjustments and reconciling items |
|
$ |
375,993 |
|
$ |
340,313 |
|
$ |
282,776 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
(1) |
Relates to income taxes paid by subsidiary operating entities included in general, administrative and other expenses. |
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Consolidated Funds other income added in consolidation, net |
|
$ |
785,152 |
|
$ |
1,175,864 |
|
$ |
1,664,489 |
|
|||||||||||
|
Other income from Consolidated Funds eliminated in consolidation, net |
|
|
(53,883 |
) |
|
(60,291 |
) |
|
(85,643 |
) |
|||||||||||
|
Performance fee reclass(1) |
|
|
14,587 |
|
|
6,141 |
|
|
— |
|
|||||||||||
|
Loss on disposal of fixed assets |
|
|
(3,062 |
) |
|
— |
|
|
— |
|
|||||||||||
|
Non-cash other expense |
|
|
(324 |
) |
|
— |
|
|
— |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total consolidation adjustments and reconciling items |
|
$ |
742,471 |
|
$ |
1,121,712 |
|
$ |
1,578,856 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
(1) |
Related to performance fees for AREA Sponsor Holdings LLC. Changes in value of this investment are reflected within other (income) expense in the Company's Consolidated Statements of Operations. |
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Economic net income |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Income before taxes |
|
$ |
556,915 |
|
$ |
872,641 |
|
$ |
1,261,842 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Amortization of intangibles |
|
|
27,610 |
|
|
34,399 |
|
|
8,682 |
|
|||||||||||
|
Depreciation expense |
|
|
7,347 |
|
|
6,255 |
|
|
4,603 |
|
|||||||||||
|
Equity compensation expenses |
|
|
83,230 |
|
|
28,837 |
|
|
52,035 |
|
|||||||||||
|
Income tax expense(2) |
|
|
— |
|
|
546 |
|
|
579 |
|
|||||||||||
|
Acquisition-related expenses(1) |
|
|
11,043 |
|
|
6,235 |
|
|
(684 |
) |
|||||||||||
|
Placement fees and underwriting costs |
|
|
14,753 |
|
|
8,403 |
|
|
13,240 |
|
|||||||||||
|
OMG expenses, net |
|
|
143,067 |
|
|
102,192 |
|
|
70,123 |
|
|||||||||||
|
Loss on fixed asset disposal |
|
|
3,062 |
|
|
— |
|
|
— |
|
|||||||||||
|
Non-cash other expense |
|
|
324 |
|
|
— |
|
|
— |
|
|||||||||||
|
Income (loss) of non-controlling interests in Consolidated Funds |
|
|
(420,358 |
) |
|
(586,771 |
) |
|
(933,592 |
) |
|||||||||||
|
Income tax expense (benefit) of non-controlling interests in Consolidated Funds |
|
|
5,283 |
|
|
(41,840 |
) |
|
(4,338 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total consolidation adjustments and reconciling items |
|
|
(124,640 |
) |
|
(441,744 |
) |
|
(789,351 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Economic net income |
|
$ |
432,273 |
|
$ |
430,897 |
|
$ |
472,491 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Fee related earnings |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Income before taxes |
|
$ |
556,915 |
|
$ |
872,641 |
|
$ |
1,261,842 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Amortization of intangibles |
|
|
27,610 |
|
|
34,399 |
|
|
8,682 |
|
|||||||||||
|
Depreciation expense |
|
|
7,347 |
|
|
6,255 |
|
|
4,603 |
|
|||||||||||
|
Equity compensation expenses |
|
|
83,230 |
|
|
28,837 |
|
|
52,035 |
|
|||||||||||
|
Income tax expense(1) |
|
|
— |
|
|
546 |
|
|
579 |
|
|||||||||||
|
Acquisition-related expenses |
|
|
11,043 |
|
|
6,235 |
|
|
(684 |
) |
|||||||||||
|
Placement fees and underwriting costs |
|
|
14,753 |
|
|
8,403 |
|
|
13,240 |
|
|||||||||||
|
OMG expenses, net |
|
|
143,067 |
|
|
102,192 |
|
|
70,123 |
|
|||||||||||
|
Loss on fixed asset disposal |
|
|
3,062 |
|
|
— |
|
|
— |
|
|||||||||||
|
Non-cash other expense |
|
|
324 |
|
|
— |
|
|
— |
|
|||||||||||
|
Income of non-controlling interests in Consolidated Funds |
|
|
(420,358 |
) |
|
(586,771 |
) |
|
(933,592 |
) |
|||||||||||
|
Income tax expense (benefit) of non-controlling interests in Consolidated Funds |
|
|
5,283 |
|
|
(41,840 |
) |
|
(4,338 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total consolidation adjustments and reconciling items |
|
|
(124,640 |
) |
|
(441,744 |
) |
|
(789,351 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Economic net income |
|
|
432,273 |
|
|
430,897 |
|
|
472,491 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total performance fees income—realized |
|
|
(146,494 |
) |
|
(224,183 |
) |
|
(390,745 |
) |
|||||||||||
|
Total performance fees income—unrealized |
|
|
(94,883 |
) |
|
(71,983 |
) |
|
(34,017 |
) |
|||||||||||
|
Total performance fee compensation—realized |
|
|
80,599 |
|
|
134,187 |
|
|
295,606 |
|
|||||||||||
|
Total performance fee compensation—unrealized |
|
|
89,429 |
|
|
60,107 |
|
|
(27,881 |
) |
|||||||||||
|
Total investment income |
|
|
(70,593 |
) |
|
(74,171 |
) |
|
(107,463 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Fee related earnings |
|
$ |
290,331 |
|
$ |
254,854 |
|
$ |
207,991 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Management fees |
|
$ |
598,046 |
|
$ |
516,657 |
|
$ |
414,690 |
|
|||||||||||
|
Administrative fees and other income |
|
|
6,300 |
|
|
5,487 |
|
|
1,331 |
|
|||||||||||
|
Compensation and benefits |
|
|
(264,112 |
) |
|
(221,778 |
) |
|
(175,994 |
) |
|||||||||||
|
General, administrative and other expenses |
|
|
(49,903 |
) |
|
(45,512 |
) |
|
(32,036 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Fee related earnings |
|
$ |
290,331 |
|
$ |
254,854 |
|
$ |
207,991 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Performance related earnings: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Income before taxes |
|
$ |
556,915 |
|
$ |
872,641 |
|
$ |
1,261,842 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Amortization of intangibles |
|
|
27,610 |
|
|
34,399 |
|
|
8,682 |
|
|||||||||||
|
Depreciation expense |
|
|
7,347 |
|
|
6,255 |
|
|
4,603 |
|
|||||||||||
|
Equity compensation expenses |
|
|
83,230 |
|
|
28,837 |
|
|
52,035 |
|
|||||||||||
|
Income tax expense(1) |
|
|
— |
|
|
546 |
|
|
579 |
|
|||||||||||
|
Acquisition-related expenses |
|
|
11,043 |
|
|
6,235 |
|
|
(684 |
) |
|||||||||||
|
Placement fees and underwriting costs |
|
|
14,753 |
|
|
8,403 |
|
|
13,240 |
|
|||||||||||
|
OMG expenses, net |
|
|
143,067 |
|
|
102,192 |
|
|
70,123 |
|
|||||||||||
|
Loss on fixed asset disposal |
|
|
3,062 |
|
|
— |
|
|
— |
|
|||||||||||
|
Non-cash other expense |
|
|
324 |
|
|
— |
|
|
— |
|
|||||||||||
|
Income (loss) of non-controlling interests in Consolidated Funds |
|
|
(420,358 |
) |
|
(586,771 |
) |
|
(933,592 |
) |
|||||||||||
|
Income tax expense (benefit) of non-controlling interests in Consolidated Funds |
|
|
5,283 |
|
|
(41,840 |
) |
|
(4,338 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Economic net income |
|
|
432,273 |
|
|
430,897 |
|
|
472,491 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total management fees |
|
|
(598,046 |
) |
|
(516,657 |
) |
|
(414,690 |
) |
|||||||||||
|
Administrative fees and other income |
|
|
(6,300 |
) |
|
(5,487 |
) |
|
(1,331 |
) |
|||||||||||
|
Compensation and benefits |
|
|
264,112 |
|
|
221,778 |
|
|
175,994 |
|
|||||||||||
|
General, administrative and other expenses |
|
|
49,903 |
|
|
45,512 |
|
|
32,036 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Performance related earnings |
|
$ |
141,942 |
|
$ |
176,043 |
|
$ |
264,500 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total performance fees—realized |
|
$ |
146,494 |
|
|
224,183 |
|
|
390,745 |
|
|||||||||||
|
Total performance fees—unrealized |
|
|
94,883 |
|
|
71,983 |
|
|
34,017 |
|
|||||||||||
|
Total performance fee compensation—realized |
|
|
(80,599 |
) |
|
(134,187 |
) |
|
(295,606 |
) |
|||||||||||
|
Total performance fee compensation—unrealized |
|
|
(89,429 |
) |
|
(60,107 |
) |
|
27,881 |
|
|||||||||||
|
Net investment income (loss) |
|
|
70,593 |
|
|
74,171 |
|
|
107,463 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Performance related earnings |
|
$ |
141,942 |
|
$ |
176,043 |
|
$ |
264,500 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
(1) |
Relates to income taxes paid by subsidiary operating entities included in general, administrative and other expenses. |
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Distributable earnings |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Income (loss) before taxes |
|
$ |
556,915 |
|
$ |
872,641 |
|
$ |
1,261,842 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Amortization of intangibles |
|
|
27,610 |
|
|
34,399 |
|
|
8,682 |
|
|||||||||||
|
Equity compensation expenses |
|
|
83,230 |
|
|
28,837 |
|
|
52,035 |
|
|||||||||||
|
OMG distributable loss(1) |
|
|
148,849 |
|
|
103,725 |
|
|
71,040 |
|
|||||||||||
|
Non-cash acquisition-related expenses |
|
|
— |
|
|
— |
|
|
(684 |
) |
|||||||||||
|
Taxes paid(2) |
|
|
(2,335 |
) |
|
— |
|
|
— |
|
|||||||||||
|
Other non-cash items |
|
|
(1,201 |
) |
|
— |
|
|
— |
|
|||||||||||
|
Income (loss) of non-controlling interests in Consolidated Funds |
|
|
(420,358 |
) |
|
(586,771 |
) |
|
(933,592 |
) |
|||||||||||
|
Income tax (expense) benefit of non-controlling interests in Consolidated Funds |
|
|
5,283 |
|
|
(41,840 |
) |
|
(4,338 |
) |
|||||||||||
|
Unrealized performance fees |
|
|
(94,883 |
) |
|
(71,983 |
) |
|
(34,017 |
) |
|||||||||||
|
Unrealized performance fee compensation |
|
|
89,429 |
|
|
60,107 |
|
|
(27,881 |
) |
|||||||||||
|
Unrealized investment and other income (loss) |
|
|
(10,933 |
) |
|
10,329 |
|
|
(19,683 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Distributable earnings |
|
$ |
381,605 |
|
$ |
409,444 |
|
$ |
373,413 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Fee related earnings |
|
$ |
290,331 |
|
$ |
254,854 |
|
$ |
207,991 |
|
|||||||||||
|
Performance fees—realized |
|
|
146,494 |
|
|
224,183 |
|
|
390,745 |
|
|||||||||||
|
Performance fee compensation—realized |
|
|
(80,599 |
) |
|
(134,187 |
) |
|
(295,606 |
) |
|||||||||||
|
Investment and other income realized, net |
|
|
59,659 |
|
|
84,500 |
|
|
87,788 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Net performance related earnings—realized |
|
|
125,554 |
|
|
174,496 |
|
|
182,927 |
|
|||||||||||
|
Less: |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
One-time acquisition costs(3) |
|
|
(8,446 |
) |
|
(6,235 |
) |
|
— |
|
|||||||||||
|
Income tax expense(4) |
|
|
(1,722 |
) |
|
(546 |
) |
|
(579 |
) |
|||||||||||
|
Non-cash income items |
|
|
(1,525 |
) |
|
— |
|
|
— |
|
|||||||||||
|
Placement fees and underwriting costs |
|
|
(14,753 |
) |
|
(8,403 |
) |
|
(13,240 |
) |
|||||||||||
|
Non-cash depreciation and amortization(5) |
|
|
(7,832 |
) |
|
(4,722 |
) |
|
(3,686 |
) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Distributable earnings |
|
$ |
381,605 |
|
$ |
409,444 |
|
$ |
373,413 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
(1) |
Represents OMG distributable earnings which includes depreciation expense. |
|
(2) |
Represents current portion of income tax expense of subsidiary operating entities. |
|
(3) |
One-time acquisition costs are reduced by the amounts attributable to OMG, equal to $2,597 and $0 for the years ended December 31, 2014 and 2013, respectively. |
|
(4) |
Represents current tax expense of subsidiary operating entities. Taxes attributable to OMG equal $613, $0 and $0 for the years ended December 31, 2014, 2013, and 2012 respectively. |
|
(5) |
Depreciation and amortization includes loss on disposal of assets, and is reduced by the amounts attributed to OMG equal to $2,577, $1,533 and $917 for the years ended December 31, 2014, 2013 and 2012. |
|
|
|
2014 |
|
2013 |
|
2012 |
|
||||||||||||||
|
Total assets from Consolidated Funds eliminated in consolidation |
|
$ |
(806,765 |
) |
$ |
(805,908 |
) |
$ |
(841,351 |
) |
|||||||||||
|
Total assets from Consolidated Funds added in consolidation |
|
|
20,758,806 |
|
|
23,066,510 |
|
|
24,024,740 |
|
|||||||||||
|
OMG assets |
|
|
15,206 |
|
|
9,716 |
|
|
9,145 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total consolidation adjustments and reconciling items |
|
$ |
19,967,247 |
|
$ |
22,270,318 |
|
$ |
23,192,534 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|||
|
|
|
As of December 31, 2014 |
|
||||||||||||||||||||||||
|
|
|
Consolidated |
|
Consolidated Funds |
|
Eliminations |
|
Consolidated |
|
||||||||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Cash and cash equivalents |
|
$ |
148,858 |
|
$ |
— |
|
$ |
— |
|
$ |
148,858 |
|
||||||||||||||
|
Restricted cash and cash equivalents |
|
|
32,734 |
|
|
— |
|
|
— |
|
|
32,734 |
|
||||||||||||||
|
Investments, at fair value |
|
|
594,346 |
|
|
— |
|
|
(424,022 |
) |
|
170,324 |
|
||||||||||||||
|
Derivative assets, at fair value |
|
|
7,623 |
|
|
— |
|
|
— |
|
|
7,623 |
|
||||||||||||||
|
Performance fees receivable |
|
|
548,098 |
|
|
— |
|
|
(361,039 |
) |
|
187,059 |
|
||||||||||||||
|
Due from affiliates |
|
|
166,225 |
|
|
— |
|
|
(19,691 |
) |
|
146,534 |
|
||||||||||||||
|
Other assets |
|
|
64,798 |
|
|
— |
|
|
(93 |
) |
|
64,705 |
|
||||||||||||||
|
Intangible assets, net |
|
|
40,948 |
|
|
— |
|
|
— |
|
|
40,948 |
|
||||||||||||||
|
Goodwill |
|
|
85,582 |
|
|
— |
|
|
— |
|
|
85,582 |
|
||||||||||||||
|
Assets of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Cash and cash equivalents |
|
|
— |
|
|
1,314,397 |
|
|
— |
|
|
1,314,397 |
|
||||||||||||||
|
Investments, at fair value |
|
|
— |
|
|
19,123,950 |
|
|
— |
|
|
19,123,950 |
|
||||||||||||||
|
Loans held for investment, net |
|
|
— |
|
|
77,514 |
|
|
— |
|
|
77,514 |
|
||||||||||||||
|
Due from affiliates |
|
|
— |
|
|
13,262 |
|
|
(1,920 |
) |
|
11,342 |
|
||||||||||||||
|
Dividends and interest receivable |
|
|
— |
|
|
81,331 |
|
|
— |
|
|
81,331 |
|
||||||||||||||
|
Receivable for securities sold |
|
|
— |
|
|
132,753 |
|
|
— |
|
|
132,753 |
|
||||||||||||||
|
Derivative assets, at fair value |
|
|
— |
|
|
3,126 |
|
|
— |
|
|
3,126 |
|
||||||||||||||
|
Other assets |
|
|
— |
|
|
12,473 |
|
|
— |
|
|
12,473 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total assets |
|
$ |
1,689,212 |
|
$ |
20,758,806 |
|
$ |
(806,765 |
) |
$ |
21,641,253 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Accounts payable and accrued expenses |
|
$ |
101,912 |
|
$ |
— |
|
$ |
(602 |
) |
$ |
101,310 |
|
||||||||||||||
|
Accrued compensation |
|
|
129,433 |
|
|
— |
|
|
— |
|
|
129,433 |
|
||||||||||||||
|
Derivative liabilities, at fair value |
|
|
2,850 |
|
|
— |
|
|
— |
|
|
2,850 |
|
||||||||||||||
|
Due to affiliates |
|
|
19,881 |
|
|
— |
|
|
(851 |
) |
|
19,030 |
|
||||||||||||||
|
Performance fee compensation payable |
|
|
381,164 |
|
|
— |
|
|
(896 |
) |
|
380,268 |
|
||||||||||||||
|
Debt obligations |
|
|
245,752 |
|
|
— |
|
|
— |
|
|
245,752 |
|
||||||||||||||
|
Equity compensation put option liability |
|
|
20,000 |
|
|
— |
|
|
— |
|
|
20,000 |
|
||||||||||||||
|
Deferred tax liability, net |
|
|
19,861 |
|
|
— |
|
|
— |
|
|
19,861 |
|
||||||||||||||
|
Liabilities of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Accounts payable, accrued expenses and other liabilities |
|
|
— |
|
|
68,674 |
|
|
(85 |
) |
|
68,589 |
|
||||||||||||||
|
Due to affiliates |
|
|
— |
|
|
63,417 |
|
|
(60,976 |
) |
|
2,441 |
|
||||||||||||||
|
Payable for securities purchased |
|
|
— |
|
|
618,902 |
|
|
— |
|
|
618,902 |
|
||||||||||||||
|
Derivative liabilities, at fair value |
|
|
— |
|
|
42,332 |
|
|
— |
|
|
42,332 |
|
||||||||||||||
|
Securities sold short, at fair value |
|
|
— |
|
|
3,763 |
|
|
— |
|
|
3,763 |
|
||||||||||||||
|
Deferred tax liability, net |
|
|
— |
|
|
22,214 |
|
|
— |
|
|
22,214 |
|
||||||||||||||
|
CLO loan obligations |
|
|
— |
|
|
12,120,842 |
|
|
(71,672 |
) |
|
12,049,170 |
|
||||||||||||||
|
Fund borrowings |
|
|
— |
|
|
777,600 |
|
|
— |
|
|
777,600 |
|
||||||||||||||
|
Mezzanine debt |
|
|
— |
|
|
378,365 |
|
|
— |
|
|
378,365 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total liabilities |
|
|
920,853 |
|
|
14,096,109 |
|
|
(135,082 |
) |
|
14,881,880 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Redeemable interest in Consolidated Funds |
|
|
— |
|
|
1,037,450 |
|
|
— |
|
|
1,037,450 |
|
||||||||||||||
|
Redeemable interest in Ares Operating Group entities |
|
|
23,988 |
|
|
— |
|
|
— |
|
|
23,988 |
|
||||||||||||||
|
Non-controlling interest in Consolidated Funds: |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
||||||||||||||
|
Non-controlling interest in Consolidated Funds |
|
|
— |
|
|
5,663,172 |
|
|
(674,443 |
) |
|
4,988,729 |
|
||||||||||||||
|
Equity appropriated for Consolidated Funds |
|
|
— |
|
|
(37,926 |
) |
|
— |
|
|
(37,926 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Non-controlling interest in Consolidated Funds |
|
|
— |
|
|
5,625,246 |
|
|
(674,443 |
) |
|
4,950,803 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Non-controlling interest in Ares Operating Group entities |
|
|
463,493 |
|
|
— |
|
|
— |
|
|
463,493 |
|
||||||||||||||
|
Controlling interest in Ares Management, L.P.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Partners' Capital (80,667,664 units issued and outstanding) |
|
|
285,025 |
|
|
— |
|
|
— |
|
|
285,025 |
|
||||||||||||||
|
Accumulated other comprehensive gain (loss) |
|
|
(4,146 |
) |
|
— |
|
|
2,760 |
|
|
(1,386 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total controlling interest in Ares Management, L.P |
|
|
280,879 |
|
|
— |
|
|
2,760 |
|
|
283,639 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total equity |
|
|
744,372 |
|
|
5,625,246 |
|
|
(671,683 |
) |
|
5,697,935 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total liabilities, redeemable interests, non-controlling interests and equity |
|
$ |
1,689,212 |
|
|
20,758,806 |
|
|
(806,765 |
) |
$ |
21,641,253 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
As of December 31, 2013 |
|
||||||||||||||||||||||||
|
|
|
Consolidated |
|
Consolidated |
|
Eliminations |
|
Consolidated |
|
||||||||||||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Cash and cash equivalents |
|
$ |
89,802 |
|
$ |
— |
|
$ |
— |
|
$ |
89,802 |
|
||||||||||||||
|
Restricted cash and cash equivalents |
|
|
13,344 |
|
|
— |
|
|
— |
|
|
13,344 |
|
||||||||||||||
|
Investments, at fair value |
|
|
525,596 |
|
|
— |
|
|
(436,158 |
) |
|
89,438 |
|
||||||||||||||
|
Derivative assets, at fair value |
|
|
1,164 |
|
|
— |
|
|
— |
|
|
1,164 |
|
||||||||||||||
|
Performance fees receivable |
|
|
481,751 |
|
|
— |
|
|
(344,069 |
) |
|
137,682 |
|
||||||||||||||
|
Due from affiliates |
|
|
130,625 |
|
|
— |
|
|
(21,705 |
) |
|
108,920 |
|
||||||||||||||
|
Other assets |
|
|
75,599 |
|
|
— |
|
|
(1,999 |
) |
|
73,600 |
|
||||||||||||||
|
Intangible assets, net |
|
|
68,742 |
|
|
— |
|
|
— |
|
|
68,742 |
|
||||||||||||||
|
Goodwill |
|
|
58,159 |
|
|
— |
|
|
— |
|
|
58,159 |
|
||||||||||||||
|
Assets of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Cash and cash equivalents |
|
|
— |
|
|
1,638,003 |
|
|
— |
|
|
1,638,003 |
|
||||||||||||||
|
Investments, at fair value |
|
|
— |
|
|
20,823,338 |
|
|
— |
|
|
20,823,338 |
|
||||||||||||||
|
Due from affiliates |
|
|
— |
|
|
2,010 |
|
|
— |
|
|
2,010 |
|
||||||||||||||
|
Dividends and interest receivable |
|
|
— |
|
|
133,158 |
|
|
— |
|
|
133,158 |
|
||||||||||||||
|
Receivable for securities sold |
|
|
— |
|
|
427,871 |
|
|
— |
|
|
427,871 |
|
||||||||||||||
|
Derivative assets, at fair value |
|
|
— |
|
|
14,625 |
|
|
— |
|
|
14,625 |
|
||||||||||||||
|
Other assets |
|
|
— |
|
|
27,505 |
|
|
(1,977 |
) |
|
25,528 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total assets |
|
$ |
1,444,782 |
|
$ |
23,066,510 |
|
$ |
(805,908 |
) |
$ |
23,705,384 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Accounts payable and accrued expenses |
|
$ |
69,550 |
|
$ |
— |
|
$ |
(2,064 |
) |
$ |
67,486 |
|
||||||||||||||
|
Accrued compensation |
|
|
132,917 |
|
|
— |
|
|
— |
|
|
132,917 |
|
||||||||||||||
|
Derivative liabilities, at fair value |
|
|
2,907 |
|
|
— |
|
|
— |
|
|
2,907 |
|
||||||||||||||
|
Due to affiliates |
|
|
35,149 |
|
|
— |
|
|
(2,459 |
) |
|
32,690 |
|
||||||||||||||
|
Performance fee compensation payable |
|
|
295,978 |
|
|
— |
|
|
— |
|
|
295,978 |
|
||||||||||||||
|
Debt obligations |
|
|
153,119 |
|
|
— |
|
|
— |
|
|
153,119 |
|
||||||||||||||
|
Deferred tax liability, net |
|
|
21,002 |
|
|
— |
|
|
— |
|
|
21,002 |
|
||||||||||||||
|
Liabilities of Consolidated Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Accounts payable, accrued expenses and other liabilities |
|
|
— |
|
|
95,839 |
|
|
— |
|
|
95,839 |
|
||||||||||||||
|
Due to affiliates |
|
|
— |
|
|
92,211 |
|
|
(89,516 |
) |
|
2,695 |
|
||||||||||||||
|
Payable for securities purchased |
|
|
— |
|
|
945,115 |
|
|
— |
|
|
945,115 |
|
||||||||||||||
|
Derivative liabilities, at fair value |
|
|
— |
|
|
75,115 |
|
|
— |
|
|
75,115 |
|
||||||||||||||
|
Securities sold short, at fair value |
|
|
— |
|
|
1,633 |
|
|
— |
|
|
1,633 |
|
||||||||||||||
|
Deferred tax liability, net |
|
|
— |
|
|
35,904 |
|
|
— |
|
|
35,904 |
|
||||||||||||||
|
CLO loan obligations |
|
|
— |
|
|
11,838,396 |
|
|
(64,239 |
) |
|
11,774,157 |
|
||||||||||||||
|
Fund borrowings |
|
|
— |
|
|
2,070,598 |
|
|
— |
|
|
2,070,598 |
|
||||||||||||||
|
Mezzanine debt |
|
|
— |
|
|
323,164 |
|
|
— |
|
|
323,164 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total liabilities |
|
|
710,622 |
|
|
15,477,975 |
|
|
(158,278 |
) |
|
16,030,319 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Redeemable interest in Consolidated Funds |
|
|
— |
|
|
1,093,770 |
|
|
— |
|
|
1,093,770 |
|
||||||||||||||
|
Redeemable interest in Ares Operating Group entities |
|
|
40,751 |
|
|
— |
|
|
— |
|
|
40,751 |
|
||||||||||||||
|
Non-controlling interest in Consolidated Funds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Non-controlling interest in Consolidated Funds |
|
|
— |
|
|
6,339,504 |
|
|
(647,630 |
) |
|
5,691,874 |
|
||||||||||||||
|
Equity appropriated for Consolidated Funds |
|
|
— |
|
|
155,261 |
|
|
— |
|
|
155,261 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Non-controlling interest in Consolidated Funds |
|
|
— |
|
|
6,494,765 |
|
|
(647,630 |
) |
|
5,847,135 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Non-controlling interest in Ares Operating Group entities |
|
|
167,731 |
|
|
— |
|
|
— |
|
|
167,731 |
|
||||||||||||||
|
Members' equity and common stock of Predecessor |
|
|
525,678 |
|
|
— |
|
|
— |
|
|
525,678 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total equity |
|
|
693,409 |
|
|
6,494,765 |
|
|
(647,630 |
) |
|
6,540,544 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total liabilities, redeemable interests, non-controlling interests and equity |
|
$ |
1,444,782 |
|
$ |
23,066,510 |
|
$ |
(805,908 |
) |
$ |
23,705,384 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
For the Year Ended December 31, 2014 |
|
||||||||||||||||||||||||
|
|
|
Consolidated |
|
Consolidated |
|
Eliminations |
|
Consolidated |
|
||||||||||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Management fees (includes ARCC Part I Fees of $118,537) |
|
$ |
598,046 |
|
$ |
— |
|
$ |
(111,569 |
) |
$ |
486,477 |
|
||||||||||||||
|
Performance fees |
|
|
226,790 |
|
|
— |
|
|
(135,378 |
) |
|
91,412 |
|
||||||||||||||
|
Other fees |
|
|
28,447 |
|
|
— |
|
|
(2,447 |
) |
|
26,000 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total revenues |
|
|
853,283 |
|
|
— |
|
|
(249,394 |
) |
|
603,889 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Compensation and benefits |
|
|
456,372 |
|
|
— |
|
|
— |
|
|
456,372 |
|
||||||||||||||
|
Performance fee compensation |
|
|
170,028 |
|
|
— |
|
|
— |
|
|
170,028 |
|
||||||||||||||
|
General, administrative and other expense |
|
|
166,839 |
|
|
— |
|
|
— |
|
|
166,839 |
|
||||||||||||||
|
Consolidated Fund expenses |
|
|
— |
|
|
187,494 |
|
|
(120,694 |
) |
|
66,800 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total expenses |
|
|
793,239 |
|
|
187,494 |
|
|
(120,694 |
) |
|
860,039 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Interest and other investment income |
|
|
15,956 |
|
|
— |
|
|
(8,712 |
) |
|
7,244 |
|
||||||||||||||
|
Interest expense |
|
|
(8,617 |
) |
|
— |
|
|
— |
|
|
(8,617 |
) |
||||||||||||||
|
Other income (expense), net |
|
|
(3,644 |
) |
|
— |
|
|
1,222 |
|
|
(2,422 |
) |
||||||||||||||
|
Net realized gain (loss) on investments |
|
|
54,434 |
|
|
— |
|
|
(46,622 |
) |
|
7,812 |
|
||||||||||||||
|
Net change in unrealized appreciation (depreciation) on investments |
|
|
23,667 |
|
|
— |
|
|
649 |
|
|
24,316 |
|
||||||||||||||
|
Interest and other investment income of Consolidated Funds |
|
|
— |
|
|
939,735 |
|
|
(1,900 |
) |
|
937,835 |
|
||||||||||||||
|
Interest expense of Consolidated Funds |
|
|
— |
|
|
(674,373 |
) |
|
8,000 |
|
|
(666,373 |
) |
||||||||||||||
|
Net realized gain (loss) on investments of Consolidated Funds |
|
|
— |
|
|
44,781 |
|
|
— |
|
|
44,781 |
|
||||||||||||||
|
Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds |
|
|
— |
|
|
475,009 |
|
|
(6,520 |
) |
|
468,489 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total other income (expense) |
|
|
81,796 |
|
|
785,152 |
|
|
(53,883 |
) |
|
813,065 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Income before taxes |
|
|
141,840 |
|
|
597,658 |
|
|
(182,583 |
) |
|
556,915 |
|
||||||||||||||
|
Income tax expense (benefit) |
|
|
16,536 |
|
|
(5,283 |
) |
|
— |
|
|
11,253 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Net income |
|
|
125,304 |
|
|
602,941 |
|
|
(182,583 |
) |
|
545,662 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Less: Net income attributable to redeemable interests in Consolidated Funds |
|
|
— |
|
|
3,071 |
|
|
(506 |
) |
|
2,565 |
|
||||||||||||||
|
Less: Net income attributable to non-controlling interests in Consolidated Funds |
|
|
— |
|
|
599,870 |
|
|
(182,077 |
) |
|
417,793 |
|
||||||||||||||
|
Less: Net income attributable to redeemable interests in Ares Operating Group entities |
|
|
731 |
|
|
— |
|
|
— |
|
|
731 |
|
||||||||||||||
|
Less: Net income attributable to non-controlling interests in Ares Operating Group entities |
|
|
89,585 |
|
|
— |
|
|
— |
|
|
89,585 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Net income attributable to Ares Management, L.P. |
|
$ |
34,988 |
|
$ |
— |
|
$ |
— |
|
$ |
34,988 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
For the Year Ended December 31, 2013 |
|
||||||||||||||||||||||||
|
|
|
Consolidated |
|
Consolidated |
|
Eliminations |
|
Consolidated |
|
||||||||||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Management fees (includes ARCC Part I Fees of $110,511) |
|
$ |
516,657 |
|
$ |
— |
|
$ |
(141,085 |
) |
$ |
375,572 |
|
||||||||||||||
|
Performance fees |
|
|
290,026 |
|
|
— |
|
|
(210,226 |
) |
|
79,800 |
|
||||||||||||||
|
Other fees |
|
|
23,955 |
|
|
— |
|
|
(672 |
) |
|
23,283 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total revenues |
|
|
830,638 |
|
|
— |
|
|
(351,983 |
) |
|
478,655 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Compensation and benefits |
|
|
333,902 |
|
|
— |
|
|
— |
|
|
333,902 |
|
||||||||||||||
|
Performance fee compensation |
|
|
194,294 |
|
|
— |
|
|
— |
|
|
194,294 |
|
||||||||||||||
|
General, administrative and other expense |
|
|
138,722 |
|
|
— |
|
|
(258 |
) |
|
138,464 |
|
||||||||||||||
|
Consolidated Fund expenses |
|
|
— |
|
|
317,083 |
|
|
(181,846 |
) |
|
135,237 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total expenses |
|
|
666,918 |
|
|
317,083 |
|
|
(182,104 |
) |
|
801,897 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Interest and other investment income |
|
|
18,815 |
|
|
— |
|
|
(12,819 |
) |
|
5,996 |
|
||||||||||||||
|
Interest expense |
|
|
(9,475 |
) |
|
— |
|
|
— |
|
|
(9,475 |
) |
||||||||||||||
|
Debt extinguishment expense |
|
|
(1,862 |
) |
|
— |
|
|
— |
|
|
(1,862 |
) |
||||||||||||||
|
Other income (expense), net |
|
|
(200 |
) |
|
|
|
|
|
|
|
(200 |
) |
||||||||||||||
|
Net realized gain (loss) on investments |
|
|
77,015 |
|
|
— |
|
|
(83,388 |
) |
|
(6,373 |
) |
||||||||||||||
|
Net change in unrealized appreciation (depreciation) on investments |
|
|
(3,983 |
) |
|
— |
|
|
19,278 |
|
|
15,295 |
|
||||||||||||||
|
Interest and other investment income of Consolidated Funds |
|
|
— |
|
|
1,236,720 |
|
|
(683 |
) |
|
1,236,037 |
|
||||||||||||||
|
Interest expense of Consolidated Funds |
|
|
— |
|
|
(542,587 |
) |
|
8,156 |
|
|
(534,431 |
) |
||||||||||||||
|
Debt extinguishment gain of Consolidated Funds |
|
|
— |
|
|
11,800 |
|
|
— |
|
|
11,800 |
|
||||||||||||||
|
Net realized gain (loss) on investments of Consolidated Funds |
|
|
— |
|
|
64,382 |
|
|
— |
|
|
64,382 |
|
||||||||||||||
|
Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds |
|
|
— |
|
|
405,549 |
|
|
9,165 |
|
|
414,714 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total other income (expense) |
|
|
80,310 |
|
|
1,175,864 |
|
|
(60,291 |
) |
|
1,195,883 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Income before taxes |
|
|
244,030 |
|
|
858,781 |
|
|
(230,170 |
) |
|
872,641 |
|
||||||||||||||
|
Income tax expense |
|
|
17,423 |
|
|
41,840 |
|
|
— |
|
|
59,263 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Net income |
|
|
226,607 |
|
|
816,941 |
|
|
(230,170 |
) |
|
813,378 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Less: Net income attributable to redeemable interests in Consolidated Funds |
|
|
— |
|
|
141,040 |
|
|
(3,116 |
) |
|
137,924 |
|
||||||||||||||
|
Less: Net income attributable to non-controlling interests in Consolidated Funds |
|
|
— |
|
|
675,901 |
|
|
(227,054 |
) |
|
448,847 |
|
||||||||||||||
|
Less: Net income attributable to redeemable interests in Ares Operating Group entities |
|
|
2,451 |
|
|
— |
|
|
— |
|
|
2,451 |
|
||||||||||||||
|
Less: Net income attributable to non-controlling interests in Ares Operating Group entities |
|
|
43,674 |
|
|
— |
|
|
— |
|
|
43,674 |
|
||||||||||||||
|
Less: Net income attributable to controlling interest in Predecessor |
|
|
180,482 |
|
|
— |
|
|
— |
|
|
180,482 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Net income attributable to Ares Management, L.P. |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
For the Year Ended December 31, 2012 |
|
||||||||||||||||||||||||
|
|
|
Consolidated |
|
Consolidated |
|
Eliminations |
|
Consolidated |
|
||||||||||||||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Management fees (includes ARCC Part I Fees of $95,182) |
|
$ |
414,690 |
|
$ |
— |
|
$ |
(165,106 |
) |
$ |
249,584 |
|
||||||||||||||
|
Performance fees |
|
|
424,762 |
|
|
— |
|
|
(355,271 |
) |
|
69,491 |
|
||||||||||||||
|
Other fees |
|
|
19,005 |
|
|
— |
|
|
(4,034 |
) |
|
14,971 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total revenues |
|
|
858,457 |
|
|
— |
|
|
(524,411 |
) |
|
334,046 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Compensation and benefits |
|
|
288,719 |
|
|
— |
|
|
— |
|
|
288,719 |
|
||||||||||||||
|
Performance fee compensation |
|
|
267,725 |
|
|
— |
|
|
— |
|
|
267,725 |
|
||||||||||||||
|
General, administrative and other expense |
|
|
85,582 |
|
|
— |
|
|
— |
|
|
85,582 |
|
||||||||||||||
|
Consolidated Fund expenses |
|
|
— |
|
|
345,048 |
|
|
(228,543 |
) |
|
116,505 |
|
||||||||||||||
|
Total expenses |
|
|
642,026 |
|
|
345,048 |
|
|
(228,543 |
) |
|
758,531 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Interest and other investment income |
|
|
17,983 |
|
|
— |
|
|
(9,559 |
) |
|
8,424 |
|
||||||||||||||
|
Interest expense |
|
|
(8,679 |
) |
|
— |
|
|
— |
|
|
(8,679 |
) |
||||||||||||||
|
Debt extinguishment expense |
|
|
(3,032 |
) |
|
— |
|
|
— |
|
|
(3,032 |
) |
||||||||||||||
|
Other income (expense), net |
|
|
7 |
|
|
— |
|
|
— |
|
|
7 |
|
||||||||||||||
|
Net realized gain (loss) on investments |
|
|
81,508 |
|
|
— |
|
|
(74,846 |
) |
|
6,662 |
|
||||||||||||||
|
Net change in unrealized appreciation (depreciation) on investments |
|
|
19,694 |
|
|
— |
|
|
(21,364 |
) |
|
(1,670 |
) |
||||||||||||||
|
Interest and other investment income of Consolidated Funds |
|
|
— |
|
|
1,407,757 |
|
|
(1,164 |
) |
|
1,406,593 |
|
||||||||||||||
|
Interest expense of Consolidated Funds |
|
|
— |
|
|
(464,073 |
) |
|
14,696 |
|
|
(449,377 |
) |
||||||||||||||
|
Net realized gain (loss) on investments of Consolidated Funds |
|
|
— |
|
|
1,794,412 |
|
|
— |
|
|
1,794,412 |
|
||||||||||||||
|
Net change in unrealized appreciation (depreciation) on investments of Consolidated Funds |
|
|
— |
|
|
(1,073,607 |
) |
|
6,594 |
|
|
(1,067,013 |
) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Total other income (expense) |
|
|
107,481 |
|
|
1,664,489 |
|
|
(85,643 |
) |
|
1,686,327 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Income before taxes |
|
|
323,912 |
|
|
1,319,441 |
|
|
(381,511 |
) |
|
1,261,842 |
|
||||||||||||||
|
Income tax expense |
|
|
21,816 |
|
|
4,338 |
|
|
— |
|
|
26,154 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Net income |
|
|
302,096 |
|
|
1,315,103 |
|
|
(381,511 |
) |
|
1,235,688 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Less: Net income attributable to redeemable interests in Consolidated Funds |
|
|
— |
|
|
202,191 |
|
|
(3,116 |
) |
|
199,075 |
|
||||||||||||||
|
Less: Net income attributable to non-controlling interests in Consolidated Funds |
|
|
— |
|
|
1,112,912 |
|
|
(378,395 |
) |
|
734,517 |
|
||||||||||||||
|
Less: Net income attributable to redeemable interests in Ares Operating Group entities |
|
|
3,293 |
|
|
— |
|
|
— |
|
|
3,293 |
|
||||||||||||||
|
Less: Net income attributable to non-controlling interests in Ares Operating Group entities |
|
|
78,157 |
|
|
— |
|
|
— |
|
|
78,157 |
|
||||||||||||||
|
Less: Net income attributable to controlling interest in Predecessor |
|
|
220,646 |
|
|
— |
|
|
— |
|
|
220,646 |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Net income attributable to Ares Management, L.P. |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|||
|
Cash |
|
$ |
64,532 |
|
|||||
|
Equity (1,578,947 Ares Operating Group units) |
|
|
25,468 |
|
|||||
|
Contingent consideration |
|
|
59,171 |
|
|||||
|
|
|
|
|
|
|||||
|
Total |
|
$ |
149,171 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
Cash |
|
$ |
95 |
|
|||||
|
Other tangible assets |
|
|
610 |
|
|||||
|
Intangible assets: |
|
|
|
|
|||||
|
—Management contracts |
|
|
48,521 |
|
|||||
|
—Client relationships |
|
|
38,600 |
|
|||||
|
—Trade name |
|
|
3,200 |
|
|||||
|
|
|
|
|
|
|||||
|
Total intangible assets |
|
|
90,321 |
|
|||||
|
|
|
|
|
|
|||||
|
Total identifiable assets acquired |
|
|
91,026 |
|
|||||
|
|
|
|
|
|
|||||
|
Accounts payable, accrued expenses and other liabilities |
|
|
455 |
|
|||||
|
|
|
|
|
|
|||||
|
Total liabilities assumed |
|
|
455 |
|
|||||
|
Net identifiable assets acquired |
|
$ |
90,571 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|||||
|
Goodwill: |
|
|
|
|
|||||
|
—Assembled workforce |
|
|
8,300 |
|
|||||
|
—Others |
|
|
50,300 |
|
|||||
|
|
|
|
|
|
|||||
|
Total goodwill |
|
|
58,600 |
|
|||||
|
|
|
|
|
|
|||||
|
Net assets acquired |
|
$ |
149,171 |
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
Year Ended |
|
May 1, 2014 - |
|
||||||||||
|
Total Revenues |
|
$ |
42,767 |
|
$ |
28,512 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Net Income Attributable to Ares Management, L.P. |
|
$ |
174 |
|
$ |
116 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
Earnings Per Common Unit—Basic and Diluted |
|
$ |
0.00 |
|
$ |
0.00 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|||
|
|
|
For the Three Months Ended |
|
||||||||||
|
|
|
March 31, |
|
June 30, |
|
September 30, |
|
December 31, |
|
||||
|
Revenues |
|
$ |
133,628 |
|
$ |
131,618 |
|
$ |
175,161 |
|
$ |
163,482 |
|
|
Expenses |
|
|
184,130 |
|
|
259,102 |
|
|
203,337 |
|
|
213,470 |
|
|
Other income (loss) |
|
|
325,177 |
|
|
318,973 |
|
|
(48,709 |
) |
|
217,624 |
|
|
Income (loss) before provision for income taxes |
|
|
274,675 |
|
|
191,489 |
|
|
(76,885 |
) |
|
167,636 |
|
|
Net income (loss) |
|
|
281,370 |
|
|
186,222 |
|
|
(79,284 |
) |
|
157,354 |
|
|
Net income (loss) attributable to Ares Management, L.P. |
|
|
N/A |
|
|
17,842 |
|
|
13,971 |
|
|
3,175 |
|
|
Net income (loss) attributable to Ares Management L.P. per common unit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
N/A |
|
$ |
0.22 |
|
$ |
0.17 |
|
$ |
0.04 |
|
|
Diluted |
|
|
N/A |
|
$ |
0.22 |
|
$ |
0.17 |
|
$ |
0.04 |
|
|
Distributions declared per common unit(1) |
|
|
N/A |
|
$ |
0.18 |
|
$ |
0.24 |
|
$ |
0.24 |
|
|
|
|
For the Three Months Ended |
|
||||||||||
|
|
|
March 31, |
|
June 30, |
|
September 30, |
|
December 31, |
|
||||
|
Revenues |
|
$ |
107,537 |
|
$ |
89,302 |
|
$ |
135,877 |
|
$ |
145,939 |
|
|
Expenses |
|
|
213,067 |
|
|
109,793 |
|
|
237,037 |
|
|
242,000 |
|
|
Other income (loss) |
|
|
353,114 |
|
|
(109,931 |
) |
|
512,147 |
|
|
440,553 |
|
|
Income (loss) before provision for income taxes |
|
|
247,584 |
|
|
(130,422 |
) |
|
410,987 |
|
|
344,492 |
|
|
Net income (loss) |
|
|
223,134 |
|
|
(136,734 |
) |
|
406,197 |
|
|
320,781 |
|
|
Net income (loss) attributable to Ares Management, L.P. |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
Net income (loss) attributable to Ares Management L.P. per common unit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
Diluted |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
Distributions declared per common unit(1) |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
(1) |
Distributions declared per common unit are reflected in the period the income is earned. |
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
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