Ares Stock Pitch Annie Wang, David Chui, Derek Wei, Mitesh Amarthaluru, Albert Li

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Ares Stock Pitch Annie Wang, David Chui, Derek Wei, Mitesh Amarthaluru, Albert Li
Ares	
  Stock	
  Pitch	
  

Annie	
  Wang,	
  David	
  Chui,	
  Derek	
  Wei,	
  Mitesh	
  Amarthaluru,	
  Albert	
  Li	
  
Ares Stock Pitch Annie Wang, David Chui, Derek Wei, Mitesh Amarthaluru, Albert Li
Table	
  of	
  Contents	
  

  I. Investment	
  Thesis	
  
  II. Industry	
  Overview	
  
  III.Company	
  Overview	
  
  IV.Financials	
  
  V. ValuaFon	
  
  VI.Appendix	
  

                                 2	
  
Ares Stock Pitch Annie Wang, David Chui, Derek Wei, Mitesh Amarthaluru, Albert Li
I.	
  Investment	
  Thesis	
  
Ares Stock Pitch Annie Wang, David Chui, Derek Wei, Mitesh Amarthaluru, Albert Li
Ares	
  Management,	
  L.P.	
  (NYSE:	
  ARES)	
  
 Ares	
  Management	
  is	
  under-­‐recognized,	
  which	
  has	
  resulted	
  in	
  a	
  significant	
  undervalua7on	
  of	
  the	
  firm’s	
  LP	
  units,	
  
 despite	
  consistently	
  strong	
  earnings	
  within	
  the	
  highly	
  aHrac7ve	
  alterna7ve	
  asset	
  management	
  sector	
  

          	
  Recommenda7on:	
  Buy                                  	
  Current	
  Price:	
  $17.68             	
  Price	
  Target:	
  $25.45	
  (44%	
  upside)	
  	
  

                                                                                      Catalysts	
  
  n Robust	
  growth	
  in	
  global	
  alternaFve	
  AUM	
  as	
  investors	
  seek	
  higher	
  returns	
  from	
  non-­‐tradiFonal	
  sources	
  
  n ShiX	
  in	
  investor	
  preferences	
  to	
  relaFonships	
  with	
  fewer	
  firms	
  benefits	
  large	
  mulF-­‐product	
  managers	
  with	
  consistently	
  
     strong	
  track	
  records	
  	
  
  n High	
  proporFon	
  of	
  management	
  fees	
  should	
  drive	
  a	
  higher	
  valuaFon	
  relaFve	
  to	
  other	
  alternaFve	
  asset	
  managers	
  	
  
  n Increased	
  a[enFon	
  as	
  the	
  firm	
  completes	
  larger	
  deals	
  and	
  the	
  industry	
  in	
  general	
  gains	
  addiFonal	
  a[enFon	
  

                                                                                         Risks	
  
   n Poor	
  future	
  investment	
  results	
  could	
  result	
  in	
  the	
  loss	
  of	
  both	
  performance	
  fees	
  and	
  AUM	
  
   n Loss	
  of	
  senior	
  investment	
  professionals	
  
   n Downward	
  pressure	
  on	
  fees	
  by	
  investors	
  could	
  result	
  in	
  a	
  reducFon	
  in	
  both	
  quanFty	
  and	
  quality	
  of	
  revenues	
  
   n ConFnued	
  lack	
  of	
  a[enFon	
  and	
  recogniFon	
  from	
  investors	
  could	
  impede	
  stock	
  performance	
  
   	
  
                                                                                                                                                                             4	
  
Ares Stock Pitch Annie Wang, David Chui, Derek Wei, Mitesh Amarthaluru, Albert Li
II.	
  Industry	
  Overview	
  
Ares Stock Pitch Annie Wang, David Chui, Derek Wei, Mitesh Amarthaluru, Albert Li
Industry	
  Overview	
  
                                                                 Tradi7onal	
  vs.	
  Alterna7ve	
  Investments	
  

                                      Alternative                                                                                    Traditional
Higher	
  performance	
  objective                                                           Relative	
  performance	
  objective
May	
  use	
  leverage                                                                       Limited	
  or	
  no	
  leverage
Performance	
  dependent	
  primarily	
  on	
  manager	
  s kill                             Performance	
  primarily	
  dependent	
  on	
  market	
  returns
Lower	
  correlation	
  with	
  market	
  indices                                            Higher	
  correlation	
  with	
  market	
  indices
Less	
  liquid                                                                               More	
  liquid
Higher	
  fees,	
  which	
  generally	
  include	
  performance	
  incentive	
  fees         Typically	
  management	
  fees	
  only
Ability	
  to	
  s hort                                                                      Shorting	
  restricted

                                                             Economics	
  of	
  an	
  Alterna7ve	
  Asset	
  Manager	
  

 n   Revenues:	
  Management	
  fees,	
  performance	
  fees,	
  investments	
  in	
  firm’s	
  investment	
  funds	
  
 n   Costs:	
  Base	
  compensaFon,	
  performance	
  compensaFon,	
  SG&A	
  
 n   Drivers:	
  AUM,	
  fees	
  as	
  a	
  percentage	
  of	
  AUM,	
  investment	
  performance	
  
 n   A[racFve	
  features	
  of	
  the	
  business	
  model	
  
      n Increasing	
  returns	
  to	
  scale	
  (declining	
  costs	
  as	
  a	
  percentage	
  of	
  revenue)	
  
      n SFcky	
  capital	
  combined	
  with	
  fixed	
  management	
  fees	
  as	
  a	
  %	
  of	
  AUM	
  results	
  in	
  very	
  predictable,	
  stable,	
  recurring	
  revenues	
  

                                                                                                                                                                                            6	
  
Ares Stock Pitch Annie Wang, David Chui, Derek Wei, Mitesh Amarthaluru, Albert Li
Industry	
  Overview	
  
  80                                                                                                                          16
                    Tradi7onal	
  vs.	
  Alterna7ve	
  Investment	
  Growth	
                                                                                 Alloca7on	
  to	
  Alterna7ves	
  
        ($	
  trillions)	
                                                                                                                                                                        25%
  60                                                                                                                     57   12

                                                                                                              50
                                            46                                      46          46
                                 43                                  43
                                                                                                                                                                 12%
  40              37                                    38                                                                    8
                                                                                                                   7.2
                                                                                                        6.8
                                                                                          6.3
                                                                              5.9
                                                               5.3
                                      5.0         5.0
                           4.1
  20       3.2
                                                                                                                              4                                 2009                              2013

                                                                                                                                    n    InsFtuFonal	
  allocaFon	
  to	
  alternaFve	
  investments	
  have	
  grown	
  
                                                                                                                                          significantly	
  over	
  the	
  past	
  few	
  years	
  
   0                                                                                                                          0     n    AlternaFves	
  needed	
  to	
  achieve	
  8%	
  return	
  target	
  for	
  insFtuFonal	
  
            2005               2006    2007        2008         2009           2010         2011         2012       2013                  investors	
  
                                       Traditional	
  CAGR:	
  5%         Alternative	
  CAGR:	
  11%                               n    Also	
  seen	
  as	
  a	
  way	
  for	
  investors	
  to	
  diversify	
  investments	
  

                                            S&P	
  Historical	
  Returns	
                                                                  Representa7ve	
  Alterna7ves	
  Targeted	
  Returns	
  
                                                                                                                                   n Tradable	
  Credit	
  
                                                                                                                                      n Performing	
  Credit:	
  5-­‐12%	
  
                                                                                                                                      n Special	
  SituaFons:	
  15-­‐18%	
  
                                                                                                                                   n Direct	
  Lending	
  
                                                                                                                                      n US:	
  8-­‐12%	
  
                                                                                                                                      n Europe:	
  8-­‐15%	
  
                                                                                                                                   n Real	
  Estate	
  
                                                                                                                                      n Real	
  Estate	
  Debt:	
  4-­‐10%	
  
                                                                                                                                      n Real	
  Estate	
  Equity:	
  12-­‐18%	
  
                                                                                                                                   n Private	
  Equity	
  
                                                                                                                                      n US/Europe:	
  18-­‐22%	
  
   n        CAGR	
  over	
  the	
  period	
  was	
  3.9%	
  (assuming	
  dividend	
  reinvestment)	
                                 n China:	
  22-­‐25%	
  

                                                                                                                                                                                                                                       7	
  
Ares Stock Pitch Annie Wang, David Chui, Derek Wei, Mitesh Amarthaluru, Albert Li
Industry	
  Overview	
  

                           8	
  
Ares Stock Pitch Annie Wang, David Chui, Derek Wei, Mitesh Amarthaluru, Albert Li
III.	
  Company	
  Overview	
  
Ares Stock Pitch Annie Wang, David Chui, Derek Wei, Mitesh Amarthaluru, Albert Li
Company	
  Overview	
  
                                      Core	
  Businesses	
                                                                     Strong	
  AUM	
  Growth	
  
  n Leading	
  global	
  alternaFve	
  asset	
  manager	
  headquartered	
  in	
  
     Los	
  Angeles	
  with	
  $79b	
  AUM	
  across	
  four	
  investment	
  groups	
  
     n Tradable	
  credit,	
  private	
  debt,	
  private	
  equity	
  &	
  real	
  estate	
  
     n Groups	
  are	
  highly	
  complimentary	
  and	
  allows	
  Ares	
  to	
  
            invest	
  across	
  the	
  capital	
  structure	
  
  n Founded	
  in	
  1990	
  as	
  the	
  capital	
  markets	
  group	
  of	
  Apollo	
  and	
  
     spun	
  out	
  in	
  1997	
  
  n IPO	
  in	
  April	
  2014	
  at	
  $19	
  per	
  share,	
  below	
  the	
  iniFal	
  expected	
  
     range	
  of	
  $21	
  to	
  $23	
  per	
  share	
  
  n Strong	
  focus	
  on	
  credit	
  

                             Fee	
  Revenue	
  Composi7on	
  

                                                                                                          Stable	
  Capital	
  Base	
  from	
  a	
  Diverse	
  Investor	
  Group	
  

                                                                                                                                                                                       10	
  
Tradable	
  Credit	
  
                                   Segment	
  Overview	
                                                        Assets	
  Under	
  Management	
  
   n Since	
  Ares’	
  incepFon	
  in	
  1997,	
  the	
  firm	
  has	
  been	
  managing	
  
      porfolios	
  of	
  non-­‐investment	
  grade	
  credit	
  	
  
   n One	
  of	
  the	
  largest	
  parFcipants	
  in	
  non-­‐investment	
  grade	
  
      corporate	
  credit	
  markets,	
  with	
  $32b	
  AUM	
  in	
  two	
  disFnct	
  
      strategies,	
  long-­‐only	
  and	
  alternaFve	
  credit	
  	
  
        n Long-­‐only:	
  invests	
  in	
  leveraged	
  loans	
  and	
  high-­‐yield	
  
           bonds	
  seeking	
  to	
  outperform	
  the	
  corresponding	
  
           performing	
  bank	
  loan	
  or	
  high	
  yield	
  market	
  indices	
              	
  	
  
        n AlternaFve	
  credit:	
  invests	
  in	
  a	
  variety	
  of	
  performing	
  non-­‐
           investment	
  grade	
  credit	
  and	
  distressed	
  situaFons	
  
           seeking	
  to	
  deliver	
  compelling	
  absolute	
  risk-­‐adjusted	
  
           returns	
  
   n Flagship	
  total	
  return	
  fund	
  ranked	
  #1	
  of	
  888	
  US	
  fixed	
  income	
  
      funds	
  for	
  5-­‐year	
  performance	
  (Lipper)	
                                                 AUM	
  Division	
  By	
  Investment	
  Type	
  

   n Management	
  fee	
  revenue	
  increased	
  14.9%	
  Y-­‐o-­‐Y	
  	
  
   n Raised	
  $12.2b	
  of	
  new	
  commitments	
  in	
  the	
  past	
  year	
  
       Gross	
  Annualized	
  Return/Outperformance	
  vs	
  Indices	
  

                                                                                                                                                              11	
  
Private	
  Debt	
  
                                    Segment	
  Overview	
                                              Assets	
  Under	
  Management	
  
   n Launched	
  in	
  2004,	
  one	
  of	
  the	
  largest	
  self-­‐originaFng	
  direct	
  
      lenders	
  in	
  the	
  US	
  and	
  Europe	
  with	
  $28b	
  AUM	
  and	
  ability	
  to	
  
      invest	
  across	
  the	
  capital	
  structure	
  
         n US:	
  Includes	
  Ares	
  Capital	
  CorporaFon,	
  the	
  largest	
  
            business	
  development	
  company	
  (non-­‐bank	
  bank)	
  and	
  a	
  
            market	
  leader	
  in	
  the	
  non-­‐bank	
  lending	
  sector	
  
         n Europe:	
  Quickly	
  established	
  presence	
  in	
  2007	
  and	
  has	
  
            completed	
  73	
  transacFons	
  totaling	
  €2.3b	
  of	
  commi[ed	
  
            capital	
  
   n Very	
  a[racFve	
  expansion	
  opportuniFes	
  in	
  the	
  direct	
  lending	
  
      segment	
  as	
  increased	
  bank	
  regulaFon	
  force	
  banks	
  to	
  cut	
  
      back	
  on	
  leverage	
  and	
  reduce	
  lending,	
  parFcularly	
  in	
  Europe	
  
   n Management	
  fee	
  revenue	
  increased	
  15%	
  Y-­‐o-­‐Y	
  	
  
                                                                                                           Investment	
  History	
  
   n Raised	
  $5b	
  of	
  new	
  commitments	
  in	
  the	
  past	
  year	
  

                               Gross	
  IRR	
  Since	
  Incep7on	
  
         	
  
                                                                                                                                           12	
  
Private	
  Equity	
  
                                   Segment	
  Overview	
                                                        Fundraising	
  
   n Launched	
  in	
  2003	
  with	
  $10b	
  AUM	
  across	
  5	
  funds	
  
        n Four	
  private	
  equity	
  funds	
  focused	
  on	
  buyouts,	
  growth	
  
           equity,	
  rescue	
  capital,	
  and	
  distressed-­‐for-­‐control	
  buyouts	
  
           in	
  the	
  US	
  and	
  Europe	
  
        n One	
  private	
  equity	
  fund	
  focused	
  on	
  minority-­‐stake	
  
           growth	
  equity	
  investments	
  in	
  China	
  
   n Aggregate	
  gross/net	
  IRR	
  of	
  24%/18%	
  on	
  nearly	
  $8b	
  of	
  
      invested	
  capital	
  since	
  2003	
  
        n Top-­‐quarFle	
  rankings	
  for	
  2006	
  and	
  2008	
  funds	
  
        n Consistent,	
  strong	
  performance	
  across	
  economic	
  cycles	
  
           allowed	
  Ares	
  to	
  quickly	
  raise	
  a	
  larger	
  fund	
  in	
  2012,	
  in	
  
           contrast	
  to	
  nearly	
  all	
  other	
  private	
  equity	
  firms	
  

                                   Investment	
  History	
  
        	
  
                                                                                                       Gross	
  IRR	
  Since	
  Incep7on	
  

                                                                                                                                               13	
  
Real	
  Estate	
  
                                      Segment	
  Overview	
                                                    Assets	
  Under	
  Management	
  
   n Launched	
  in	
  2011	
  and	
  currently	
  has	
  $9b	
  AUM	
  	
  
   n Acquired	
  AREA	
  Property	
  Partners	
  in	
  2013	
  
   n Real	
  Estate	
  is	
  a	
  new	
  and	
  growing	
  area	
  for	
  Ares,	
  but	
  the	
  
      senior	
  team	
  has	
  been	
  together	
  for	
  over	
  20	
  years	
  and	
  
      previously	
  worked	
  with	
  the	
  Ares’	
  founders	
  at	
  Apollo	
  
   n Invests	
  in	
  the	
  debt	
  and	
  equity	
  of	
  US	
  and	
  European	
  real	
  estate	
  
         n Real	
  Estate	
  Equity:	
  Value-­‐add	
  and	
  opportunisFc	
  
            investments	
  in	
  the	
  US	
  and	
  Europe	
  
         n Real	
  Estate	
  Debt:	
  Senior	
  debt,	
  mezzanine	
  debt,	
  and	
  loan	
  
            servicing	
  in	
  the	
  US	
  	
  
   n Management	
  fee	
  increased	
  800%,	
  primarily	
  from	
  the	
  
      increased	
  AUM	
  as	
  a	
  result	
  of	
  the	
  AREA	
  acquisiFon	
  
   n Raised	
  $2.2b	
  of	
  new	
  commitments	
  in	
  the	
  past	
  year	
                           AUM	
  Division	
  By	
  Investment	
  Type	
  
                                 Investment	
  Performance	
  
                                  Gross	
  IRR	
                   Unlevered	
  EffecFve	
  Yield	
  
         	
  
                                    Equity	
                                     Debt	
  

                                                                                                                                                             14	
  
How	
  Ares	
  Differs	
  
                                               Overview	
                                                               Illustra7ve	
  Fee	
  Split	
  for	
  Compe7tor	
  
   n Focus	
  on	
  credit,	
  parFcularly	
  performing	
  loans,	
  results	
  in	
                                   Corporate	
  Private
                                                                                                                              Equity               Real	
  E state      Tradable	
  Credit   Private	
  D ebt
      more	
  stable	
  earnings	
  vs	
  other	
  alternaFves	
  managers	
  
                                                                                                      Management	
  
        n ~80%	
  of	
  fee	
  revenue	
  comes	
  from	
  stable,	
  recurring	
                       Fees	
  
           management	
  fees	
  
        n ~10%	
  of	
  fee	
  revenue	
  comes	
  from	
  contractual	
  
           interest	
  and	
  dividend	
  payments	
  
        n CompeFtors	
  management	
  fees	
  make	
  up	
  20%-­‐40%	
                              Performance	
  
           of	
  fee	
  revenues	
                                                                        Fees	
  

        n Consistent	
  revenue	
  stream	
  merits	
  a	
  higher	
  mulFple	
  	
  
   n Among	
  large,	
  mulF-­‐offering	
  alternaFve	
  managers,	
  Ares	
  
      is	
  one	
  of	
  just	
  a	
  few	
  that	
  have	
  had	
  strong	
  performance	
  in	
                                       AUM	
  Breakdown	
  
      all	
  segments	
  through	
  the	
  downturn	
  
                                   AUM	
  CAGR	
  (2011-­‐2013)	
  
                                                                       23%
        	
  
                            17%

               Publicly	
  Traded	
  Competitors                       Ares                                BX            Carlyle           Apollo                KKR            Oaktree           Ares

                                                                                                                   Credit          Private	
  E quity       Real	
  E state      Hedge	
  Funds

                                                                                                                                                                                                                15	
  
IV.	
  Financials	
  
Historical	
  Performance	
  
                                                                   Year	
  Ended	
  December	
  31,	
  
                                                             2011A             2012A                    2013A
      Direct	
  Lending                                      $155              $190                     $238
      Tradable	
  Credit                                       99                145                     145
      Private	
  Equity                                        68                    69                   93
      Real	
  Estate                                            3                    10                   40
      Management	
  Fees                                     $324              $415                     $517
         Growth	
  in	
  	
  Management	
  Fees                                 28%                      25%

      Other	
  Fees	
  (Admin.	
  &	
  Deal	
  Income)        $20                 $19                  $24
      Comp.	
  &	
  Benefits                                 (179)               (237)                (305)
      SG&A                                                    (44)                (58)                 (83)
      Fee	
  Related	
  Earnings                             $120                $138                 $153
        Growth	
  in	
  Fee	
  Related	
  Earnings                                15%                  11%

      Net	
  Performance	
  Fees                              $39                $157                 $102
      Net	
  Investment	
  Income                              34                 107                   74
      Performance	
  Related	
  Earnings                      $73                $265                 $176
        Growth	
  in	
  Performance	
  Related	
  Earnings                       263%                (34%)

      Economic	
  Net	
  Income                              $194                $402                 $329
         Growth	
  in	
  Economic	
  Net	
  Income                               107%                (18%)

      Memo:
      Fee	
  Revenue	
  (Mgmt	
  &	
  Net	
  Performance)    $363                $572                 $619
      Distributable	
  Earnings                               203                 302                  306

                                                                                                                17	
  
Projected	
  Financials	
  
                                                                 Year	
  Ended	
  December	
  31,	
  
                                                           2013A             2014E                    2015E
     Management	
  Fees                                    $517              $620                     $744

     Other	
  Fees	
  (Admin.	
  &	
  Deal	
  Income)       $24                 $32                  $38
     Comp.	
  &	
  Benefits                                (305)               (354)                (425)
     SG&A                                                   (83)                (90)                (108)
     Fee	
  Related	
  Earnings                            $153                $208                 $249

     Net	
  Performance	
  Fees                            $102                 $80                  $99
     Net	
  Investment	
  Income                             74                  89                  114
     Performance	
  Related	
  Earnings                    $176                $169                 $213

     Economic	
  Net	
  Income                             $329                $377                 $462
        Growth	
  in	
  Economic	
  Net	
  Income                              14%                  23%

     Memo:
     Fee	
  Revenue	
  (Mgmt	
  &	
  Net	
  Performance)   $619                $700                 $843

                                                                                                              18	
  
V.	
  Valua7on	
  
Sum	
  of	
  the	
  Parts	
  Approach	
  
  n RaFonale:	
  Earnings	
  from	
  management	
  fees	
  should	
  be	
  valued	
  similarly,	
  if	
  not	
  higher,	
  
     to	
  that	
  of	
  tradiFonal	
  asset	
  managers.	
  Performance	
  fee	
  earnings	
  should	
  be	
  valued	
  at	
  
     a	
  discounted	
  mulFple.	
  Balance	
  sheet	
  investments	
  should	
  also	
  be	
  included.	
  
  n TradiFonal	
  asset	
  manager	
  P/E	
  mulFple	
  applied	
  to	
  2015E	
  management	
  fee	
  earnings	
  
     n 17.5x	
  for	
  base	
  case	
  
     n 20.0x	
  for	
  upside	
  case	
  
     n 15.0x	
  for	
  downside	
  case	
  
  n Reduced	
  mulFple	
  applied	
  to	
  2015E	
  performance	
  fee	
  earnings	
  
     n 7.5x	
  for	
  base	
  case	
  
     n 8.0x	
  for	
  upside	
  case	
  
     n 7.0x	
  for	
  downside	
  case	
  
  n 95%	
  of	
  value	
  of	
  2014E	
  balance	
  sheet	
  investments	
  
  n Price	
  Range:	
  $22.46	
  -­‐	
  $28.43	
  
     n Implied	
  Premium:	
  27%	
  -­‐	
  61%	
  

                                                                                                                             20	
  
Share	
  Price	
  CalculaFon	
  
                                              Multiple   Metric   Value

   2015E	
  Mgmt	
  Fee	
  Earnings             17.5x     $233    $4,077
                                                                           Base	
  Case	
  
   2015E	
  Performance	
  Fee	
  Earnings        7.5x      93      743
                                                                           Price	
  Target:	
  $25.45	
  
   2014E	
  Balance	
  Sheet	
  Investments       .95x     605      575

   Market	
  Cap                                                  $5,394
                                                                           Implied	
  Premium:	
  44%	
  
   Price                                                          $25.45

                                              Multiple   Metric   Value

   2015E	
  Mgmt	
  Fee	
  Earnings             20.0x     $233    $4,660
                                                                           Upside	
  Case	
  
   2015E	
  Performance	
  Fee	
  Earnings        8.0x      93      792

   2014E	
  Balance	
  Sheet	
  Investments       .95x     605      575
                                                                           Price	
  Target:	
  $28.43	
  
   Market	
  Cap                                                  $6,026
                                                                           Implied	
  Premium:	
  61%	
  
   Price                                                          $28.43

                                              Multiple   Metric   Value

   2015E	
  Mgmt	
  Fee	
  Earnings             15.0x     $233    $3,495   Downside	
  Case	
  
   2015E	
  Performance	
  Fee	
  Earnings        7.0x      93      693    Price	
  Target:	
  $22.46	
  
   2014E	
  Balance	
  Sheet	
  Investments       .95x     605      575    Implied	
  Premium:	
  27%	
  
   Market	
  Cap                                                  $4,762

   Price                                                          $22.46

                                                                                                            21	
  
VI.	
  Appendix	
  
TradiFonal	
  Asset	
  Manager	
  Comps	
  
                                              Share    %	
  of	
  52	
  week Enterprise	
  Value	
     Market	
  Cap   P/E            P/E

                   Company          Ticker    Price         High                  (US	
  BB)             (US	
  BB)    TTM            FY1

 Blackrock                   BLK             $331.75          98%                     $58.4                 $55.1      18.3x          17.3x

 T.	
  Rowe	
  Price         TROW              80.07          93%                       19.4                  21.1      18.6           17.4

 Charles	
  Schwab	
         SCHW              30.37          98%                       16.4                  39.6      32.9           31.5

 Fidelity                    FNF               27.78          80%                       12.4                    9.0          -­‐-­‐    30.4

 Legg	
  Mason               LM                50.78          98%                        5.8                    5.9     19.8           24.6

 Alliancebernstein           AB                27.47          97%                        2.7                    2.7     15.7           15.0

 State	
  Street             STT               74.84          97%                    (49.2)                   31.7      16.3           15.6

 Mean                        	
                                                                                        20.3x          21.7x

 Median                      	
                                                                                         18.4           17.4

                                                                                                                                              23	
  
AlternaFve	
  Asset	
  Manager	
  Comps	
  
                                     AUM         %	
  of	
  52	
  week   Market	
  Cap   P/E     P/E     P/ENI	
     P/DE

          Company          Ticker   (US	
  BB)         High                (US	
  BB)    TTM     FY1     TTM         TTM

 Blackstone         BX               $279                 92%                 $38.3      12.7x    8.6x       8.9x     16.0x

 Carlyle            CG                203                 79%                     9.9     14.7    10.6       7.0       9.9

 Apollo             APO               168                 62%                     9.1      8.4     9.6       6.6       5.4

 KKR                KKR                 98                85%                   18.8       8.5     8.6       7.4       9.9

 Oaktree            OAK                 91                83%                     9.4     10.9    13.4      10.4      12.9

 Mean               	
                                                                   11.0x   10.2x       8.1x     10.8x

 Median             	
                                                                    10.9     9.6       7.4       9.9

 Ares               ARES              $79                 88%                  $3.8       7.5x    9.6x     10.2x      13.5x

                                                                                                                              24	
  
Term	
  Sheet	
  
  n AUM:	
  	
  (Asset	
  Under	
  Management)	
  
  The	
  market	
  value	
  of	
  assets	
  that	
  an	
  investment	
  company	
  manages	
  on	
  behalf	
  of	
  investors.	
  AUM	
  is	
  looked	
  at	
  as	
  a	
  measure	
  of	
  
  success	
  against	
  the	
  compeFFon	
  and	
  consists	
  of	
  growth/(decline)	
  due	
  to	
  both	
  capital	
  appreciaFon/(losses)	
  and	
  new	
  money	
  inflow/
  (ouflow).	
  
  	
  
  n ENI:	
  	
  	
  	
  (Economics	
  Net	
  Income)	
  
  Economic	
  Net	
  Income	
  (“ENI”)	
  represents	
  segment	
  net	
  income	
  excluding	
  the	
  impact	
  of	
  income	
  taxes	
  and	
  transacFon-­‐related	
  
  items,	
  including	
  charges	
  associated	
  with	
  equity-­‐based	
  compensaFon,	
  the	
  amorFzaFon	
  of	
  intangibles	
  and	
  corporate	
  acFons	
  
  including	
  acquisiFons.	
  
  	
  
  ENI=	
  Total	
  Fund-­‐level	
  Fee	
  Revenue	
  +	
  Realized	
  Performance	
  Fees	
  +	
  Realized	
  Investment	
  Income	
  +	
  Interest	
  &	
  Other	
  Income	
  –	
  Direct	
  
  Base	
  CompensaFon	
  –	
  Performance	
  Fee	
  Related	
  CompensaFon	
  –	
  G&A	
  and	
  Other	
  Indirect	
  Expenses	
  -­‐	
  	
  Interest	
  Expense	
  
  	
  
  n Distributable	
  Earning	
  
  Distributable	
  Earnings	
  differs	
  from	
  Economic	
  Net	
  Income	
  in	
  that	
  it	
  only	
  includes	
  the	
  cash-­‐generaFng	
  porFon	
  of	
  the	
  performance	
  
  and	
  investment	
  related	
  revenues	
  and	
  compensaFon	
  expenses.	
  
  	
  
  Distributable	
  net	
  income	
  is	
  the	
  maximum	
  amount	
  received	
  by	
  a	
  unit-­‐holder	
  or	
  a	
  beneficiary	
  that	
  is	
  taxable;	
  any	
  amount	
  above	
  
  this	
  figure	
  will	
  be	
  tax	
  free.	
  
  	
  
  DE	
  =	
  Total	
  Fund-­‐level	
  Fee	
  Revenue	
  +	
  Realized	
  Performance	
  Fees	
  +	
  Realized	
  Investment	
  Income	
  +	
  Interest	
  &	
  Other	
  Income	
  –	
  Direct	
  
  Base	
  CompensaFon	
  –	
  Realized	
  Performance	
  Fee	
  Related	
  compensaFon	
  –	
  G&A	
  and	
  Other	
  Indirect	
  Expenses	
  –	
  Interest	
  Expense	
  
  	
  
                                                                                                                                                                                             25	
  
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