Ares Management Corporation Q3 FY2025 earnings call

• Ares generated strong Q3 financial results with 28% y/y growth in management fees, 39% y/y growth in FRE, and 34% y/y growth in realized income. • Raised over $30 billion in new capital in Q3, highest quarter on record, with YTD over $77 billion and 12-month over $105 billion. • AUM up to over $595 billion, fee-paying AUM to $368 billion. • Strong fundraising across strategies, including over 40 funds in market. Infrastructure secondaries fund closed at $3.3 billion, real estate fundraising strong with funds targeting hard caps. • Wealth business had record equity inflows in Q3, with semi-liquid wealth AUM target raised to $125 billion by 2028. • Launched Promote Giving initiative, with funds having accrued over $45 million in pledged charitable contributions.

Management fees were a record $971 million, a 28% year-over-year increase. Fee-related performance revenues totaled $85 million. Management fees excluding catch-up fees increased at a 21% annualized rate. AUM increased to more than $595 billion, up 28% year-over-year, with fee-paying AUM at $368 billion, also up 28% y/y. Credit strategies raised $19.3 billion, including strong demand for private credit. Infrastructure secondaries fund closed at $3.3 billion. Wealth business had $5.4 billion equity inflows in Q3, with semi-liquid wealth strategies having raised over $12 billion YTD, up over 70% y/y.

• Expect to meaningfully exceed last year's $93 billion fundraising. • Anticipate new funds in market, including third special opportunities fund, 10th real estate secondaries fund, and new digital infrastructure fund. • Raised 2028 AUM target for semi-liquid wealth products from $100 billion to $125 billion. • Confident in continued strong fundraising and deployment opportunities with $150 billion dry powder. • Expect FRPR from credit group in Q4, with potential FRPR from diversified non-traded REIT next year.

• High-profile bankruptcies/fraud events in credit markets, but seen as idiosyncratic and isolated. • Credit portfolios remain healthy with low nonaccrual rates. • Asset-based finance underweight nonresidential consumer assets and subprime consumer assets, with negligible exposure to such areas. • Fraud events in industry seen as potentially coincidental and not indicative of broader credit cycle turn.

Q: Alex Blostein asked about real estate franchise position and how Ares will benefit from increased transaction volume.

A: Michael Arougheti said Ares is the third largest institutional real estate manager, seeing green shoots in real estate with increased deployment quarter-over-quarter and year-over-year, and will benefit from increased transaction volume.

Q: Steven Chubak asked about fundraising outlook and deployment mix.

A: Michael Arougheti said Ares expects to surpass $93 billion fundraising, with diverse strategies resonating with investors, and next year will see tying up large funds and introduction of flagship credit funds.

Q: Craig Siegenthaler asked about lower yields in private credit and investor reaction.

A: Michael Arougheti said private credit spreads offer meaningful risk-adjusted returns, and lower rates are constructive for real estate transaction volumes and private credit deployment.

Q: William Katz asked about GCP transaction growth opportunities.

A: Jarrod Phillips said GCP is going well, expanding real estate platform to be one of the 3 largest alternative real estate managers, and opportunities in data centers with urban adjacent sites.

Q: Brian McKenna asked about portfolio management and workout capabilities in direct lending.

A: Michael Arougheti said deep portfolio management and restructuring teams are critical, with historical recovery rates in U.S. direct lending at ~93% and European at ~95%.