Welcome to Ares Management L.P.’s Fourth Quarter Earnings Conference Call. At this time all participants are in a listen only mode. As a reminder, this conference call is being recorded on Monday, February 29, 2016. I will now turn the call over to Carl Drake, Head of Ares Management Public Investor Relations.

Good afternoon and thank you for joining us today for our fourth quarter and yearend earnings conference call. I’m joined today by Michael Arougheti, our President; and Michael McFerran, our Chief Financial Officer. In addition, Tony Ressler, our CEO, Greg Margolies and Kipp deVeer, the Co-Heads of our newly combined Credit Group and Bennett Rosenthal, our Co-Head of our Private Equity Group, will also be available for questions. 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 the performance of and investment in our funds is discrete from the performance of and investment in Ares Management L.P. During this conference call, we will refer to certain non-GAAP financial measures. We use these as measures of operating performance not as measures of liquidity. These measures should not be considered in isolation from, or as a substitute for, measures prepared in accordance with Generally Accepted Accounting Principles. These measures may not be comparable to like-titled measures used by other companies. In addition, please note that our management fees include ARCC Part I fees. Please refer to our earnings release and Form 10-Q that we filed this morning for definitions and reconciliations of these measures to the most directly comparable GAAP measures. I would 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 Ares or any other person, including any interest in any fund. We’ve also posted a new fourth quarter earnings presentation under the Investor Resources section of our website at aresmgmt.com, which can be used as a reference for today’s call. I will now turn the call over to Mike Arougheti.

Thanks Carl, good afternoon everyone. So despite challenging market conditions throughout 2015 we delivered strong results in many important respects fund raising, AUM and fee growth, deployment and investment performance. But before I discuss last year's highlight let me provide some contacts on the current environment. During 2015, the major loan and high yield industries both ended with negative returns. To put this in historical contacts in the last two decades the Credit Suisse leverage loan index has been negative only twice and the BAML High Yield Index only four times. 2015, actually marked the first year that both have been since 2008. Fears of slowing global growth, currency devaluation and economic deceleration in China, the knock-on effects from the energy and commodity collapse and uncertain Fed policy have all contributed the heightened volatility and significant fund out flows. The dislocation that started in oil and gas expanded across commodities is now bleeding into other select factors. In the face of this we have remain cautious and defensively positioned with generally low or equal weight oil and gas exposure in most of our funds. So while we’re not immune to these market pressures we did deliver strong relative performance for our investors, outperforming the benchmark indices for loans and high yields for the year. We believe that continued volatility in 2016 will create buying opportunities for managers like us who are able to identify over sold assets. At current levels we continue to deepen our work on individual assets as we believe that this is a classic credit pickers market where there are growing numbers securities that are priced at evaluation that more than compensate us for the uncertainty and fundamental risk. Outside of the liquid and tradable credit markets recent market volatility and risk aversion are improving investment opportunities…

Thanks, Mike. As Mike stated, we are generally pleased with our results as we meaningfully grew our various categories of assets under management, management fees and our fee related earnings during 2015. Like others in the industry, market volatility impacts our performance related earnings with unrealized marks on our assets but we view these market price fluctuations as an opportunity for long-term value creation. We are fortunate to be in the business of investing long dated capital where we can be very patient as the prices fluctuates. We continue to have relatively low oil and gas and related services exposure which represented just over 3% of our AUM at year-end. Looking forward we are heading into 2016 with a backlog of shadow AUM where we expect would generate a significantly higher level of run rate management fees by the end of 2016 than where we start of the year. Keep in mind that we are in a period of meaningful business expansion, where we are continuing to invest in new product and incremental distribution. We view these expenditures as investments in growth, in areas like infrastructure and a business development. And these investments are front loaded compared to the revenue generators. For this reason, we likely will not have a linear progression of growth and management fees and fee related earnings during the course of 2016, instead we expect our management fees and fee related earnings growth to be more of step function. Now with those comments let me turn to our financial results. For the fiscal year ended 2015 our AUM increased by about 12 billion to approximately 94 billion, the year-over-year increase of approximately 15%. Our total fee earning AUM increased about 68 billion up 11% year-over-year. Of our total 22.4 billion in available capital at the end…

Great, thank, Mike. So sitting here at times I know our business may seem complex and difficult to understand, particularly during volatile markets. But I’ll remind everybody its actually quite simple, our core business is and also has been to deliver consistent and attractive investment returns to our fund investors. If we can deliver compelling investment performance through business cycles, which we have done over the past 15 plus years then we will naturally grow our assets, as has been our experience assets follow great performance. And if we grow our assets that will grow our fees in core earnings unfortunately create lasting value for our unit holders. So keep in mind that volatile market present opportunities for us to grow our company and create value. Ironically at a time when our stock and the entire sector are at their lows we see more drivers of future value creation than we’ve ever had in the past. We are experiencing great fund raising success. Our underlying investment performance is strong and this continues to feed our capital raising momentum. Nearly 25% of our AUM is dry powder of which the majority will on fee and we start investing also with the time when the investment environment is increasingly more interesting than we witnessed in recent years. We have improved our operating margins by double digits year-over-year and we expect to continue to do so by yearend 2016 and we have over $140 million of net accrued performance income and a meaningful amount of our $45.8 billion or incentive eligible AUM is tied to underplayed capital and recent fund raising. So in summary, we are continuing to invest in our future to support both organic and inorganic growth, developing ancillary products, expanding geographies and developing new distribution channels. We’re very excited about where we are and even more excited about where we're going, and I just want to thank everybody for their time and support and with that we'll open it up for questions.

[Operator Instructions] Our first question is from Mike Carrier, Bank of America Merrill Lynch.

Hey, good morning guys, this is Mike Needham in for Mike Carrier. I guess just, first on the reversal of ARCC part 2 fees in 4Q and then the 9 billion of assets leaving incentive generating AUM. How much will performance have to improve for those assets to move back into incentive generating AUM and if they don't how does that impact the part 2 fees for 2016.

Sure I think they're actually two separate questions, so maybe we'll handle the second one first. And part of this is definitional but the movement of GE related assets out of our global credit group to perform not just a leverage leaving ARCC through a transition of the SSLP away from GE to Varagon AIG but also reduction in leverage available in our European SSLP as well as our European loan opportunity funds. It's important to understand though that of that $8.7 billion only about $700 million of it was actively generating incentive income. So I think we have to disconnect the $8.7 billion from the question of ARCC part 2. So speaking to the first part of the question as you look at where ARCC finished the year and you look at our accruals going into Q4, at the end of Q3 based on performance and the significant amount of realized gains that we had witnessed at ARCC throughout the course of 2015, the expectation was that there would be a part 2, obviously given the volatile markets we saw a reversal on largely the unrealized gain portion as we've mentioned in the ARCC earnings call last week though the bulk of that NAV move was due to mark to market volatility as opposed to any kind of fundamental credit deterioration. And if you look at the formula roughly $90 million would be the number that would get us back to -- somewhere between $90 million and a $100 million get us back to the part 2 hurdle. That's on a $9 billion asset portfolio.

Okay, got it. Thank you. And then just as a follow up on expenses and FRE, I heard your comments that for the full year you should expect FRE to increase I think meaningfully. In 4Q we saw a pickup in G&A by a few million I guess, what drove that and then for the full year just on the, you know the expense base, I don't know if you could give us some more details on what you have planned in terms of just like core expense growth for the year, thanks.

Sure, I mean to put this in context. We referred to this in our prepared remarks, we -- as the business expands, expenses are going to increase and they're generally front loaded as we make investments to our infrastructure, will that be related to compliance capabilities, middle or back office or our footprint in different geographies and our capital raising capabilities. So if you look at the full year we raised over $20 billion and with that is going to come some expense growth where we believe the opportunity for margin expansion value is we believe the revenue derived from that, the new AUM is going to outpace that expense growth albeit probably lagging behind it. As you look at -- for 2016, I think this is what we wanted to you know headline for people is, while you'll see our expenses have stepped up and you saw that in Q4 you will see the revenue is going to benefit from those coming during the year as revenues activated from deployment and funds coming on line. I think from a practical standpoint I would look out for G&A specifically. The fourth quarter is probably a pretty decent proxy for what we would expect in the next few quarters of 2016 and for compensation we'll as you see we compensation's effectively flat year over year. I think that will continue to grow modestly as we grow our firm but I think you've witnessed over the past year it was a fairly flattish number and we don't expect it to be significantly increased in the future.

I just also referenced a comment that Mike McFerran made on our last earnings call, is that while there is a lag and a little bit of a step function our expectation is given the fund raising momentum and the controlled expense base that we're going to be moving towards a run rate 30% FRE margin targets through the course of 2016.

Okay, thanks for taking my question.

The next question is from Ken Worthington of JPMorgan.

First, I wanted some more details on the combination of the credit groups, it kind of seems from your prepared remarks their combinations is really about revenue opportunities here. So I guess maybe first why did you need to combine the groups to kind of get those synergies and how did the roles that the investment professionals change, like are they now seating together, are they doing there morning meetings and reviews together like does the investment side change it all? And then are there efficiencies on the cost side, what happens to servicing and sales there, is there any changes there? Thanks.

Sure, I appreciate the question because for those of you who have followed our company, the businesses today run very collaboratively and cohesively, there's lot of information sharing that already exists. So this was really the culmination of years and years of managing these two businesses in changing global credit environment and so in terms of the day-to-day not a lot of changes for the vast majority of folks that worked within the credit group, those that are following and investing in the liquid market will generally continue to be focused there and those that are executing in the private credit markets will generally continue to be focused there. But what you articulate in terms of the revenue opportunities really the driver. As we talked out before what we're seeing more and more within our global LP based is people are looking to a consolidate their assets and relationships with fewer strategic partners and that showing up in the disproportionate growth that we’re experiencing, it's also showing up in the disproportion growth that our peers were experiencing. Part in parcel with that consolidation trend is a desire to have what more flexible and more dynamic strategies, I think the large LPs are beginning to understand particularly when you have volatile markets that the ability to move in and out of liquid markets and illiquid markets, European markets and U.S. markets is a huge driver of investment performance and long-term value. And so part of putting these groups together is to just put us in a position as one business to more efficiently and more effectively invest capital, more dynamically as I just described but also to start to create as I mention in our prepared remarks, products that are more integrated, the structure of the markets for years was very…

Okay, great, just stocks trading kind of nears to lows, we've seen some of your peers start to consider moving towards a buyback in addition to a distribution, what are your thoughts? Does that serve the needs of investors in Ares here?

I think each company has to go through its own evaluation and it's always a function as you know when you're talking about buybacks of the embedded return opportunity in buying back your stock versus the embedded opportunities investing that capital elsewhere and the frank answer is, I think the biggest challenge that we have in our stock is the lack of public float and there was a circular issue between the float and performance and the ability to breakthrough. So while we're looking at the stock and you saw a lot of insider buying of the stock, it's hard for us right now again the size of the float to start to reducing that float at a time, and I’m just articulating when we think the opportunity is in front of us, or about as good as we've seen. So I think for the time being it’s not something that we're going to pursue, but is appropriately always going to be part of the ongoing discussion.

The next question is from Alex Blostein of Goldman Sachs.

Understand that capital deployment will probably vary, to your point earlier when the opportunities there and obviously things could be a little lumpy but given the fact that we’re kind of 2/3 of the way into the first quarter, I was wondering if you can provide us on an update of how the deployment picture look so far in the first quarter as we try to guess and kind of formulate our meaningful fee related earnings for this year?

I'll let Greg or Bennett chime in here with regard to any specifics around deployment, but I would say, generally when the markets are transitioning like they have early in 2016, we as a firm tend to be much more measured about the way we go into that market environment, we articulated this on our ARCC call last week. So, we're incredibly enthusiastic about the opportunity that sits in front of us, but we are slower to deploy as the market starts to show signs of volatility. So I would say generally speaking deployment in Q1 would be slower but as the year continues to progress we would expect we will accelerate deployment into the volatility.

Great. And then Mike, to your point about the revenues synergies in combining some of the credit businesses, I thought the point about dynamic cash allocation to the liquid and the liquid stuff was pretty interesting. Can you talk a little bit about whether it's an external demand that you seeing with clients now that hasn’t really been there before and the way these vehicles will be set up more kind of like a separate manage account format and against the fees associated with that will be also in that kind of the institutional SMA range or I guess how should we think about against the revenue opportunities from this combination?

It's actually both. And it is very much been driven by a change in investor appetite but with counseling from us. Reason been as I said the structure of the market has change just in terms of how we and other function within it, how the position that we occupy relative to the bank. But at its core when you think about institutional investors are looking for from us, they are looking for alternative credit exposure that’s going to generate 8% to 12% rates of return for them and they are looking to express that yield appetite by getting good risk adjusted return, good relative back you to other product they’re invested in and to the extent that they can non-correlated risk adjusted return. And so it depend on the investor but a lot of folks will look at a direct lending strategy in U.S. alongside a direct lending strategy in Europe but they are missing part of that global allocation. So typically what's happening is people coming to us with SMA request with large pools of capital and asking us to work with them on an allocation strategy that works for them, leveraged, unleveraged, senior secured, unsecured, liquid, illiquid, U.S., Europe and then we put that allocation in place and run that SMA. It's less about fee savings and it's more about capturing the best available market opportunity. But it's not just about SMA as I said by putting these groups together we are seeing a pretty significant opportunity to create co-mingled fund product as well that we can bring to both the institutional and retail investors that captures the best of everything we do, we do in credit. So fees on SMAs generally to your point coming at slightly lower fee than co-mingled fund product do, but I remind everybody when they do coming in they coming in meaningful size and at very high marginal profit contribution and that’s the tradeoff. But as I mentioned this consolidation trend is forcing the consolidation on the asset management sites. So in order to be able to deliver the investment solution to the institutional investor and also even with standard entertainer conversation about a lower fee, you have to have the economy of scale that we and a handful of others have.

Yes, that all make sense. And is that something that we should expect to see kind of move the needle for you guys in ’16 again given the dislocation in the credit and the opportunities or would this be more the 2017 story?

I think it's emerging in '16 and will accelerate into 2017. I have mentioned it in our prepared remarks, if you use history as a guide and you look at 2007 through 2009, the way we think about growing our asset base through volatile markets or even market downturns is -- you have to appreciate that the core in place AUM is very sticky, it's long dated, it's very flexible. So we don’t see asset leading the platform and while we’re seeing more appetite and interest in our credit product now we haven't gotten far enough into the development of this part of the cycle to see what I would call opportunistic and tactical allocation. Case in point in 2008, 2009 we were seeing multi-billion dollar portfolio acquisition opportunities coming to us from the market and marrying that market opportunity with investor demand and investor appetite, so our strength has been really in this cycle people are strategically allocating into our asset classes and then as we continue to get deeper and deeper into it. I would expect that you will see a fair amount of opportunistic -- opportunities that come to us both on the investment side and has a direct result on the capital raising as well.

Got it, thanks so much for that. Maybe one more just I guess around the M&A opportunities and I think you touched on that almost a little bit in your last answer, but thinking through lots of kind of closed in fund vehicles in the space right now whether it's other BDCs or maybe some of the other close end vehicles are trading well below book values. Should we expect you guys to participate in any of that whether from an investment perspective from Ares or buying some of these things breaking them up and lumping them into your existing kind of investment products because it seems like there is a number those locations and I just wonder how meaningful of an opportunity that could be for you?

I think it could be meaningful and I think they did a great job talking about that opportunity on the ARCC call. The issue -- if there is any issue is that we are incredibly disciplined, value oriented buyers and our hope is -- it’s not necessarily an expectation but our hope is at least right now that some of these opportunities will clear prices that are attractive and make sense for us. But just take a quick step back, as we do talk about M&A, to your question. What's nice about our platform is we have three businesses in credit, private equity and real estate each of which is run by an incredibly deep bench of business leaders who focus on organic and inorganic growth, so I would expect that in each of those businesses and you've seen this historically, there is an opportunity to make acquisitions and obviously as we get to a phase of the cycle where valuations are challenged and credit managers are dealing with outflows or energy exposure or risk retention that that should free up assets or platforms within the three investment groups and the good news is we've got management talent and experience in each of those groups to make those acquisitions. That's not mutually exclusive with the opportunity to make acquisitions at the management company as well and as you've seen in the past, we have an appetite and a willingness and ability to make acquisitions and either step out strategies or new geographies that in our opinion accelerate the growth of the company. So again it's too early to tell, but I hope that we'll see opportunities in each of our businesses as well as at Ares Management to continue to grow in the businesses that we know and understand.

The next question is from Robert Lee of KBW.

Hi just since it seems like at least a decent amount maybe of the step up in Management fees at some point this year maybe into next year does relate to turning on I guess Fund 5 and PE. Can you kind of maybe update us on where you're thinking is around the timing of that where does Fund 4 stand with kind of what's left for it to, how much invested capital is left in Fund 4 and when we should be thinking about that switch taking place?

[Multiple speakers] Go ahead Bennett.

I was going to say that we're -- got about $1 billion left to deploy excluding reserves and Fund 4 and at the pace we're going we’ve targeted sort of starting towards the end of the third quarter beginning of the fourth quarter but that's, you know it’s obviously dependent on the opportunities in the market place and that's -- at our current pace that be a logical timing for a turn on of Fund 5.

Okay and I'm just with Fund 5, I know you mentioned post year-end the commitments were up to 6.8 so you originally targeted 6.5 so are you still fund raising for Fund 5 or have you pretty much got to the point where you're capping it out and it's a matter of when you can turn it on?

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Okay, great and I guess a question for you, Mike. Clearly ’15 was a pretty good year for capital raising and seemed pretty bullish or optimistic about the opportunity ahead of you in ’16 and beyond. So I know it hard to be specific but just curious, do you think that there's a reasonable shot of replicating the capital formation 16 billion to 20 billion that you did in ’15 or is the absence of the fifth PE fund from part of that make that more challenging, but just trying to get a sense what you think is doable in ’16.

Yes, so again it's still early in the year and as I mentioned we've been surprised in the past that when markets start to dislocate we see a fair amount of interest in the platform. That’s pretty reasonable to expect given the amount of activity that we experienced in 2015 not just in PE Fund Five but in our third European direct lending strategy some of our real estate funds that 2016 would probably show lower aggregate fund raising in the AUM growth. So I don't want to say that '16 will be meaningfully deteriorated relative to 2015 but given the amount of capital and dry powder that's in the platform I think 2016 is going to be all about disciplined deployment of that capital, turning the fees on through that deployment. Turning on Fund 5 and then obviously exiting 2016 at what we think is going to be a really attractive run rate FRE given the fund raising queue that we're sitting on now. So I think by definition it's going to be lower, there're still things that are in the pipeline, there are things that are in product development but the absence of two or three of those flagship funds are going to make it harder to replicate that momentum in '16.

Sounds reasonable and one last question. I'm just curious in European direct lending, EBIT, you raised a lot of capital there and seems like you've been deploying capital there. Just curious about the nature of the capital deployment and maybe this doesn't fall in this business as much and I'm curious about -- the outlook for not just originations of lending but also kind of buying portfolios. Have you seen much of that? Do you feel like that's an opportunity for you guys that's actually picking up, just trying to get a feel for it?

Sure, so just to remind everybody what we have in Europe and a least in the credit size and we have a direct lending business as you just highlighted Rob, has scale dramatically. We started that business in late 2007 and with the closing of now our third co-mingled fund and other managed accounts alongside of it, that's up to $9 million plus of AUM. Our tradable credit liquid strategies continued to scale there as well and now real estate and our corporate private equity are well positioned for growth there, so as we think about primary and secondary market opportunities we’re absolutely looking at both. Up until now the bulk of the activity on the secondary side has been what I'd call non-incorporates, so it’s been in NPLs, either consumer or real estate related and we have taken advantage of that opportunity through some of our special situations and liquid credit funds as well as our opportunistic real estate funds, but we are now beginning to see the opportunities to buy corporate credit assets, specifically a good example of that is in the fourth quarter we actually bought a portfolio of middle market loans from Barclays, which just by way of remainder going into the credit prices was probably the largest middle market lender in that market, I think they had a middle market loan book of about 10 billion sterling and the portfolio purchase that we just made, I think was the remaining outstanding of that business, at about 750 million in U.S. So the business -- for years the European banks, we're not really selling meaningful portions with the corporate assets, I think now the combination of asset values going up and some of the continued focus on recapitalizing their balance sheet is going to free up some of these, so we're encouraged with that portfolio acquisition that we made in the fourth quarter and we hope that we see more, can’t guarantee that we will, but we're encouraged to see it occurring in more traditional corporate asset as opposed to the NPL space where we've been predominantly focused

The next question is from Christ Harris with Wells Fargo.

Just wanted to follow-up on a question earlier about the M&A environment and maybe ask a specific question related to your Real Estate group. As I'm sure you guys have been following Apollo is merging its two mortgage REITs and your mortgage REIT is probably operating a little bit sub scale at this point and trading at a discounted book. Wondering if you guys are thinking about strategic actions specifically for ACRE, is there anything else you might be contemplating there?

Yes, so I can't comment on that specifically, obviously ACRE is a public company, they're reporting their earnings tomorrow and for anybody who is interested, I would encourage them listen to the conference call to get that management teams perspective. What I can say is our ambitions for our commercial real estate lending business are larger than what it currently is, we have had success scaling our lending activities away from ACRE, but ACRE is a big part of the future opportunities for us. So without getting into specific, I'd just highlight we've been frustrated both by the subscale nature of that REIT, but we've been incredibly encouraged by the fundamental performance of those portfolios and again I’ve encouraged people to listen in to the call just to get a sense for how well they're doing in that portfolio in terms of the underlying credit quality as well as the origination capacity that they have. So I think we still have some work to do generally in our commercial real estate lending business in ACRE and outside of ACRE, but as I said earlier asset typically follow good performance and the performance in those loan books has been great. So, just working it.

Okay understood, and just the one follow-up I wanted to ask relates to your dividend and distributable earnings. It sounds like you guys think that you have a pretty decent shot at maybe growing the dividend in ’16 and I know the fee earnings ramp will certainly help with that. The other sort of unknowable of course I guess is realization activity and wanting to know if the credit markets stay as volatile as they are and perhaps don't get much materially better from here, do you still think that you have a decent shot at growing the dividend based on the investments you have in the ground and some of the gains you've built up?

We do, and why don’t we put this in a two compartments. First, our core contribution, two, our distribution. So our FRE contribution given which is, let's called as we start '16 is in the mid-teens. As we look ahead during the course of 2016 as we expect management fees and FRE to grow, we've seen that core contribution should take our distribution on a run rate basis to 20% or better by the end of '16. So if you think about today's distribution, we'd like to sit here a year from now and say that was just the core management fee contribution with a number absent any contribution of performance or the investment income. Separate from that, we said so on the call, we have 140 million of accrued performance income in our books and an impairment amount of incentive eligible AUM that’s not affiliate and usually there is a clearly a time lag of investing working and harvesting of that, but if was just to take that 140 million, you picked the date whether you want to say over eight quarters or 10 quarters, straight line that in, there has always been a contribution of performance or distribution and we expect that to continue albeit in a volatile fashion as we work through the current cycle.

Next question is from Doug Mayweather at SunTrust.

I just have two questions. First on your financial statements, on your balance sheet investments you separate out other category. I just wanted to know what the general nature of those investments are and what kind of general returns -- not -- no exact number obviously, I mean is it a cash substitute or is it a pseudo private equity or is something between?

Sure, so the 78.9 -- just put it into three pieces 11 million relates to the strategically investment we had announced I believe was last year, obviously in 2014 in DMOS, a little over 40 million of that relates to a co-investments we have and a commercial Real Estate debt strategy and then the remainder, call it just over 27 million relates to the investments we have made to date in a certain Cane Anderson funds, which we have previously announced.

So the way to think that any time of balance sheet investment doesn’t fit into one of our core three verticals or businesses. It will fall into the other and that’s typically where we’re making “strategic” investments at the management company. So I’d highlight of that $40 million, it's in partnership with an insurance provider and is really serving to help build out our investment insurance solutions. So you will continue to see that when we are making step out investments to grow the platform away from one of our key verticals that’s typically where will see growth and the other.

Great, my last question on energy, it sound like midstream, downstream and project financer power plants are seems to be the most attractive assets right now, you’re not quite willing to go shopping reserves yet. On the ARCC call they were taking about -- especially in California the low natural gas prices were however were putting pressure on the economics of power plants, just because the absolute dollars they can make has gone down even though their cost of goods sold is going down. Has that affected your EIF project business or is there economic somewhat insulated from that?

Yes, that as we discussed on the ARCC call that was a company and markets specific issue no a commentary on the project financial power generating market in general. Not to going all the detail but obviously each of these projects is going to have its own discreet set of economic risks and opportunities depending on what market it operates and whether it's a capacity market or not, whether they are taking merchant risk, or there is a long term PPA, so each one is different. I’ll say that when you look at EIF, it really a very interesting hedge against some of the volatility that is going on in the oil and gas market with large and the performance in the EIF funds has been quite good. As I mentioned if you would look at the existing funds, for example, our fourth power fund which is the predecessor fund to the fund where in the market with now, is currently generating gross returns since inception about 16.5%. So what we like about this strategy is non-correlated to oil and gas. Depending on the market you can actually see some modest benefit or some modest negative reaction to a gas prices but generally speaking you have got contracted off takes and you are generating very stable cash flow. So we think it's a unique infrastructure asset, it generate much higher rates of return than traditional infrastructure. It generate slightly low returns than corporate private equity, but it does so with typically long dated and contractual streams. To that end we are also happy that frequent which folks know, but the large alternative asset consultant just named Ares EIF as I think the most consistent infrastructure manager in the market. So that performance that are generating particularly against the volatile market back drop is starting to get some recognition.

The next question is from Michael Cyprys of Morgan Stanley.

Just curious you guys are leaving fund related flagship fund here, just in terms of how any of the terms may have change relative to some of the earlier funds that you have just in terms in the management fee, fee break preferred return hurdles and so forth?

Yes, I’ll make it general comment and then if anybody wants to chime in here, but I think generally speaking the fees that we're earning both in terms of percentages and structure are very consistent with our prior funds and as I mentioned you may some fee negotiation going on in the large managed account business. A lot of that is really just a function of fund structure but in our core co-mingled fund business really no meaningful changes. The market has moved to modest first close and size discounts, but that's something that's been in the market for years now, so I wouldn't actually say that that's anything new.

And then seems like you're scaling this latest fund very nicely, just is there anything that we can expect here in terms of the carry comp pool, the change relative to some of the earlier and smaller funds?

[Multiple Speakers] sorry go ahead Bennett.

I was just going to say it's very consistent with how we've done it in the past in terms of percentages to the management company.

I think it's important for people to appreciate though that the scaling of that fund is a recognition of the tremendous track record that our PE team has generated both in terms of dollars but also consistency of return, I'll remind folks that what makes our Private Equity business unique is that within those core Private Equity funds we have the ability to do regular way bypass and growth investing as well as distressed for control. So when you look at the scaling of that fund, yes we've put resources in Europe and that's increasing the global opportunity for us but I think it's really a commentary on performance and distress for controlled market opportunity starting to develop into 2016 and 2017.

Thanks, and I would like to ask a follow up here on the buyout side since you're raising a large buyout fund here, just how you're thinking about the availability and access to financing that you know at this point some in the industry suggest that it's all dried up, can you see some more unit issuance of levels generally, just curious given your credit skew and the other parts of your business what some of your thought are here and how you're thinking about accessing financing on the buyout side and to what extent would you consider or do you already provide financing through the credit side to the buyout that you do on the PE side.

Mike you want me to take that? And I could talk about the private markets

Why don't you take that?

Yes, so for access to capital, we -- I'd just clear out the first point, your last point which is we don't provide capital to our own buyouts, so that's both our internal conflict policies as well as regulatorily with our BDC. So we've not done in the past and we don't expect to do that in the future. In terms of availability of financing you know for great companies, we found that capital is available might be at a slightly lower level certainly when it was in the past year, but frankly we have never historically been users of maximum leverage on portfolio company. So for our buyout business it really doesn't affect us that much and as Mike said we have the flexibility and frankly more of their activity today is focused on looking at the distressed market or distress for control opportunities. So again this creates an opportunity for us, given we use lower leverage and given we have the flexibility to provide rescue capital or a distress for control buyouts, we love these market environments and it gives us what we see as a big pool of opportunities.

And so Mike, just to put a finer point on that from the platform perspective. That financing constraint is exactly what's creating the opportunity in our credit business. So as the banks retrench our ability to come in with scaled full balance sheet solutions either on a bought and held basis or a distributed basis is a big driver of the opportunity, so when I referenced the challenges that the banks are having it's not just on the traditional commercial banking side in terms of risk appetite or availability of capital, it’s also on the syndicated loan in high yield side and the ability for scaled managers like us to come in and provide certainty of close at a price at a time when financing is scarce is a big driver of the value proposition to our clients, but also to our investors.

I guess how do you balance between the two, between the scarce financing that's available for the banks versus the vehicle that you have in play that are trying to provide financing, but on the buyout side, it seems like that’s a little bit more challenging these days, how do you thread the needle on the buyout side of the equation, I guess that maybe it's there for a higher quality companies and it may be a little bit less available than in the past, but just how do you think about balancing the two and also the use of more equity.

Yes, I think as Bennett highlighted, just to rephrase, when you go into a distress for control environment the availability of financing becomes less of an issue. It's actually one of the catalysts for the opportunity, so when you're going in and taking the ownership of company through a balance sheet restructuring and then trying to invest in the growth of that company going forward, the financing constraints in the syndicated loan market and the high yield market don’t come into play, so notwithstanding Bennett's comments and you can see this in our historical portfolios, notwithstanding the comments that we do not makes out leverage in our core buyout business as we transition into Fund 5 and what we think is going to be a great vintage for distress for control that doesn't become a balancing act or us because we're just not needing access to the financing market. So, I think it's less of an issue for us than some of the more regular way buyout shops, but it is the key driver of the opportunity in credit for us.

Got it. So its sounds like you pivot more towards the distress for control typed strategies in this environment.

Yes, for sure.

Great, thank you.

This concludes our question-and-answer session. I'd like to turn the conference back over to Mr. Arougheti for closing remarks.

Great. I think that's all we had. We really appreciate all the great questions and the robust discussion and we look forward to speaking with everybody next quarter. Have a great day.

Ladies and gentlemen, this concludes our conference call for today. If you missed any part of today's call, an archived replay of this conference call will be made available through March 29, 2016 by dialing 877-344-7529 and international callers by dialing 1-412-317-0088. For all replays, please reference conference number 10078855. An archived replay will also be available on a webcast link, located on the home page of the investor resources section of our Web site. Thank you. You may now disconnect.