Ares Management Q3 2026: fee earnings up 11% to $524M as paper losses cut GAAP EPS 82% to $0.21

Ares Management's third quarter of 2026 split the same way its second quarter did, only more sharply. The fee business kept growing: fee related earnings rose 11% to $524.2 million and assets under management reached $690.6 billion, up 16% from a year earlier. GAAP profit, by contrast, collapsed: net income attributable to Ares fell 70.5% to $85.3 million and diluted EPS fell 82% to $0.21 from $1.15. Almost all of that drop came from paper (unrealized) losses on Ares' own investments and lower accrued carried interest, not from the fee business.

Three terms carry this report:

• AUM (assets under management) is all the client money Ares manages, including money committed but not yet invested. FPAUM (fee paying AUM) is the part currently being charged a management fee.
• FRE (fee related earnings) is a non-GAAP measure: management fees plus recurring performance fees, minus the cost of running the firm. It leaves out investment gains and losses, so it is the steadiest profit line an asset manager has.
• Carried interest is Ares' share of the profits of the funds it runs. It is booked as fund values rise and reversed if they fall, long before any cash changes hands.

Key metrics

Operating margin here is total revenues minus total expenses ($284.9 million) over total revenues, before the investment gains and losses and interest that sit below that line. Diluted EPS equals basic EPS in both years; weighted-average Class A and non-voting shares rose 3.5% to 227.5 million.

Why GAAP profit fell 70% while fees grew

Ares' reconciliation from GAAP pretax income to realized income shows where the $410.6 million drop in pretax income came from:

• Unrealized investment results: a $115.7 million loss this quarter against a $278.5 million gain in Q3 2025, a $394.2 million swing. On the GAAP income statement, "net realized and unrealized gains (losses) on investments" went from +$188.4 million to -$147.4 million. The release does not name the positions behind it; the 10-Q, due in the coming weeks, should.
• Unrealized carried interest: unrealized performance income net of the compensation owed on it fell to $64.2 million from $133.0 million, a $68.8 million swing. Several fund families had a weak quarter: the APMF secondaries fund returned -1.9% net, private equity secondaries -1.2% gross and corporate private equity -0.8% gross.

Together those two swings, about $463 million, exceed the whole pretax decline. None of it is cash: Ares strips both out of realized income, which is why realized income rose 7.6% to $490.1 million while GAAP net income fell. The gap was then widened at the bottom line by $77.2 million of income that belonged to outside investors in funds Ares consolidates (up from $67.4 million) and by $25.3 million of preferred dividends, leaving $60.0 million for common shareholders, down 77%.

The fee engine: slower on paper, steadier underneath

Segment management fees rose 10% to $1,069.3 million (the segment figure includes $21.1 million of fees from consolidated funds that GAAP eliminates). The headline growth rate is held back by one comparison: Q3 2025 included $27.2 million of catch-up fees from ASIS III, a secondaries fund. Catch-up fees are charged to investors who join a fund late, covering fees back to the fund's start, so they land once. Excluding them, segment management fees grew about 13%.

• Real Assets was the growth leader: management fees rose 29% to $229.5 million, from capital raised by the open-ended core infrastructure fund, the diversified non-traded REIT and commitments to US XI.
• Credit, about 69% of the four segments' FRE before corporate costs, grew fees 10% from deployment in U.S. and European direct lending and alternative credit, and from perpetual wealth vehicles.
• Secondaries FRE fell 32%: the ASIS III catch-up fees in the base, plus incentive fees from APMF dropping 67%.

FRE margin, the share of fee revenue kept as fee profit, widened to 42.5% from 41.4%. General and administrative costs counted in FRE rose 15.5% to $199.1 million, but compensation, the larger cost, rose only 3.5% to $510.9 million.

Fundraising, deployment and the fees already raised

Ares raised $31.0 billion of gross commitments ($28.6 billion net of redemptions), down from $36.4 billion in Q2 but, as CEO Michael Arougheti noted, with "over half of inflows coming outside of our Credit Group": Real Assets raised $11.2 billion, Secondaries $2.6 billion and other businesses $2.0 billion alongside Credit's $15.2 billion. Perpetual capital, money with no fixed end date, rose 23% to $233.9 billion, and 93% of management fees came from perpetual or long-dated funds.

Deployment, the investing that turns committed money into fee-paying money, was weaker: $34.8 billion, down from $41.7 billion a year earlier, with drawdown funds at $18.4 billion against $20.2 billion. That is why FPAUM grew 13% while AUM grew 16%. The backlog is intact: $93.8 billion of AUM not yet paying fees is available for deployment, plus $2.3 billion of development assets, which Ares estimates could add about $826.9 million of annual management fees once invested (it was $828.2 million at June 30). Ares also notes that ARCC, its largest listed lending fund, agreed on October 26 to acquire MFIC for an enterprise value of about $2.6 billion, with the cash portion provided by an Ares subsidiary.

What the headline numbers hide

• The GAAP decline is a mark-to-market swing. About $463 million of pretax swing in unrealized investment and carry results more than explains the $410.6 million fall in pretax income. Realized income, which counts only what was actually earned or cashed, rose 7.6%.
• FRE growth is understated by a one-off in the base. The $27.2 million ASIS III catch-up fee in Q3 2025 cut reported FRE growth from roughly 18% to 11% (treating the catch-up as pure profit, which is an upper bound).
• Realized income per share is helped by a tax deduction, and less than last year. Tax deductions from vesting restricted stock lifted after-tax realized income per share by $0.12 this quarter and $0.15 a year ago. Excluding them, it grew about 10% ($1.14 vs $1.04), faster than the reported 5.9%.
• Dividend coverage is now a real question. After-tax realized income per Class A share of $1.26 is below the $1.35 dividend for a second straight quarter, and year to date $3.79 sits below $4.05 declared. Ares says it sizes dividends off the after-tax cash generated by FRE; FRE was about $1.52 per share before tax across all 345.5 million shares and units, so the fee stream still covers the payout, but with less room than the headline FRE growth suggests.
• No buyback effect. The share count rose 3.5%, so per-share growth trails total growth; nothing in EPS came from repurchases. The 8-K does not include a cash flow statement, so cash spent on dividends and repurchases this quarter is not given; the 10-Q will have it.

On balance the quarter is understated: GAAP EPS fell 82% on a $394 million swing from unrealized investment gains to losses, while fee related earnings grew 11% and after-tax realized income per share grew 6%.

Did last time's read hold up?

Our Q2 2026 report said a second straight quarter of after-tax realized income per share below $1.35 "would make coverage a live question". It happened ($1.29 in Q2, $1.26 now). It also flagged management's talk of "a meaningful pickup" in the investment pipeline; deployment has not shown it yet ($34.8 billion vs $41.7 billion a year ago), and management now points to Q4. The expectation of a steady FRE line and a jumpy GAAP line held, more dramatically than expected.

Takeaway: The 82% fall in GAAP EPS says nothing about the fee business, which grew FRE 11% (about 18% without last year's one-off catch-up fees) on AUM up 16%. The number to watch is lower down: realized earnings per share have now trailed the $1.35 dividend for two quarters, and closing that gap depends on deployment picking up in Q4 as management says it will.

Guidance and outlook

Ares gave no numeric guidance. CFO Jarrod Phillips said year-to-date results "and expectations for improved fourth-quarter deployment position us well to meet or exceed our key financial objectives for 2026", and pointed to "substantial embedded growth from capital already raised but not yet earning fees". Arougheti said the firm continues "to expect another record year in fundraising with visibility for a strong fourth quarter". Ares declared a $1.35 dividend payable December 31, 2026.

Our read: the fee side has visibility. FPAUM is up 13%, $173.8 billion of available capital is waiting to be invested, and about $827 million of potential annual fees sits in capital already raised. Q4 is the test of the deployment claim: if drawdown-fund deployment stays below last year's pace, management fee growth will keep trailing AUM growth and dividend coverage stays tight. The GAAP line will keep moving with marks on Ares' own investments and on carried interest; incentive-generating AUM rose 14% to $168.6 billion, including $79.8 billion from funds with incentive fees accrued but not yet recognized, which can convert to income or shrink with valuations.

Source: Ares Management Corporation Form 8-K, Exhibit 99.1 (earnings release) and Exhibit 99.2 (Third Quarter 2026 earnings presentation), filed October 29, 2026. The full Q3 2026 10-Q has not been filed yet, so cash flow and position-level detail on the unrealized losses are not yet available.