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Ares Management Employees: Smarter Ways to Manage Taxes on Appreciated Stock

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'Ares Management employees with concentrated stock positions may benefit from thoughtful tax planning that allows for tax deferral while balancing liquidity, compliance, and long-term compounding,' Wesley Boudreaux, a representative of The Retirement Group, a division of Wealth Enhancement.

'Ares Management employees who hold highly-appreciated stock may want to consider tax-efficient strategies that help mitigate their liabilities while aligning with their overall retirement goals,' Patrick Ray, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article, we will discuss:

How taxes can affect investment returns, particularly on concentrated stock positions.
Exchange funds and options-based strategies as methods for tax deferral and diversification.
Alternative planning techniques outside ETFs, including charitable trusts and gifting strategies.

By Carlos Hernandez, Wealth Enhancement advisor

When it comes to driving portfolio returns, many investors aim to keep management fees low by investing in low-cost index funds and exchange-traded funds (ETFs). While fees matter, however, the real culprit for lower-than-anticipated performance is taxes. ¹

Wealth Enhancement advisor Carlos Hernandez explains: 'By losing less to taxes each year, investors have access to more capital that can continue to compound over time. This makes tax deferral an important part of an effective financial plan.' Ares Management employees looking for long-term growth strategies could benefit by understanding how to better manage their investment tax burdens.

Trade Money

One area where taxes can take a toll is on the sale of company stock or other concentrated investment positions. Ares Management professionals looking to diversify could face significant capital gains taxes on an outright sale. One way to diversify without triggering immediate capital gains is through exchange funds. By contributing their highy-appreciated stock to a pooled fund, investors can trade their concentrated holdings for shares in a diverse basket of securities. This method can be used by Ares Management employees who want to diversify while postponing taxable events.

Although this method allows for tax deferral, it also requires investors to hold the exchange fund for a period of time, typically seven years. ² This could create a challenge for investors who require liquidity. Additionally, these funds are often exclusively accessible to wealthy, accredited investors—something Ares Management executives should carefully evaluate.

Funds Based on Options

Another way to mitigate taxes on the sale of highly-appreciated stock is by using options contracts. The idea is to hedge risk with put options while covering the cost of those puts by selling call options—a strategy called 'collaring'. From there, the strategy reverses, with investors selling put options and using the proceeds to buy call option on an equity or bond index. ³ If managed effectively, this helps to diversify a concentrated portfolio while still maintaining liquidity.

Given the complexity of this strategy, meticulous planning is necessary. It's generally recommended that investors work with an experienced financial advisor before pursuing this approach.

Things to Be Aware of

Although these strategies can be beneficial for Ares Management employees who hold highly-appreciated stock, caution is recommended. There are costs associated with these approaches, and potential liquidity risks. Additionally, the IRS may eventually contest such arrangements because their tax status has not been thoroughly examined—something Ares Management retirees should keep top of mind.

'Tax drag reduction strategies can be effective, but they must be assessed through the lens of risk, liquidity, cost, and compliance,' warns Carlos Hernandez. What is appealing in theory must hold up to inspection in the real world.

Alternative Strategies

Although they show promise, investors with highly-appreciated stock or those looking to postpone gains have other alternatives besides exchange funds or options. Other tactics could include:

- Prepaid variable forwards (subject to IRS regulations, contracts to sell at predetermined terms in the future).
- Charitable remainder trusts (CRTs), which allow investors to donate appreciated stock to a charitable trust and receive a stream of regular income in return.
- Donor-advised funds (DAFs), which provide investors with a tax deduction for the fair market value of the appreciated stock they donate.
- Other gifting techniques, such as direct donations to charity or family.
Each has its own set of guidelines, advantages, and disadvantages. To limit unnecessary taxes or violating the constructive sale regulations, careful planning is necessary for Ares Management professionals managing complex portfolios.

The Bottom Line

Although the movement to mitigate the tax burden on investments is not new, the instruments are changing. Both exchange funds and options-based structures offer investors a way to manage tax liabilities, especially for Ares Management employees who hold highly-appreciated stock.

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In the end, taxes are unavoidable. However, with the correct set of instruments, they can be controlled and postponed. 'The real value comes from aligning tax strategy with investment strategy,' summarizes Carlos Hernandez.

Sources:

1. BlackRock Advisor Center. ' Investing for After-Tax Returns ,' 2025.

2. Kiplinger. ' Four Clever and Tax-Efficient Ways to Ditch Concentrated Stock Holdings ,' by Robert Waskiewicz. Sep. 11, 2025.

3. Financial Planning Association. ' Tax-Efficient Ways to Diversify Concentrated Stock Positions ,' by Peter Lazaroff. Oct. 2024.

What is the purpose of Ares Management's 401(k) plan?

The purpose of Ares Management's 401(k) plan is to help employees save for retirement by providing a tax-advantaged way to contribute a portion of their salary.

What types of contributions can employees make to Ares Management's 401(k) plan?

Employees can make pre-tax contributions, Roth (after-tax) contributions, and, if eligible, catch-up contributions to Ares Management's 401(k) plan.

Does Ares Management offer a company match for 401(k) contributions?

Yes, Ares Management offers a company match for employee contributions to the 401(k) plan, subject to specific terms and conditions.

How often can employees change their contribution amounts to Ares Management's 401(k) plan?

Employees can change their contribution amounts to Ares Management's 401(k) plan at any time, subject to plan rules.

What investment options are available in Ares Management's 401(k) plan?

Ares Management's 401(k) plan offers a variety of investment options, including mutual funds, target-date funds, and other investment vehicles.

Is there a vesting schedule for the company match in Ares Management's 401(k) plan?

Yes, Ares Management has a vesting schedule for the company match, which determines when employees fully own the matched contributions.

What is the maximum contribution limit for Ares Management's 401(k) plan?

The maximum contribution limit for Ares Management's 401(k) plan is set by the IRS and may change annually; employees should check the current limit for the year.

Can employees take loans against their 401(k) balance at Ares Management?

Yes, Ares Management allows employees to take loans against their 401(k) balance, subject to specific terms and conditions outlined in the plan.

What happens to an employee's 401(k) balance if they leave Ares Management?

If an employee leaves Ares Management, they can choose to roll over their 401(k) balance to another retirement account, leave it in the plan, or withdraw it, subject to tax implications.

How can employees access their 401(k) account information at Ares Management?

Employees can access their 401(k) account information through the Ares Management benefits portal or by contacting the plan administrator.

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

Ares Management has recently announced a restructuring plan aimed at streamlining operations and reducing overhead costs. This restructuring includes potential layoffs and changes to employee benefits as part of a broader effort to improve operational efficiency. It is crucial to address this news due to the current economic environment, where companies are making significant adjustments to adapt to shifting market conditions and regulatory changes. The investment climate is uncertain, and understanding these changes is vital for navigating financial planning and tax implications. Additionally, political decisions on economic policies may influence how these restructuring measures impact employees' retirement plans and benefits.

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For more information you can reach the plan administrator for Ares Management at 2000 Avenue of the Stars Los Angeles, CA 90067; or by calling them at (310) 201-4100.