Key Takeaways
- • Founded in 1997 as a credit-focused firm, Ares Management has evolved into a diversified global alternative asset manager operating across credit, private equity, real estate, and secondary strategies, with a formalized operating partner function established by the mid-2010s.
- • Structured operating capability emerged from deal experience: Landmark transactions including the 2006 investment in 99¢ Only Stores and the 2013 Neiman Marcus acquisition demonstrated the need for systematic operational improvement beyond balance sheet restructuring, prompting Ares to formalize its Value Creation Team (VCT).
- • Dedicated operating partners hired circa 2015: Ares transitioned from ad-hoc external advisory relationships to an in-house function by recruiting functional experts in procurement, sales force effectiveness, and operational consulting to support portfolio company value creation.
- • Credit heritage shaped operational approach: Ares's origin as a leveraged credit investor established a foundational discipline in risk management and downside protection that informed its subsequent evolution into control-oriented private equity investing.
- • Operating partner function reflects industry competitive necessity: The formalization of Ares's operating capability coincided with broader industry trends recognizing that private equity success requires active operational value creation beyond financial engineering.
Summary
Ares Management, established in 1997, began as a specialized credit investment firm focused on bank loans, high yield bonds, direct lending, and structured equity opportunities. The firm's early operational philosophy was shaped by its credit pedigree, emphasizing risk management and downside protection for leveraged companies. This foundational discipline would later inform Ares's approach to portfolio operations as it expanded into new asset classes.
The transition toward broader alternative asset management and private equity occurred over the 2000s and 2010s. When Ares launched its dedicated Private Equity group in the 2000s, leadership recognized that driving upside in control investments required more than financial restructuring—it demanded robust operational capability. Two landmark transactions catalyzed this shift: the 2006 investment in 99¢ Only Stores and the 2013 acquisition of Neiman Marcus. These distressed-for-control and traditional buyout deals exposed gaps in Ares's systematic approach to operational improvement, establishing the strategic rationale for building internal operating expertise.
By the mid-2010s, Ares had formalized its Value Creation Team (VCT) within the Private Equity group, marking a departure from reliance on external advisors toward an integrated, in-house operating function. Around 2015, the firm hired its first dedicated operating partners and functional specialists in areas including procurement and sales force effectiveness. This organizational evolution aligned Ares with industry-wide recognition that competitive private equity investing requires active operational value creation, not merely balance sheet optimization. The firm's core values—collaborative, responsible, entrepreneurial, self-aware, and trustworthy (CREST)—underpin this operationally engaged approach to portfolio management.
The transition toward broader alternative asset management and private equity occurred over the 2000s and 2010s. When Ares launched its dedicated Private Equity group in the 2000s, leadership recognized that driving upside in control investments required more than financial restructuring—it demanded robust operational capability. Two landmark transactions catalyzed this shift: the 2006 investment in 99¢ Only Stores and the 2013 acquisition of Neiman Marcus. These distressed-for-control and traditional buyout deals exposed gaps in Ares's systematic approach to operational improvement, establishing the strategic rationale for building internal operating expertise.
By the mid-2010s, Ares had formalized its Value Creation Team (VCT) within the Private Equity group, marking a departure from reliance on external advisors toward an integrated, in-house operating function. Around 2015, the firm hired its first dedicated operating partners and functional specialists in areas including procurement and sales force effectiveness. This organizational evolution aligned Ares with industry-wide recognition that competitive private equity investing requires active operational value creation, not merely balance sheet optimization. The firm's core values—collaborative, responsible, entrepreneurial, self-aware, and trustworthy (CREST)—underpin this operationally engaged approach to portfolio management.
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