Ares Management Corp (ARES)

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Ares Management Corporation is a Delaware corporation. Unless the context otherwise requires, references to “Ares,” “we,” “us,” “our,” and the “Company” are intended to mean the business and operations of Ares Management Corporation and its consolidated subsidiaries. The following discussion analyzes the financial condition and results of operations of the Company. “Consolidated Funds” refers collectively to certain Ares funds, co-investment vehicles, CLOs and SPACs that are required under U.S. GAAP to be consolidated in our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Additional terms used by the Company are defined in the Glossary and throughout the Management’s Discussion and Analysis in this Quarterly Report on Form 10-Q.

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements of Ares Management Corporation and the related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and the related notes included in the 2025 Annual Report on Form 10-K of Ares Management Corporation.

Amounts and percentages presented throughout our discussion and analysis of financial condition and results of operations may reflect rounded results in thousands (unless otherwise indicated) and consequently, totals may not appear to sum. In addition, illustrative charts may not be presented at scale.

The changes from current year compared to prior year may be deemed to be not meaningful and are designated as “NM” within the discussion and analysis of financial condition and results of operations.

Trends Affecting Our Business

We believe that our disciplined investment philosophy across our distinct but complementary investment groups contributes to the stability of our performance throughout market cycles. For the three months ended June 30, 2026, 94% of our management fees were derived from perpetual capital vehicles or long-dated funds. Our funds have a stable base of committed capital enabling us to invest in assets with a long-term focus over different points in a market cycle and to take advantage of market volatility. However, our results from operations, including the fair value of our AUM, are affected by a variety of factors. Conditions in the global financial markets and economic and political environments may impact our business, particularly in the U.S., Europe and Asia-Pacific (“APAC”).

The following table presents returns of selected market indices:-

During the second quarter of 2026, global markets continued to experience heightened volatility amid geopolitical tension in the Middle East and evolving expectations regarding monetary and U.S. trade policies. However, the possibility of a ceasefire between the U.S. and Iran eased energy market pressures, and resilient macroeconomic conditions supported positive returns across U.S. and European high yield bonds and leveraged loans. U.S. and international equity markets were also supported by first quarter corporate earnings growth and improving investor sentiment.

Despite elevated uncertainty stemming from disruptions in energy markets, global commercial real estate markets continued to improve in the second quarter of 2026. Transaction volumes continued to increase, debt availability improved and property values appreciated across markets. Rising Japanese government bond yields pressured REIT performance during the quarter, however, we do not believe this reflects deterioration in our portfolio’s underlying fundamentals. While performance varies by sector and geography, we believe constrained new supply will be a meaningful tailwind for commercial real estate markets. Infrastructure investment remained robust, particularly across the digital infrastructure, energy and utilities sectors.

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Renewable energy deployment also continued at a meaningful scale, underpinned by stable demand for clean energy and an expanding development pipeline. While performance varies by sector and geography, we believe increasing power demand, continued renewable energy deployment and the expansion of digital infrastructure will provide meaningful opportunities for infrastructure investment in coming periods.

Private equity activity moderated during the quarter with the concentration in a smaller number of large transactions. Dealmaking and exit activity continued to reflect market selectivity and elevated uncertainty in private credit markets. Sponsors continued to prioritize businesses with resilient fundamentals and clear paths to value creation, including differentiated technology and artificial intelligence capabilities. We believe a renewed focus on value creation strategies that emphasize operational improvements, selective deployment, talent optimization and digital transformation are essential to support long-term momentum.

We believe our portfolios across all strategies remain well positioned for a fluctuating interest rate environment. On a market value basis, approximately 82% of our debt assets and 51% of our total assets were floating rate instruments as of June 30, 2026.

Managing Business Performance

Operating Metrics

We measure our business performance using certain operating metrics that are common to the alternative investment management industry and are discussed below.

Assets Under Management

AUM refers to the assets we manage and is viewed as a metric to measure our investment and fundraising performance as it reflects assets generally at fair value plus available uncalled capital.

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The tables below present rollforwards of our total AUM by segment ($ in millions):

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The components of our AUM are presented below ($ in billions):

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Results of Operations

Consolidated Results of Operations

Although the consolidated results presented below include the results of our operations together with those of the Consolidated Funds and other joint ventures, we separate our analysis of those items primarily impacting the Company from those of the Consolidated Funds.

The following table presents our summarized consolidated results of operations ($ in thousands):

Year Ended December 31, 2025 Compared to Year Ended December 31, 2024

Consolidated Results of Operations of the Company

The following discussion sets forth information regarding our consolidated results of operations:

Revenues

Management Fees. Within the Credit Group, our publicly-traded funds and our perpetual wealth vehicles contributed an increase in management fees of $172.8 million for the year ended December 31, 2025 compared to the prior year, primarily driven by increases in the average size of their portfolios. Capital deployment in private funds within our direct lending and alternative credit strategies led to a rise in FPAUM, contributing to an increase in management fees of $112.5 million for the year ended December 31, 2025 compared to the prior year. Within the Real Assets Group, funds that we manage as a result of the GCP Acquisition generated $202.8 million in additional management fees for the year ended December 31, 2025. In addition, management fees also increased by $20.3 million for the year ended December 31, 2025 compared to the prior year, driven by the WSM Acquisition, which began generating fees in the fourth quarter of 2024.

In addition, Part I Fees increased by $74.5 million for the year ended December 31, 2025 compared to the prior year. The increase in Part I Fees were primarily attributable to ASIF, our open-ended European direct lending fund, our open-ended core infrastructure fund and CADC driven by increase in net investment income from their growing portfolio of investments.

For detail regarding the fluctuations of management fees within each of our segments, see “—Results of Operations by Segment.”

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Carried Interest Allocation. The following table sets forth carried interest allocation by segment ($ in millions):

The activity was principally composed of the following:

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