Ares Management Financial Model
Asset Management Company Financials Example (Free Excel Download)
Ares Management Corporation is a leading global alternative investment manager operating across credit, real estate, infrastructure, private equity, and secondaries markets.
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About this model
This model projects Fee-Paying Assets Under Management (FPAUM), Fee Related Earnings (FRE), and Realized Income to determine the dividend-paying capacity and sum-of-the-parts equity valuation for Ares Management Corporation.
Ares Management Corporation is a leading global alternative investment manager operating across credit, real estate, infrastructure, private equity, and secondaries markets. The firm generates revenue primarily through management fees charged on client capital and performance fees earned by exceeding return hurdles.
Business segments by Total AUM (as of FY2025):
- Credit Group: 65% of AUM
- Real Assets Group: 22% of AUM
- Secondaries Group: 7% of AUM
- Private Equity Group: 4% of AUM
The company operates an asset-light, intellectual-capital-heavy business model focused on recurring management fees from perpetual capital and long-dated funds. Ares is a dominant player in global direct lending and alternative credit. A major recent event was the strategic acquisition of GCP International (closed March 2025), which significantly expanded the Real Assets segment and contributed to total AUM crossing the $600 billion threshold in FY2025.
The downloadable Ares Management financial model includes SEC-sourced historical financials, forecast assumptions, core operating schedules, and valuation outputs in an Excel workbook built for review and scenario analysis.
A turnkey financial model
Live formulas, no hardcoded values
Outputs are driven by live formulas, so the workbook updates from its assumptions instead of relying on hardcoded results.
All assumptions in one tab
Inputs are clearly marked in the Assumptions tab and separated from calculations, making it clear what to change and what to leave intact.
Statements always balancing
For integrated-statement models, the balance sheet, cash flow, and supporting schedules tie through properly.
Distinct schedules for clarity
Debt, working capital, taxes, and cash flow can get messy quickly. We group calculations in clear schedules, not across disconnected tabs.
No hidden macros or external links
There are no unexplained external workbook links or macros to undermine auditability or portability.
Changes flow through the model
Update a key driver and see the impact carry through the forecast, financing, and return outputs. We never use hardcoded numbers in formulas.
Historicals & AssumptionsAres Management financial modelCompany, Historicals & Assumptions used
Source: SEC EDGAR · values in USD
| Line item | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Revenue | $4.21B | $3.06B | $3.63B | $3.88B | $5.60B |
| Income before taxes | $1.07B | $510.8M | $1.33B | $1.28B | $1.29B |
| General, administrative and other expenses | $444.2M | $695.3M | $660.1M | $736.5M | $996.1M |
| Net income | $386.7M | $167.5M | $474.3M | $441.0M | $426.1M |
Forecast assumptions
Defaults used in the downloadable model. Forecast horizon: FY2026–FY2030.
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How to build a detailed financial model for Ares Management
A complete walkthrough of every driver, margin, working-capital input, and capital-allocation assumption used in the downloadable model.
Revenue Deep Dive
Management Fees
- Segment name: Management Fees (reported within each of the four investment groups)
- Revenue driver formula: Average Fee-Paying AUM (FPAUM) x Effective Management Fee Rate
- Historical growth rate: 20-25% CAGR (FY2025 management fees grew 25% year-over-year to $3.68 billion)
- Key growth levers and headwinds: Driven by gross fundraising, deployment of "AUM not yet paying fees" (shadow AUM), and the shift towards perpetual capital vehicles. Headwinds include slower capital deployment in muted M&A environments and elevated redemption requests in retail wealth products.
- Pricing dynamics: Contractual fee rates typically range from 0.75% to 1.50% depending on the asset class, with liquid credit at the lower end and private equity at the higher end.
- Revenue recognition notes: Recognised over time as services are provided.
- Seasonality: Generally not seasonal, though Q4 often sees a spike in transaction-based fees and capital deployment.
Fee Related Performance Revenues (FRPR)
- Segment name: Fee Related Performance Revenues
- Revenue driver formula: Eligible FPAUM x Contractual Performance Rate (subject to high-water marks)
- Historical growth rate: Highly variable, grew 30% in FY2025.
- Key growth levers and headwinds: Driven by the performance of perpetual capital vehicles (like the diversified non-traded REIT) and secondaries products.
- Pricing dynamics: Typically 10-15% of returns above a specified hurdle rate.
Realized Performance Income (Carried Interest)
- Segment name: Realized Performance Income
- Revenue driver formula: Realized Gains on Fund Investments x Carry Rate (typically 20%)
- Historical growth rate: Lumpy and dependent on the monetisation environment.
- Key growth levers and headwinds: Relies on successful exits (M&A, IPOs, refinancings) of underlying portfolio companies.
- Revenue recognition notes: Only recognised in Realized Income when investments are sold and cash is distributed, avoiding the volatility of mark-to-market unrealised gains.
Cost Structure
Variable Costs / COGS
Alternative asset managers do not report traditional COGS. The closest equivalent is placement fees and direct fund expenses, which are typically netted against gross management fees or passed through to the funds.
Operating Expenses
- Compensation and Benefits: The largest expense category. Split into base compensation (fixed) and bonus/incentive compensation (variable). Base compensation scales with headcount, while incentive compensation is directly tied to FRE and Realized Performance Income.
- General, Administrative and Other Expenses (G&A): Includes occupancy, technology, professional fees, and travel. Typically scales slower than revenue, providing operating leverage.
- Depreciation & Amortisation: Minimal as a percentage of revenue, primarily related to leasehold improvements and amortisation of intangible assets from acquisitions (like GCP International).
- Stock-Based Compensation: Material expense used to align employee and shareholder interests. Excluded from Fee Related Earnings (FRE) but included in GAAP Net Income.
Margin Profile
- FRE Margin: 41.0% to 42.5% (FY2025 FRE margin was 41.7%). This is the most critical margin metric for the firm.
- Margin trend: Expanding slightly due to operating leverage and back-office efficiencies from the GCP integration, offset by investments in wealth distribution platforms.
- Segment-level margins: Credit typically operates at the highest margin due to scale, while Private Equity and Real Assets have slightly lower margins due to higher investment professional headcount requirements per dollar of AUM.
Balance Sheet Structure
- Total assets: Approximately $25 billion to $30 billion.
- Key asset categories: Investments (co-investments in Ares funds), Accrued Carried Interest (unrealised performance fees), Cash and Cash Equivalents, and Intangible Assets/Goodwill from acquisitions.
- Goodwill & intangibles: Represents a significant portion of assets due to historical acquisitions (e.g., Landmark Partners, AMP Capital's infrastructure debt platform, GCP International).
- Working capital profile:
- DSO: 30 to 45 days for management fees.
- Working capital is generally positive but not a primary driver of the business model. The firm uses cash to seed new funds rather than fund traditional working capital.
- PP&E: Immaterial. Primarily office leases and leasehold improvements.
- Right-of-use assets: Material due to global office footprint, offset by corresponding lease liabilities.
Capital Expenditure & Investment
- Capex as % of revenue: Less than 1%. The business is highly asset-light.
- Maintenance capex vs. growth capex: Almost entirely IT infrastructure and office build-outs.
- Major capex programmes underway: None material.
- M&A pattern: Transformational and bolt-on acquirer. Ares uses M&A to enter new asset classes or geographies (e.g., GCP International for global logistics real estate and Asian market presence).
- Typical acquisition multiple paid: Usually structured with significant earn-outs tied to future FRE generation to align interests.
Debt & Capital Structure
- Total debt: Primarily consists of senior notes and a revolving credit facility.
- Debt/EBITDA ratio: Ares targets a conservative leverage profile, typically maintaining Debt to FRE below 2.0x.
- Credit rating: Investment grade (typically A- or BBB+ range depending on the agency).
- Key debt instruments: Long-term senior unsecured notes (e.g., 2032 notes) and a corporate revolving credit facility used for short-term working capital and fund seeding.
- Interest rate profile: Predominantly fixed-rate senior notes.
- Preferred Equity: Ares has mandatory convertible preferred stock (e.g., 6.75% Series B) which must be factored into share count dilution and dividend outflows.
- Share repurchase programme: Active but secondary to dividend growth and M&A.
- Dividend policy: Highly predictable. Ares targets a payout ratio of approximately 70% to 80% of after-tax Realized Income. The Q1 2026 dividend was raised 20% to $1.35 per share ($5.40 annualised).
Cash Flow Characteristics
- Operating cash flow conversion: Very high. FRE converts to cash at nearly 100% because management fees are collected quarterly in cash and capital expenditure is minimal.
- Major non-cash items: Unrealised carried interest (accrued performance income) and stock-based compensation are the largest bridges between GAAP Net Income and cash flow.
- Working capital cash flow impact: Minimal impact on a year-over-year basis.
- Cash tax rate: Typically 15% to 20%, often lower than the statutory rate due to the partnership structure of certain subsidiaries and tax benefits from equity compensation.
Sheet Structure
- Assumptions: Hardcoded inputs for AUM growth, fee rates, margins, tax rates, and capital return policies.
- AUM & FPAUM Roll-forward: Beginning balance, fundraising, deployment, realisations, market impact, and ending balance broken out by the four segments (Credit, Real Assets, Secondaries, Private Equity).
- Revenue Build: Calculation of Management Fees (FPAUM x Fee Rate) and Performance Revenues by segment.
- FRE & Realized Income (Income Statement): Non-GAAP P&L mirroring Ares' management presentation. Calculates FRE, Realized Performance Income, and After-Tax Realized Income.
- GAAP Income Statement: Statutory P&L including unrealised marks, stock-based compensation, and GAAP tax provision.
- Balance Sheet: Assets (Cash, Investments, Accrued Carry, Goodwill) and Liabilities (Debt, Accrued Compensation, Equity).
- Cash Flow Statement: Operating, Investing, and Financing cash flows, highlighting fund seeding and dividend payments.
- Debt & Equity Schedule: Debt tranches, interest expense calculation, preferred stock dividends, and share count roll-forward (including preferred conversion).
- Valuation (SOTP & DCF): Sum-of-the-parts valuation applying a higher multiple to FRE and a lower multiple to Net Realized Performance Income, plus a standard Dividend Discount Model.
Key Financial Relationships
- `Credit FPAUM = Prior Period Credit FPAUM + Credit Capital Raised + Credit Capital Deployed - Credit Distributions - Credit Redemptions`
- `Credit Management Fees = Average Credit FPAUM x Credit Effective Fee Rate`
- `Total Management Fees = Sum of Management Fees across Credit, Real Assets, Secondaries, and Private Equity`
- `Fee Related Earnings (FRE) = Total Management Fees + Fee Related Performance Revenues - Base Compensation - G&A Expenses`
- `FRE Margin = FRE / (Total Management Fees + Fee Related Performance Revenues)`
- `Net Realized Performance Income = Gross Realized Performance Income - Realized Performance Compensation`
- `Realized Income = FRE + Net Realized Performance Income + Realized Investment Income - Interest Expense - Cash Taxes`
- `After-Tax Realized Income Per Share = Realized Income / Fully Diluted Shares Outstanding`
- `Common Dividend Paid = After-Tax Realized Income Per Share x Target Payout Ratio x Share Count`
- `AUM Not Yet Paying Fees (Shadow AUM) = Total AUM - FPAUM - Non-Fee Paying AUM`
- `Future Incremental Management Fees = AUM Not Yet Paying Fees x Estimated Deployment Fee Rate`
Cross-Sheet Dependencies
- The AUM & FPAUM Roll-forward sheet is the engine of the model. It feeds directly into the Revenue Build sheet to calculate Management Fees.
- The Revenue Build sheet feeds the top line of the FRE & Realized Income sheet.
- The FRE & Realized Income sheet determines the dividend capacity, which feeds the Cash Flow Statement (Financing section) and the Debt & Equity Schedule.
- The Debt & Equity Schedule calculates interest expense, which flows back into the FRE & Realized Income sheet to calculate After-Tax Realized Income. This creates a minor circularity that must be managed with a toggle or iterative calculation.
- The Cash Flow Statement ending cash balance feeds the Balance Sheet.
Sign Convention
- All revenue, AUM inflows (fundraising, deployment), and asset balances are entered as positive numbers.
- All expenses (compensation, G&A, interest, taxes) are entered as positive numbers and subtracted in total formulas.
- AUM outflows (distributions, redemptions) are entered as positive numbers and subtracted in the roll-forward formulas.
- On the Cash Flow Statement, sources of cash are positive and uses of cash (including dividends and capex) are negative.
Things Most Likely to Go Wrong
- Confusing Total AUM with FPAUM: Management fees are charged on FPAUM, not Total AUM. Applying fee rates to Total AUM will massively overstate revenue.
- Mishandling "AUM Not Yet Paying Fees": Ares has over $100 billion in shadow AUM. The model must activate this capital (move it to FPAUM) based on a deployment schedule, otherwise future growth will be understated.
- Including Unrealised Carry in Cash Flow: Accrued Carried Interest is a non-cash accounting mark. Only Realized Performance Income should flow into the dividend-paying capacity and operating cash flow.
- Ignoring the GCP International Acquisition: Historical Real Assets growth rates are not indicative of FY2025/FY2026 due to the GCP acquisition. The model must use pro-forma base levels for the Real Assets segment.
- Miscalculating FRE Margin: Stock-based compensation and performance-based compensation must be strictly excluded from the FRE calculation. Including them will ruin the FRE margin validation.
- Preferred Stock Dilution: Failing to account for the mandatory convertible preferred stock (Series B) in the fully diluted share count will overstate per-share metrics.
- Double Counting Fee Related Performance Revenues (FRPR): FRPR is part of FRE, whereas Realized Performance Income (Carry) is not. Mixing these two up distorts the quality of earnings valuation.
- Constant Currency Adjustments: Ares has significant European and Asian AUM. Fluctuations in EUR/USD and GBP/USD can swing reported AUM by 2-4% without any actual capital movement.
Validation Checks
- "FRE Margin must be between 41.0% and 42.5%; flag if outside this band."
- "Credit segment must represent >60% of Total FPAUM; flag if segment mix shifts drastically without a hardcoded M&A event."
- "Effective Management Fee Rate should remain between 0.90% and 1.05% on a consolidated basis."
- "Dividend payout ratio must be between 70% and 80% of After-Tax Realized Income."
- "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period."
- "Total AUM must equal FPAUM + AUM Not Yet Paying Fees + Non-Fee Paying AUM."
- "Debt to FRE ratio should not exceed 2.5x; flag if leverage breaches this threshold."
- "Cash flow conversion (Operating Cash Flow / FRE) should be >90%."
Key Assumptions (Default Values)
| Assumption | Default Value | Unit | Rationale |
|---|---|---|---|
| Credit FPAUM Annual Growth | 15.0 | % | Reflects strong ongoing demand for private credit and historical mid-teens growth. |
| Real Assets FPAUM Annual Growth | 12.0 | % | Normalised organic growth rate post-GCP International acquisition. |
| Secondaries FPAUM Annual Growth | 18.0 | % | High growth area as institutional LPs seek liquidity solutions. |
| Private Equity FPAUM Annual Growth | 5.0 | % | Slower growth reflecting challenging traditional buyout fundraising environment. |
| Consolidated Effective Fee Rate | 0.95 | % | Based on FY2025 Management Fees ($3.68B) divided by Average FPAUM. |
| FRE Margin | 41.7 | % | Actual reported FY2025 FRE margin, reflecting current operating leverage. |
| Realized Performance Income Margin | 45.0 | % | Typical margin on carried interest after paying out compensation to investment teams. |
| Cash Tax Rate | 18.0 | % | Historical average effective tax rate on Realized Income. |
| Annual Dividend Per Share | 5.40 | $ | Based on Q1 2026 declared quarterly dividend of $1.35 annualised. |
| Target Dividend Payout Ratio | 75.0 | % | Midpoint of management's historical payout guidance on Realized Income. |
| Cost of Debt | 5.5 | % | Weighted average interest rate on recent senior notes and credit facility. |
| FRE Valuation Multiple | 22.0 | x | Typical market multiple for highly predictable, recurring asset management fee streams. |
| Net Realized Performance Valuation Multiple | 8.0 | x | Lower multiple applied to volatile, market-dependent carried interest. |
Data Sources & Benchmarks
- Filings: SEC EDGAR (Form 10-K, 10-Q, 8-K) and the Ares Management Investor Relations website (quarterly earnings presentations are critical for non-GAAP metrics like FRE and FPAUM roll-forwards).
- Key Peers for Benchmarking: Blackstone (BX), KKR & Co. (KKR), Apollo Global Management (APO), The Carlyle Group (CG), and Blue Owl Capital (OWL).
- Industry Data Sources: Preqin (for alternative asset fundraising and dry powder data), PitchBook (for private credit and direct lending deal flow).
- Consensus Estimates: Bloomberg or FactSet for forward FRE and Realized Income per share estimates.
Sources
- Ares Management Corporation FY2024 and FY2025 Earnings Releases and Presentations (via SEC EDGAR and Ares Investor Relations).
- Ares Investor Day 2024 Presentations (Credit Group and Business Development overviews).
- Investing.com: "Ares Management Q4 2025 slides: AUM surges 29% despite earnings miss" (February 2026).
- Seeking Alpha: "Ares Management Corporation (ARES) Q4 2025 Earnings Call Transcript" (February 2026).
- Freedom24: "Investment analysis of Ares Management LP Partnership Units" (March 2026).
Do more with the Ares Management model
Frequently asked
What does Ares Management Corporation do?+
Ares Management Corporation is a leading global alternative investment manager operating across credit, real estate, infrastructure, private equity, and secondaries markets. The firm employs an asset-light, intellectual-capital-heavy business model, focusing on recurring management fees from perpetual capital and long-dated funds.
How does Ares Management generate revenue?+
Ares Management primarily generates revenue through management fees charged on client capital and performance fees earned by exceeding specific return hurdles. Their business model is driven by Fee-Paying Assets Under Management (FPAUM) and the performance of their various investment strategies.
What are the key assumptions for Ares Management's financial model regarding revenue growth?+
The financial model for Ares Management includes a key assumption for revenue growth set at approximately 19.76%. This growth rate is crucial for projecting future Fee-Paying Assets Under Management (FPAUM) and Fee Related Earnings (FRE).
What is Ares Management's capital expenditure strategy?+
Ares Management operates a highly asset-light business model, resulting in capital expenditures typically less than 1% of revenue. Capex is almost entirely focused on IT infrastructure and office build-outs, with no material major programs currently underway.
What is the purpose of the Ares Management financial model?+
The financial model for Ares Management projects Fee-Paying Assets Under Management (FPAUM), Fee Related Earnings (FRE), and Realized Income. Its primary purpose is to determine the dividend-paying capacity and to facilitate a sum-of-the-parts equity valuation for the company.
Can I download an Excel financial model for Ares Management?+
Yes, an Excel financial model for Ares Management is available for download. This model provides projections for key financial metrics, including FPAUM and FRE, with a forecast horizon from FY2026 through FY2030.
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