Ares(US:ARES)2023-10-31 16:55Financial Data and Key Metrics Changes - The company declared a fourth quarter common dividend of $0.77 per share, representing a 26% increase over the same quarter a year ago [5] - Total Assets Under Management (AUM) reached $395 billion, with a target of exceeding $500 billion by the end of 2025 [25] - Management fees totaled over $643 million in the quarter, an increase of 17% compared to the same period last year [25] - Fee-related earnings (FRE) totaled $274 million, an increase of 18% from the third quarter of 2022 [27] - The FRE margin in the third quarter was 41.2%, showing a 100 basis point improvement from the year-ago period [28] Business Line Data and Key Metrics Changes - The company raised $21.9 billion in new commitments during the quarter, marking the second highest fundraising quarter in its history [8] - The US direct lending business raised $11.6 billion in the third quarter, bringing total AUM in this strategy to nearly $118 billion [11] - The alternative credit strategy, Pathfinder II, closed approximately $2.2 billion in the third quarter, bringing total commitments to $5.8 billion [13] - The real estate debt business exceeded $11 billion, with a European real estate debt mandate raising over $1 billion [15] Market Data and Key Metrics Changes - The company noted a slower transaction activity due to higher capital costs and valuation disparities, but significant pent-up demand exists [7] - In Asia credit, nearly $400 million was raised in the quarter, with strong economic trends in India and Australia [14] - The company is seeing a growing opportunity to partner with the banking sector through its alternative credit business [21] Company Strategy and Development Direction - The company is focused on expanding its product capabilities and geographic reach, particularly in Asia and Latin America [22] - There is a strong emphasis on filling gaps left by traditional capital providers and banks, especially in the private credit market [37] - The company plans to continue exploring inorganic growth opportunities through strategic acquisitions and partnerships [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the resilience of the underlying economy, despite the challenges posed by higher interest rates [6] - The company expects market activity to improve in 2024 due to aging private equity dry powder and growing pressure from limited partners [20] - Management highlighted strong visibility on continued earnings growth, dividend growth, and margin expansion [39] Other Important Information - The company has over $100 billion in dry powder available for future deployment, which is expected to generate nearly $650 million in incremental management fees [25] - The company is on track to meet or exceed its goal of reaching $25 billion or more in AUM for its insurance business by the end of 2025 [17] Q&A Session Summary Question: Update on bank partnerships and asset acquisitions - Management confirmed ongoing partnerships with banks and optimism about future opportunities in the asset-backed finance market [42] Question: Fundraising opportunities outside of credit - Management indicated a strong pipeline for fundraising across various verticals, including private equity and infrastructure funds [48] Question: LP dynamics and pricing concessions - Management stated that they are not experiencing any pressure for lower hurdles or pricing concessions in their credit funds [55] Question: Cap rates in non-traded REITs - Management reported cap rates for non-traded REITs at approximately 5.5% to 5.6%, reflecting an increase from the previous year [63] Question: Expectations for European waterfall funds - Management explained that the duration of underlying assets is extending, which may push out the timing of realizations but is expected to result in a larger build over time [66]