Ares(US:ARES)2024-08-02 20:14Financial Data and Key Metrics Changes - The company reported a record $26 billion in gross capital raised during Q2 2024, marking a 29% increase in assets under management (AUM) not yet paying fees, positioning the company well for future deployment [10][27] - AUM reached $447 billion, an 18% increase year-over-year, with fee-paying AUM at $276 billion, up 14% from the previous year [31][32] - Fee-related earnings (FRE) totaled approximately $325 million, reflecting a 22% year-over-year growth, with a margin improvement of 130 basis points to 42.1% [31][32] Business Line Data and Key Metrics Changes - In private credit strategies, gross deployment increased over 58% year-over-year, with approximately $20 billion deployed in Q2 [11] - Real estate strategies saw deployment more than double compared to the previous year, with positive trends in industrial and multifamily sectors [13][14] - The company raised nearly $20 billion in funds managed accounts and collateralized loan obligations (CLOs) within its credit group during Q2 [17] Market Data and Key Metrics Changes - The macroeconomic environment improved, with a stronger transaction environment and stable credit trends, contributing to increased investor confidence [8][9] - The company noted significant institutional and retail demand for alternative investment products globally, particularly in credit strategies and real estate [9][10] - The wealth management channel saw a tripling of net flows year-over-year, indicating strong demand for alternative investments [16][22] Company Strategy and Development Direction - The company is focused on expanding its alternative investment offerings, particularly in private credit, real estate, and digital infrastructure [14][15][38] - There is a strategic emphasis on maintaining a balance sheet light model to capitalize on market opportunities while managing risks effectively [38] - The company is exploring inorganic growth opportunities in sectors such as insurance, Asia real estate, and digital infrastructure [50] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing a large pool of available investment capacity and strong investor demand for products [39] - The company anticipates continued solid economic growth and favorable credit performance in both US and European markets [12] - Management highlighted the importance of adapting to changing market conditions and maintaining a competitive edge through rigorous due diligence and selective investment [12][62] Other Important Information - The company declared a third-quarter common dividend of $0.93 per share, representing a 21% increase over the same quarter last year [7] - Aspida, the company's minority-owned insurance affiliate, secured nearly $600 million in additional institutional equity, positioning it for continued growth [24] - The company has committed nearly $5 billion in digital-related infrastructure investments over the past five years [15] Q&A Session Summary Question: Update on the private wealth channel and new product launches - Management reported positive scaling in new products and noted that international expansion of wealth distribution is accelerating, with 30% to 35% of flows coming from outside the US [41][43] Question: Credit quality and industry outlook on defaults - Management indicated that while default rates may rise, they do not expect alarming levels, citing strong credit quality and a favorable capital structure [44][46] Question: M&A strategy and potential targets - Management highlighted a disciplined approach to M&A, focusing on cultural fit and financial accretion, while noting that rate cuts could catalyze deal flow [49][51] Question: Deployment dynamics and origination ratios - Management expects further improvement in the gross to net origination ratio, with a shift towards new transaction activity [53][54] Question: Wealth distribution fees and expense dynamics - Management clarified that distribution fees are a run-rate expense, and as fundraising increases, these expenses will also rise, but they view it positively as a sign of growth [57][59]