Ares(US:ARES)2025-09-09 13:17Ares Management Conference Call Summary Company Overview - Company: Ares Management Corporation (NYSE: ARES) - Date: September 09, 2025 - Speaker: Michael Arougheti, CEO Key Points Macroeconomic Outlook - Ares Management has a diverse portfolio with investments in over 3,000 middle market companies and significant real estate holdings, indicating a stable economic environment despite labor market concerns [3][4] - High occupancy rates and year-over-year EBITDA growth of 12% to 13% were reported, with non-accruals below historical averages [3][4] Direct Lending Market - The direct lending market has grown approximately 14.4% over the last decade, with private equity growth at 12.8% [5][6] - Ares Management does not view direct lending as mature; instead, it sees continued growth potential, especially as private equity is expected to outpace private credit growth by 200-300 basis points in the coming years [5][6] - Ares has maintained a strong position in the market, with a 30% year-on-year increase in FPAUM over the last two years, despite a slow M&A environment [6][8] Deployment Trends - Deployment has been strong, particularly in U.S. and European direct lending, with a broad-based increase in areas like secondaries and opportunistic credit [10][11] - The company anticipates continued growth in deployment, especially if interest rates are cut in the latter half of the year [4][10] Competitive Dynamics - Credit spreads are primarily influenced by credit risk rather than competition, with current excess returns in direct lending at approximately 225 basis points compared to broadly syndicated loans [12][13] - Ares Management has not seen significant new entrants in the direct lending market over the past 10-15 years, allowing it to maintain its competitive edge [6][8] Private Credit and Risk Management - Ares Management emphasizes that the companies borrowing in private credit markets are not riskier than those in traditional bank markets [20][21] - The U.S. loan book has a loan-to-value (LTV) ratio of 43%, indicating a strong equity cushion [22][24] - Interest coverage is healthy at two times EBITDA, with non-accruals near all-time lows [24][25] Asset-Based Finance (ABF) - Ares has been in the ABF space for over 20 years, with a current AUM of approximately $47 billion and a target of reaching $70 billion by 2028 [36][37] - The company is focusing on a balanced approach between high-grade and non-rated tranches in ABF to maximize profitability [40] Insurance and Retirement Market - Ares Management is cautiously optimistic about the potential for democratized access to alternative investments in the 401(k) market, pending regulatory changes [49][50] - The company is exploring new product introductions tailored for this market, but significant hurdles remain [51][53] Secondaries Market - Ares has successfully scaled its secondaries business since acquiring Landmark, with AUM growing from $20 billion to approximately $34-35 billion [56][59] - The market remains capital constrained, with annual deployment around $200 billion against $250-270 billion in dry powder [60] Conclusion - Ares Management is positioned well across various sectors, with strong growth in direct lending, asset-based finance, and secondaries, while maintaining a focus on risk management and competitive advantages in the private credit market [3][4][36][56]