Ares Management Corporation

Welcome to Aries Management Corporation's third quarter and its September 30th, 2019 earnings conference call. At this time, all participants are in a listen-only mode. As a reminder, this conference call is being recorded on Thursday, October 31st, 2019. I will now turn the call over to Carl Drake, Head of Public Company Investor Relations for Aries Management.

Thank you, Eileen. Good afternoon, happy Halloween, and thank you for joining us today for our third quarter 2019 conference call. I'm joined today by Michael Arrighetti, our chief executive officer, and Michael McFerrin, our chief operating officer and chief financial officer. In addition, Bennett Rosenthal, co-head of our private equity group, Kip DeVere, head of our credit group, will be available for the question and answer session. Before we begin, I want to remind you that comments made during the course of this conference call and webcast contain forward-looking statements and are subject to risks and uncertainties. Our actual results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in our SEC filings. We assume no obligation to update any such forward-looking statements. Please also note that past performance is not a guarantee of future results. Moreover, please note that performance of an investment in our funds is discreet from performance of an investment in Harry's Management Corporation. During this conference call, we refer to certain non-GAAP financial measures such as fee-related earnings and realized income. We use these as measures of operating performance, not as measures of liquidity. These measures should not be considered an isolation from or as a substitute for measures prepared in accordance with GAAP. These measures may not be comparable to like-tidal measures used by other companies. In addition, please note that our management fees include ARCC Part 1 fees. Please refer to our third quarter earnings presentation we filed this morning for definitions and reconciliations of the measures to the most directly comparable GAAP measures. This presentation is also available under the Investor Resources section of our website at www. www.ariesmgmt.com and can be used as a reference for today's call. I'd like to remind you that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any securities of Aries or any other person including any interest in any fund. This morning we announced that we declared our fourth quarter common dividend of 32 cents per Class A common stock, a 14% year-to-year increase. Dividend will be paid on December 31st to holders of record on December 17th. We also declared our quarterly preferred dividend of 43.75 cents per Series A preferred share, which is payable on December 31st, 2019, to effective holders of record on December 13th. Now we'll turn the call over to Michael Arrighetti, who will start with some quarterly financial and business highlights.

Thanks, Carl. Good afternoon, everyone. Our third quarter results marked our 10th consecutive quarter of sequential AUM, management fee, and fee-related earnings growth. All of these metrics grew in the mid-teens or better on a year-over-year basis. Our AUM and fee-paying AUM increased 15% and 18% respectively. Our management fees increased 22%, and our fee-related earnings increased 35% versus the prior year. We're also pleased to see our FRE margins meaningfully expand during Q3. Our FRE margin increased to 33% from just under 31% last quarter, driven by a pickup in management fees across all three investment groups from a combination of deployment and strong fundraising activities. Continued strength in our fund performance is highlighted by the 38% growth in our accrued net performance fees year-to-date. During the third quarter, we added $3.5 billion in new gross capital commitments, which brings our year-to-date commitments to $17 billion and our last 12-month gross commitments to over $27 billion. We continue to expand our wallet share with our existing client base, and we've seen a strong influx of new investors to the platform. Of the capital raised directly from institutions in the third quarter, approximately 80% was from existing ARIES fund investors and 20% from new investors. Clearly, the deepening of our valuable relationships with our clients continues to drive our growth as we perform and expand our solutions across the entire platform. For the third quarter, we continued to raise capital across all three of our groups. In our credit group, we raised approximately $2.3 billion across various strategies, including U.S. and European direct lending, alternative credit, and U.S. and European liquid credit. Within private equity, we also added about $300 million to our energy and special opportunity strategies. In real estate, we held the final close for our fifth European Opportunistic Fund, or EF5, which was oversubscribed at its hard cap of 1.8 billion euros, or about $2 billion. This is the largest Aries real estate equity fundraise to date, and it meaningfully exceeded its target of 1.25 billion euros. One-third of the investors in that fund were new to Aries, and over half were new to our European real estate strategy. And of the existing investors that re-upped, the average upsize of their commitment was over 30%, which reflected in part the strong performance of our predecessor fund. During the third quarter, we also meaningfully expanded real estate debt commitments with an additional $450 million of capital raised as we near $5 billion in total AUM in that growing strategy. Looking ahead over the next 12 to 24 months, our pipeline is strong as we begin fundraising for several large successor funds across all three investment groups. We recently launched our sixth corporate private equity fund with a target of 9.25 billion, and we continue to raise capital on our special opportunities, energy opportunities, and climate infrastructure strategies. In real estate, we're in the market with our third U.S. opportunistic real estate private equity fund, targeting 1.5 billion, and our third European value-add private equity fund, targeting 1 billion euros. We also continue to actively raise funds in our real estate debt strategy and are seeing meaningful growth in our open-ended fund offerings. Within credit, we recently launched our flagship alternative credit fund with a target of over $2 billion. In addition, based on the pace of current deployment, several large successor funds are likely to launch next year, including our second junior capital direct lending and our fifth European direct lending funds. with our second US Senior Direct Lending Fund following shortly thereafter. We also continue to raise capital in global liquid credit and within all of our public vehicles. As we've discussed on past calls, we're focused on expanding our fundraising capabilities geographically. To that end, we recently announced the formation of ARIES Australia Management to coordinate marketing and investment management in Australia and New Zealand. Ares Australia Management is a strategic joint venture with Fidante, an investment management company that's part of Challenger Limited based in Sydney. The formation of this strategic partnership will better position us to address the increased demand for alternative yield products from that region's growing retirement community. We believe that this joint venture could scale nicely for us over time as we offer funds across all three of our groups in the region with a value-added strategic partner. From an investment standpoint, the markets continue to be challenging, yet investable and constructive. We clearly benefit from our deep origination platform and increased scale, which differentiate us in the market and create moats around our business. In the third quarter, we used our extensive self-origination capabilities and flexible capital to invest $7 billion in our drawdown funds across the platform. We were most active in U.S. and European direct lending, where we emphasized funding the growth needs of our existing borrowers. To put that in perspective, approximately 40% of our direct lending deal flow continues to come from existing borrowers, and approximately 95% of those loans were senior loans. These incumbent relationships enable us to make new commitments to fund the growth needs of our best borrowers in less competitive situations. We also invested approximately $2.4 billion in private equity across our corporate infrastructure and power and special opportunity strategies. For example, during the third quarter, we completed the acquisition of a leading provider of safety, quality, patient experience, and workforce engagement solutions for healthcare organizations. And with infrastructure and power, we made an investment to develop the largest single-phase, single-site wind project in the U.S., And in that deal, we've already signed 80% of its eventual renewable power capacity through long-term contracts with blue-chip corporate clients like Facebook. Our investing activities continue to translate into steady, positive investment returns for our clients. Our reported quarterly credit, PE, and real estate returns all range between 2% to 4% for the third quarter, with our corporate and real estate PE strategies at the high end of that range. And with that, I'll now turn the call over to Mike McFerrin, our CFO, who will walk through our third quarter results in more detail. Mike?