Ares(US:ARES)2020-02-13 23:46Financial Data and Key Metrics Changes - Ares Management reported a record year with management fee growth exceeding 20% and fee-related earnings growth exceeding 25% in Q4 2019 [6] - Full year fee-related earnings totaled $323.7 million, a 27% increase from 2018, while realized income for the year was $503.5 million, up 27% [12][14] - The company's AUM reached $148.9 billion, reflecting a 14% year-over-year growth [15] Business Line Data and Key Metrics Changes - The credit business generated low to mid-teens returns, with significant outperformance in loan and high-yield strategies [10] - Real estate funds achieved gross returns of 16.8% in the U.S. and 12.7% in Europe, while private equity funds posted gross returns exceeding 20% [10] - Total drawdown deployment was approximately $22 billion, up from $17 billion in 2018, indicating growth across all investment groups [11] Market Data and Key Metrics Changes - Ares raised $24 billion in 2019, with existing limited partners contributing over 80% of the gross capital raised [6] - The company is experiencing strong demand from global pension funds, insurance companies, and sovereign wealth funds, indicating a broadening investor base [7] Company Strategy and Development Direction - Ares is focusing on expanding its product suite and entering new markets, including Asia through the acquisition of SSG Capital [8][9] - The company plans to launch several flagship funds in 2020, targeting a fundraising total that could surpass the record $36 billion raised in 2018 [7] - Strategic initiatives include expanding into insurance with Aspida and launching Ares Australia Management [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to grow in a favorable market environment, with significant momentum heading into 2020 [20] - The firm is well-positioned to capitalize on changing markets, with available capital of nearly $35 billion [21] - Management highlighted the importance of maintaining a disciplined approach to expense management while pursuing growth opportunities [40] Other Important Information - Ares declared a quarterly common dividend of $0.40 per share, a 25% increase from the previous year, reflecting confidence in future earnings growth [5] - The company has seen a significant increase in its shareholder base since converting to a corporation in 2018, with trading volume increasing sixfold [18] Q&A Session Summary Question: Update on the real estate business after David Roth's joining - Management reported strong progress in real estate fundraising and performance, with significant momentum in new funds [24] Question: Potential for additional common equity raises in ARCC - Management indicated that equity base at ARCC could continue to grow if deployment remains strong [28] Question: Insights on FRE margins and compensation growth - Management clarified that the expected increase in FRE margins is aligned with historical growth rates, with a target of 34% for 2020 [30][31] Question: Staging of fundraising and fee-paying AUM - Management explained that PE-oriented strategies will pay on committed assets, while credit funds will pay on invested capital, leading to a balanced growth picture [37] Question: Impact of strategic transactions on earnings and growth profile - Management highlighted that strategic transactions like SSG and Aspida are expected to open new markets and contribute significantly to profit over the next few years [44][46] Question: Market dynamics for direct lending in Asia - Management noted that direct lending in Asia presents unique challenges but also significant opportunities for growth, similar to past experiences in Europe and the U.S. [51][53] Question: Factors driving expected FRE growth and dividend increases - Management indicated that growth in FRE will largely come from capital raised in 2019 and continued deployment in 2020 [56][57] Question: Confidence in deploying capital amid market conditions - Management expressed confidence in deploying capital effectively, regardless of market conditions, with a focus on both primary and secondary markets [61][62]