Ares(ARES) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Ares Management achieved a record $994 million in management fees for Q4 2025, totaling $3.7 billion for the full year, representing a 27% increase quarter-over-quarter and a 25% increase year-over-year [28] - Fee-related earnings (FRE) for the full year increased by 30% compared to the prior period, with a record FRE of $528 million in Q4, reflecting a 33% year-over-year growth [31] - Realized income for Q4 reached a record $589 million, with full-year realized income exceeding $1.8 billion, marking a 26% increase from 2024 [34] Business Line Data and Key Metrics Changes - The wealth management business saw AUM grow to over $66 billion, a 69% increase year-over-year, driven by strong performance across semi-liquid wealth products [7][22] - The real estate group raised more than $16 billion for the year, including over $7 billion in Q4, with significant commitments in various real estate strategies [18] - The secondaries group raised $12.9 billion for the full year, with AUM increasing by 45%, nearly doubling in size since the acquisition of Landmark [21] Market Data and Key Metrics Changes - Ares Management's total AUM reached over $622 billion, a 29% increase year-over-year, with $113 billion in total fundraising for 2025 [5] - The company reported a record $46 billion in deployment for Q4, with full-year gross deployment totaling $146 billion, a 37% increase over 2024 [6] - The private equity business reported organic portfolio company EBITDA growth of 13% for the last 12 months in its latest fund, ACOF Six [10] Company Strategy and Development Direction - Ares Management is focused on expanding its investment platform and geographic reach, with significant investments in new data systems and AI projects to enhance decision-making and operational efficiency [7][8] - The acquisition of GCP has positioned Ares as a global top three owner and operator of industrial real estate, contributing to the growth of its real estate and digital infrastructure offerings [7] - The company aims to leverage its diverse strategies across asset classes and geographies to capture growth opportunities, particularly in real assets and secondaries [68] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the improving transaction environment and pent-up demand for private equity sponsors seeking liquidity solutions, supported by a large inventory of seasoned assets and an improving interest rate environment [12][13] - The company anticipates 2026 to be a significant year for realizing European-style performance fees, with expectations for substantial growth in fee-related performance revenues [28] - Management highlighted strong fundamentals across credit portfolios, with loan-to-value ratios near historical lows and improving interest coverage [34][43] Other Important Information - Ares Management declared a 20% year-over-year increase in its first quarter 2026 common dividend to $1.35 per share [3] - The company has a substantial dry powder of $156 billion, positioning it well for future investments [27] - Ares is well-prepared to navigate market challenges, including potential risks from AI disruptions, with a diversified portfolio and strong fundamentals [42][43] Q&A Session Summary Question: Impact of software AI disruption on deployment efforts - Management expressed confidence in their software investments, emphasizing the diversification and stability of their portfolio, and noted that the disruption would not significantly impact overall origination volumes [47][50] Question: Wealth channel performance and sentiment - Management reported strong flows in January and February, with broad-based demand across private credit and core infrastructure products, indicating resilience in the wealth channel despite some cyclicality [54][59] Question: Outlook for real assets and secondaries - Management highlighted ongoing growth in real estate and secondaries, with expectations for significant fundraising and deployment opportunities in these areas [64][71]