Ares Management Corporation Q1 FY2026 earnings call

• AUM and fee-paying AUM saw strong growth. - Strong fundraising with 30 billion dollars raised in Q1, highest ever first quarter. - Pipeline of new institutional funds robust. - Available capital over 158 billion dollars with over 100 billion dollars in credit dry powder. - Wealth business had strong quarter with various products seeing inflows. - Investment deployment activity increased modestly with strong pipeline in various strategies. - Software exposure analyzed with detailed study showing low risk of AI disruption for majority of portfolio. - Successful IPO of X-energy.

AUM increased 18% year-over-year to 644 billion dollars, fee-paying AUM increased 19% to 400 billion dollars. Management fees increased 22% year-over-year, FRE grew 26%, and realized income increased 24%. Q1 gross capital raised was 30 billion dollars, highest ever first quarter. Available capital stands at over 158 billion dollars, with over 100 billion dollars in credit dry powder. Fundraising strong across Credit, Real Estate, Wealth etc. segments. For example, Credit Group raised over 20 billion dollars in Q1, including ASOF III raising over 8.3 billion dollars in equity commitments. Wealth business had strong quarter with Wealth AUM up 54% to 68 billion dollars. U.S. Direct Lending non-traded BDC had equity flows moderate but fund performance and credit fundamentals strong.

• On track for 16% to 20% compound annual growth in FRE, 20% to 25% in realized income and 20% in dividends for 2026. - Anticipate continued FRE margin expansion within upper end of 0 to 150 basis points annual target. - On track for another record year of fundraising. - Expect to be well positioned for strong deployment even in uncertain markets with expansive origination platform, record dry powder and flexible capital. - No change to 125 billion dollars fundraising target for 2028.

• Potential impact of redemptions in certain retail-focused funds, but minimal impact expected on FPAUM. - Geopolitical issues could impact market conditions. - Uncertainty in software industry and potential AI disruption risks, though software exposure is well diversified and mitigated by capital structure. - Impact of market volatility on deployment and realization timelines.

Q: Craig Siegenthaler with Bank of America asked about evolving demand dynamics between institutional, insurance, and retail channels within private credit.

A: Michael J. Arougheti discussed the need for diversification of funding across traded, non-traded, and institutional channels, and the difference between high-grade and sub-investment-grade assets.

Q: Alexander Blostein with Goldman Sachs asked about deployment pipelines in Credit business.

A: Michael J. Arougheti said pipeline is at record level, with acceleration expected in back half of year.

Q: Steven Chubak with Wolfe Research asked about retail appetite for strategies outside credit and fundraising target.

A: Michael J. Arougheti said there is secular momentum for non-credit strategies in wealth channel and no change to 125 billion dollars fundraising target.

Q: Patrick Davitt with Autonomous Research asked about direct lending pipeline.

A: Michael J. Arougheti said there is lag, but catalysts for deployment remain.

Q: William Raymond Katz with TD Cowen asked about realizations and FRE margins.

A: Jarrod Morgan Phillips said realizations depend on transactional backdrop and FRE margin guidance is within 0 to 150 basis points.

Q: Analyst with RBC Capital Markets asked about secondaries market opportunity.

A: Michael J. Arougheti said secondaries market is growing due to GP-led solutions and primary market growth.

Q: Kenneth Brooks Worthington with JPMorgan asked about deployment opportunity in European direct lending.

A: Michael J. Arougheti said European direct lending has robust deployment and healthy pipeline.

Q: Michael Brown with UBS asked about software forward look.

A: Michael J. Arougheti said software portfolio is well diversified with low LTV and mitigants to loss.

Q: Benjamin Elliot Budish with Barclays asked about European-style realization revenues, G&A growth, and FRPR.

A: Jarrod Morgan Phillips said G&A is encompassed in margin guidance and there will be some imbalance in G&A trend.

Q: Brennan Hawken with BMO Capital Markets asked about credit selection trends.

A: Michael J. Arougheti said credit selection follows same playbook with high selectivity and reliance on incumbent relationships.

Q: Brian J. Mckenna with Citizens asked about managing flexible pools of capital.

A: Michael J. Arougheti said flexible mandates allow for relative value investing across markets.

Q: Analyst with Raymond James asked about data center business.

A: Unknown Speaker and Michael J. Arougheti discussed data center business with large market opportunity and investment in the space.

Q: Analyst with Jefferies asked about differentiation in institutional market demand.

A: Michael J. Arougheti said institutional market demand is broad-based with consolidation theme benefiting larger platforms.