Earnings call transcript: Ares Management Q1 2026 misses expectations By Investing.com

Ares Management Corporation reported its Q1 2026 financial results, revealing a miss on both earnings and revenue forecasts. The company announced an earnings per share (EPS) of $1.24, falling short of the projected $1.38, marking a surprise of -10.14%. Revenue stood at $1.27 billion, below the expected $1.32 billion, resulting in a -3.79% surprise. Despite the misses, Ares Management’s stock showed resilience, rising 2.7% in pre-market trading to $120.5. The stock has experienced significant volatility this year, with shares down 26% year-to-date and trading 38% below the 52-week high of $195.26, according to InvestingPro data.

Key Takeaways

• Earnings per share missed forecasts by 10.14%.
• Revenue also fell short of expectations by 3.79%.
• Stock price increased by 2.7% in pre-market trading.
• Assets under management grew 18% year-over-year.
• Management fees exceeded $1 billion for the first time.

Company Performance

Ares Management demonstrated solid growth in its assets under management (AUM), which increased by 18% year-over-year to $644 billion. The company’s revenue surged 44% over the last twelve months as of Q4 2025, reaching $5.6 billion, while maintaining a market capitalization of $39.6 billion. Fee-paying AUM rose 19% to reach $400 billion. Despite the earnings miss, the company achieved several milestones, including surpassing $1 billion in management fees for the first time, highlighting strong underlying business performance.

Financial Highlights

• Revenue: $1.27 billion, down from the forecasted $1.32 billion.
• Earnings per share: $1.24, compared to a forecast of $1.38.
• Management fees: Over $1 billion, a 22% increase year-over-year.
• Fee-related earnings: $464 million, a 26% increase year-over-year.
• Realized income: $503 million, up 24% year-over-year.

Earnings vs. Forecast

Ares Management’s Q1 2026 earnings per share of $1.24 missed the forecast of $1.38 by 10.14%, while revenue of $1.27 billion fell short of the $1.32 billion projection by 3.79%. This marks a significant deviation from the company’s historical performance, where it has often met or exceeded earnings expectations.

Market Reaction

Despite the earnings miss, Ares Management’s stock rose by 2.7% in pre-market trading, reaching $120.5. The stock’s movement appears to reflect investor confidence in the company’s long-term growth prospects, supported by its strong asset management performance and strategic initiatives. An InvestingPro tip reveals that 12 analysts have revised their earnings downwards for the upcoming period, though net income is still expected to grow this year. The stock currently trades at a P/E ratio of 68.25, and InvestingPro analysis suggests the shares are undervalued at current levels. Want deeper insights? InvestingPro offers 11 additional exclusive tips for ARES, plus comprehensive Fair Value analysis and financial health scores.

Outlook & Guidance

Looking ahead, Ares Management has set ambitious targets, with EPS forecasts for future quarters ranging from $1.45 to $2.15. Full-year 2026 EPS is projected at $6.58, representing significant growth from the trailing twelve-month EPS of $2.16. The company also boasts a strong dividend profile, with a current yield of 4.6% and dividend growth of 45% over the last twelve months. Revenue projections for the upcoming quarters highlight continued growth, with expectations reaching up to $1.45 billion in Q4 2026. The company remains optimistic about its growth trajectory, driven by robust demand across its investment platforms.

Executive Commentary

CEO Michael Arougheti stated, “Our strong asset management growth and record management fees reflect the resilience and scalability of our business model. We continue to see significant opportunities across our investment platforms, which position us well for future growth.”

Risks and Challenges

• Market Volatility: Ongoing geopolitical tensions and inflationary pressures could impact investment performance.
• Interest Rate Increases: Rising interest rates may affect borrowing costs and investor sentiment.
• Competitive Pressure: Increasing competition in the asset management industry could challenge Ares Management’s market share.
• Regulatory Changes: Potential regulatory shifts could impact operational flexibility and profitability.
• Economic Slowdown: A broader economic downturn could dampen investment activity and returns.

Q&A

During the earnings call, analysts focused on the company’s future growth prospects and the impact of macroeconomic factors on its performance. Questions centered around Ares Management’s strategy to navigate market volatility and its plans to capitalize on emerging investment opportunities in digital infrastructure and private credit markets.

For investors seeking comprehensive analysis, ARES is one of 1,400+ US equities covered by InvestingPro’s detailed Pro Research Reports, which transform complex Wall Street data into clear, actionable intelligence through intuitive visuals and expert analysis.

Full transcript – Ares Management Corp Class A (ARES) Q1 2026:

Alex Blostein, Analyst, Goldman Sachs2: Good morning, everyone. Welcome to the Ares Management Corporation’s first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. As a reminder, this conference call is being recorded on Friday, May 1, 2026. I would now like to turn the call over to Mr. Greg Mason, Co-Head of Public Markets Investor Relations for Ares Management. Please go ahead, sir.

Greg Mason, Co-Head of Public Markets Investor Relations, Ares Management Corporation: Good morning, and thank you for joining us today for our first quarter 2026 conference call. I’m joined today by Michael Arougheti, our Chief Executive Officer, and Jarrod Phillips, our Chief Financial Officer. We also have a number of executives with us today who will be available during Q&A. Before we begin, I want to remind you that comments made during this call contain forward-looking statements and are subject to risks and uncertainties, including those identified in our risk factors in our SEC filings. Our actual results could differ materially, and we undertake no obligation to update any such forward-looking statements. Please also note that past performance is not a guarantee of future results, and nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in Ares or any Ares fund.

During this call, we will refer to certain non-GAAP financial measures, which should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles. Please refer to our first quarter earnings presentation available on the Investor Resources section of our website for reconciliations of these non-GAAP measures to the most directly comparable GAAP measures. Note that we plan to file our Form 10-Q later this month. This morning, we announced that we declared a quarterly dividend of $1.35 per share on the company’s Class A and non-voting common stock, representing an increase of over 20% over our dividend the same quarter a year ago. The dividend will be paid on June 30, 2026, to holders of record on June 16.

Now I’ll turn the call over to Mike, who will start with some comments on the current market environment and our first quarter financial results.

Alex Blostein, Analyst, Goldman Sachs2: Thank you, Greg, and good morning. We hope everybody’s doing well. In the first quarter, we continued to generate strong financial results and significant growth across our key financial metrics, and we’re excited and confident about the opportunities ahead for our business. Our AUM increased 18% year-over-year to $644 billion, and our fee-paying AUM increased 19% to $400 billion. This is translating into strong top-line growth and profitability as management fees increased 22% year-over-year, FRE grew 26%, and realized income increased 24%. We also continued to generate strong fund performance for our investors across an expanding array of investment strategies, which is helping to drive increased and more diversified investor demand across our firm.

In fact, we are on track for another record year of fundraising as we raised $30 billion of gross capital in Q1, which is our highest ever first quarter, and that’s up 46% compared to last year’s record first quarter. Our pipeline of new institutional funds remains robust for this year and next year, with three of our largest institutional private credit funds in the market over the next 12 months, two of which have already launched with significant momentum. Our institutional franchise remains strong. Three-quarters of our $644 billion of AUM is comprised of institutional capital, with 14% from publicly traded closed-end funds and other sources, and just over 10% from Evergreen Wealth Products. With nearly 1,700 investment professionals across more than 55 global offices, we operate one of the largest and most diversified origination platforms in the private markets.

This platform enables us to source differentiated investments throughout market cycles and to capture market share during periods of volatility. Even with the typical seasonal slowdown in the first quarter, which was further amplified by heightened geopolitical issues, our deployment was still over $32 billion across the firm, which was higher than the first quarter of last year. As sponsors and business owners gain increasing comfort with the market backdrop, we’re seeing our forward investment pipeline increase to a new record level with notable strength across European and U.S. direct lending, alternative credit, and infrastructure. The expansion of our platform is also driving new investment opportunities. For example, over the past two years, we’ve added 14 new investment products and strategies, which now total $68 billion in AUM.

These new additions to the platform enable us to continue to expand our global origination capabilities and help us to find supply-demand imbalances and to deploy capital in high conviction areas. Our available capital continues to expand on the back of our strong fundraising, and it now stands at over $158 billion. As one of the largest institutionally backed private credit providers globally, we believe that we have the most credit dry powder of any public player in the market, totaling more than $100 billion. This sets us up well for continued growth in FPAUM as we invest in today’s increasingly attractive market. Let me dive into a few key drivers of our business, starting with fundraising.

In short, we continue to see strong demand from institutional investors as many are seeking to take advantage of improving market conditions across private credit, real assets, and secondaries. Institutional demand is broad-based, and we continue to see investors consolidating relationships with scaled platforms like Ares that can generate consistent performance across cycles. Within our credit group, we raised over $20 billion in Q1, driven by strong demand across both drawdown funds and perpetual capital vehicles. In the first quarter, we held the final close for ASOF III, our latest opportunistic credit fund, raising over $8.3 billion of equity commitments and nearly $10 billion, including related transaction vehicles. ASOF III significantly exceeded its target and the size of the prior vintage. We believe that the timing of this raise is particularly compelling as the team is seeing a large pipeline of investment opportunities.

In January, we launched the 3rd vintage of our alternative credit fund with a target of $6.5 billion. Our alternative credit strategy is where we invest across the multi-trillion dollar addressable market in global Asset-Based Finance. Our prior alternative credit fund totaled $6.6 billion in capital, the current fund is experiencing strong demand from existing and new institutional investors, well in excess of the target. We expect to complete the fundraise in the second quarter at its hard cap as the fund is already meaningfully oversubscribed. In U.S. direct lending, we’re accelerating the launch of our 4th senior direct lending fund due to improving market conditions, which are offering enhanced economics, lower leverage, and improved deal terms in U.S. direct lending investments. We anticipate a 1st close late third quarter or early fourth quarter of this year.

We also have some exciting structural enhancements to our main fund series, which we believe will benefit investors and enhance our fundraising capabilities in the strategy. In our third U.S. senior direct lending fund, SDL III, we raised approximately $15.3 billion in equity commitments across both levered and unlevered sleeves in the fund against a $10 billion cover. The fourth vintage in the series will be a fully levered fund, and we plan to launch a new unlevered evergreen U.S. senior direct lending core product. The two products will continue to invest together just like previous vintages, but will now provide investors with both a commingled and an evergreen opportunity. Like our third fund, we would expect this fourth fund series to also exceed its $10 billion cover.

In digital infrastructure, we’re raising a global data center equity fund to take advantage of the multi-decade supply-demand imbalance as the hyperscalers drive demand for trillions of dollars of cloud and AI computing over the next 5 years, a significant portion of which will need to be solved by private equity and private credit. Our digital infrastructure group, which includes our own vertically integrated operating platform, Ada Infrastructure, has a differentiated position in the market characterized by long-standing hyperscaler relationships, significant investment and development expertise, and multiple seed projects in the pipeline in top-tier markets. We expect to hold a significant first close for our global data center fund this summer. As many of you know, we operate 1 of the largest real estate platforms globally, and our scale continues to drive accelerating demand across our real estate funds.

In the first quarter, our 11th U.S. value add fund closed at its increased hard cap of $3.1 billion in fund commitments and approximately three and a half billion of total capital. Similarly, our fifth Japan logistics development fund is seeing very strong demand following the excellent performance of prior vintages. We expect to hold a first close this spring and ultimately reach the hard cap later this year. In secondaries, we’re back in the market with our third real estate secondaries fund and expect to first close in the back half of the year. Within our wealth business, we had another strong quarter driven by accelerating demand in our six products outside of U.S. private credit.

In fact, we raised the same amount of gross and net equity capital of $4 billion and $3 billion, respectively, in the first quarter as we did in the fourth quarter of last year. On a year-over-year basis, our wealth AUM increased 54% to $68 billion. We believe that our diversified product offering is enabling us to gain market share as advisors broaden their focus away from U.S. private credit toward other alternative products like infrastructure, real estate, and private equity. For example, during the first quarter, our core infrastructure fund raised $1 billion in equity subscriptions and now has over $3 billion of AUM. The fund just launched on its first major platform with its first capital raise on that platform closing today.

We’re also seeing improving flows across our two non-traded REITs with more than $640 million of inflows in the quarter. Our European direct lending wealth products had equity flows of nearly $1.2 billion. Within U.S. direct lending, equity flows into our non-traded BDC have moderated relative to prior periods, while fund performance and underlying credit fundamentals remain strong. Since inception, the non-traded BDC has generated an annualized return of over 10% for Class I shares. Notably, the majority of repurchase requests during the most recent quarter came from a limited number of family offices and smaller institutions in select regions, and over 95% of our investors did not request redemptions. It’s important to remember that these vehicles are specifically designed to align liquidity with the underlying assets.

For example, the non-traded BDC’s 5% quarterly repurchase framework approximates the natural repayments of a typical U.S. direct lending portfolio. This repurchase framework is intended to provide access to attractively yielding illiquid assets while also mitigating against the risk of forced asset sales from heightened redemption requests. We believe that we’re well positioned to continue to drive strong growth regardless of redemption activity in our 2 U.S. private credit vehicles. These 2 private credit wealth products account for approximately 4.5% of our overall fee-paying AUM. While we believe it is a very unlikely scenario, if these 2 funds were to experience 5% quarterly redemptions for a full year with no gross inflows, we estimate that based on existing fund structures and redemption mechanics, it could impact our FPAUM by approximately 1% annually.

Considering that our FPAUM increased by over 19% in the past 12 months and our current AUM not yet paying fees available for deployment represents another 19% of future growth in FPAUM, we would expect the impact of any redemption activity to be minimal. In reality, any deployment that would have gone to these non-traded vehicles will likely be taken up by other traded and institutional funds and SMAs with limited to no impact to our current year profitability. On the investing side, overall deployment activity increased modestly compared to the first quarter of 2025, driven by real estate, alternative credit, European direct lending, and private equity.

The transaction market environment for U.S. direct lending was slower in the first quarter as industry-wide deal count and middle market M&A declined by 41% in Q1 2026 versus Q1 2025 due to impacts from the Iran war and changing inflation and rate expectations. During slower periods, we often gain considerable market share due to our certainty of capital and broad sourcing capabilities, and the first quarter was no exception. Over the past several weeks, we’re beginning to see a pickup in new U.S. direct lending transaction activity as market participants adjust to changing market conditions. As Jarrod will discuss later in the call, our investment portfolios are performing well and credit fundamentals remain positive.

Of course, the broader market will see defaults, which will inevitably garner attention. We are not seeing signs of an impending default cycle, and we believe that private credit players are getting well compensated for the risks with enhanced economics. We have operated our U.S. direct lending strategy for over 20 years, and looking at Ares’ BDC, Ares Capital Corporation, we’ve deployed and exited more than $70 billion in capital with an asset level realized gross IRR of 13% on all exited investments. In our view, the growth of the private credit asset class is part of a multi-decade structural evolution supported first by continued expansion of the private markets relative to the public markets. Secondly, it was driven by bank consolidation, the need for tight bank regulation given the dependence on federally insured deposits, and the inherent asset liability mismatch and leverage in the banking system.

Lastly, the syndicated bank loan and high yield markets have been focused on larger companies for decades, which has left a growing void for middle market companies, which comprise about one-third of our economy. The U.S. private credit market, which is funded 75% or more by institutional investors, serves as a stabilizing force in the economy when bank lending contracts or when the capital markets become constrained. For example, if you look over the last 25 years, U.S. private credit has contracted once, which was over 10 years ago, versus the banking sector, which has contracted 8 times over the same period. Today, Ares has over $100 billion in available capital to invest in credit, and we estimate that the industry has over $500 billion of available capital, which is larger than the size of the entire non-traded BDC industry.

While private credit has expanded at low double-digit rates over the past decade, this growth tracks in line with the growth of the $5 trillion private equity sector and other private market asset classes. Also, the percentage of our economy’s GDP funded by corporate credit, including private credit, bank C&I loans, syndicated bank loans, and high-yield bonds, has not changed over the past decade. This indicates that the growth of private credit is not increasing the amount of leverage credit in the economy and is providing more consistent funding throughout business cycles. Every loan funded by private credit with comparatively less fund or balance sheet leverage should reduce risk of volatility. Software is a topic that’s rightfully drawing a lot of attention, but there seems to be confusion on how to distinguish between software exposures and different software companies.

Senior debt is much more protected from downside risks than equity in the capital structure, and individual software companies have varying degrees of potential AI disruption risks and opportunities. In the traded loan markets, we’re seeing a bifurcation in the prices of software loans between the potentially less and more impacted companies.

For example, we’ve tracked a basket of companies focused on core operational software, systems of record, and highly regulated markets, where their loans have traded down 2% on average year-to-date to 98.99, versus another basket of software companies primarily focused on content generation, data analysis, or productivity tools, where their loans have declined 24% on average year-to-date and now trade below 65. As we’ve discussed in the past, areas of software exposure, which is 6% of overall AUM and less than 8% of our AUM in private credit, is focused on senior lending primarily to software companies in the former basket, serving the core operations of complex businesses in regulated industries with proprietary data. As you may have heard from the Ares Capital call earlier this week, we engaged 1 of the top 3 global management consulting firms to supplement our own internal analysis of our software-oriented portfolio.

They conducted a 9-week independent and detailed review of the potential forward-looking AI risk in our software-oriented portfolio companies, and the study also included our relatively lower software exposure in our European direct lending portfolio. The study graded each company on a spectrum base of risk characteristics and concluded that our software-oriented portfolio is very well-positioned with 86% of the portfolio with low risk of potential AI disruption. Approximately 13% of the portfolio was classified as medium risk. These companies are performing well today, but have a greater need and an opportunity to adapt to AI risks in their business, and only 1% of the portfolio was categorized as having high risk of AI disruption.

If the consultant’s framework, which aligns with our own rigorous underwriting views, proves directionally correct, the portion of our software exposure that is medium to high risk represents less than 2% of our U.S. and European direct lending AUM and well under 1% of our total firm-wide AUM. Lastly, before turning the call over to Jarrod, I wanted to highlight the successful IPO last week of X-Energy, which is a small modular nuclear reactor company. In 2022, we identified X-Energy as a revolutionary company through our first SPAC, Ares Acquisition Corp One. As we approached the De-SPAC process in the fall of 2023, high inflation and rapidly rising interest rates impacted market conditions for the transaction. We chose to support X-Energy in a private transaction, and the company continued to execute its strategy, including receiving support from strategic investors like Amazon.

Last week, X-Energy completed its IPO that was meaningfully oversubscribed, raising over $1 billion at a 20% premium to the high end of the proposed range and represented the largest equity offering ever for a nuclear company. The cost basis of our balance sheet investment is a little over $100 million, and based on the recent trading price of the stock, our current fair value, net of employee compensation, is close to $700 million. We’re super excited to celebrate this significant milestone with our partners at X-Energy. With that, I’ll turn the call over to Jarrod to provide additional details on our financial results. Jarrod?

Alex Blostein, Analyst, Goldman Sachs0: Thanks, Mike. Good morning, everyone. Our financial results in the first quarter demonstrate the strength, durability, diversification of our platform with continued strong growth across our key financial metrics. Importantly, these results reinforce what we believe is one of the defining characteristics of our business model, which is our ability to continue growing, often faster, through periods of market dislocation, given our FRE-rich earnings profile, balance sheet light strategy, the diversity of our AUM and investment strategies, and the scale of our global platform. As we look ahead, we remain confident that we’re on track to meet our financial objectives for the year. We continue to benefit from a large base of AUM that is not yet paying fees, strong fundraising momentum, especially in the institutional channel, and improving conditions for our deployments across a broader set of strategies.

We believe the combination of long-duration capital, flexible investment mandates, significant dry powder, an asset-light balance sheet, and a management fee-centric model positions us well to navigate through a range of market environments while continuing to drive growth in earnings over time. Turning to our results, quarterly management fees exceeded $1 billion for the first time in our firm’s history and increased 22% compared to the prior year period. This growth continues to be driven by expansion in FPAUM, which increased 19% year-over-year due to strong underlying fundraising and deployment activity across the platform. Fee-related performance revenues totaled $20 million in the quarter, which were driven by APMF. As a reminder, the timing of FRPR varies by fund and investment strategy.

Within credit, we typically recognize FRPR from our alternative credit strategy in the third quarter, with most of the remaining credit strategies recognized in the fourth quarter. In real estate, FRPR is concentrated in the fourth quarter, while APMF and certain other perpetual vehicles generate FRPR on a more recurring quarterly basis. Fee-related earnings were $464 million in the quarter, increasing 26% year-over-year. Our FRE margin expanded 90 basis points year-over-year to 42.4%. These results reflect our ability to drive operating leverage as we scale.

We continue to have good visibility into margin expansion for the full year toward the high end of our targeted range, driven by a number of factors, including continued efficiencies from the GCP integration, the data center business flipping from a negative to a positive FRE contributor with new global digital infrastructure funds paying on committed capital, and our expectations for continued strong growth in AUM and FPAUM from deployment. Turning to performance income, we generated $75 million in realized net performance income, an 84% increase over the year-ago period. Interest expense increased to $51 million. Due to normal increased Q1 seasonality. Additionally, interest income should remain around the Q1 level going forward. Realized income for the quarter was $503 million, representing growth of 24% year-over-year. After-tax realized income per share was $1.24, up 14% compared to the prior year period.

Our tax rate in the quarter totaled 13.5%, just above the midpoint of our 11%-15% expected range for the year, in line with where we’d expect the rate to be for the remainder of the year. As Mike stated, our fund performance remains strong across the platform. Over the last 12 months, we generated time-weighted returns of approximately 12%-15% in our U.S. direct lending strategies, 15% in alternative credit, 12% in opportunistic credit, 9% in European direct lending, and over 20% in APAC credit. We continue to see strong fundamental performance in our funds, and when we look across private and public credit markets, nothing we’re observing suggests we are at or near a turn in the credit cycle.

Across our direct lending portfolios, we’re seeing continued near 10% EBITDA growth, loan-to-value ratios in the mid-40% range as private equity funds continue to fund new transactions with majority in equity, and improving interest coverage ratios of 2.2 times. Non-accrual ratios are well below historical norms, and we’re generally financing much larger, more resilient businesses today versus past vintages. The relatively small number of credit issues we see are company-specific rather than indicative of broader trends, and we’re not seeing any credit deterioration broadly within software, as we have only one software company on non-accrual. Within real assets, our diversified non-traded REIT has generated total return of approximately 12% over the last 12 months. Our infrastructure debt strategy produced gross returns of approximately 9% in the last 12 months.

In secondaries, APMF has generated a since-inception net return of over 14%, while our primary private equity strategies continue to deliver strong performance with net returns of approximately 15% in ACOS 6. Overall, these results reflect the breadth and consistency of our investment performance across strategies and continue to be a key differentiator for Ares as we look to drive long-term growth in AUM and earnings. In conclusion, for the year 2026, we’re on track with our longer-term goals of generating compound annual growth of 16%-20% in FRE, 20%-25% in realized income, and 20% dividends. We anticipate continued FRE margin expansion, and we expect to be within the upper end of our 0-150 basis points annual target this year.

We’re on track for another record year of fundraising, and our expansive origination platform, record levels of dry powder and flexible capital positions us for strong deployment, even in uncertain markets. I’ll now turn the call back over to Mike for his concluding remarks.

Alex Blostein, Analyst, Goldman Sachs2: Thanks, Jarrod. As we step back and reflect on the events of the first quarter, we believe one of the most important takeaways is the continued strength and resilience of our institutional fundraising franchise. Last week, we held our global annual meeting for our institutional investors. We welcomed over 1,100 attendees from across the world to both highlight the breadth and depth of Ares’ investment platform and to expand and deepen relationships with our largest investors. We continue to see enthusiastic engagement from large, sophisticated investors who are allocating capital with a long-term perspective and are increasingly consolidating relationships with scaled managers that can deliver across strategies and cycles. That demand has remained consistent despite the recent market noise, and in many cases, we’re seeing investors lean in given the improving opportunity set.

I think it’s noteworthy that we continue to exceed our fundraising targets in most of our flagship fundraises, and in many cases, we’re getting to the hard cap in a shorter amount of time than in prior vintages. We also believe that the current environment is setting up very well for enhanced deployment. Periods of uncertainty tend to create more attractive investment terms and risk-adjusted returns, and we’re already seeing a broader set of opportunities across credit, real assets, and secondaries. Given the ongoing impacts from geopolitical issues and certain redemptions in retail-focused funds, the current environment is offering wider spreads, higher fees, and better terms. With over $150 billion of available capital and a highly diversified origination platform, we’re well-positioned to take advantage of these conditions and deploy capital at more attractive risk-adjusted returns.

Importantly, our business model continues to provide us with a high degree of diversification, stability, and flexibility. We operate leading businesses across an array of global credit, real estate, infrastructure, secondaries, and PE strategies. Our earnings are driven by management fees, supported by long-duration capital, and complemented by performance income that we believe will continue to grow over time. This combination enables us to remain patient and opportunistic while continuing to generate durable growth in earnings. We’re excited about the many levers that we have for profitable growth and our ability to continue driving long-term shareholder value.

I remind everyone that Ares experienced its two fastest periods of growth during the GFC and COVID, as we’re able to leverage our competitive advantages to consolidate share and as our institutional investors increase their allocations to us to take advantage of improving returns in choppy markets. As always, I wanna thank our employees around the world for their continued hard work and dedication, and I wanna thank our investors for their ongoing support and confidence in our platform. With that, operator, could you please open the line for questions?

Alex Blostein, Analyst, Goldman Sachs4: Certainly, Mr. Arougheti. Thank you. Ladies and gentlemen, at this time, if you would like to ask a question, please press star then one on your touchtone telephone. We ask that you please limit yourself to one question to allow as many callers to join the queue as possible. We’ll go first today to Craig Siegenthaler with Bank of America.

Craig Siegenthaler, Analyst, Bank of America: Good morning, Michael and team. Hope everyone’s doing well.

Alex Blostein, Analyst, Goldman Sachs2: Thanks. You too, Craig.

Craig Siegenthaler, Analyst, Bank of America: You had a strong fundraising quarter in the credit platform, and that’s despite a deceleration in 2 of your newer retail funds. You know, that, as you said, only represents 5% of your AUM. I’m curious if you can provide some perspective on the evolving demand dynamics between the institutional channel, the insurance channel, and also the retail channel within private credit.

Alex Blostein, Analyst, Goldman Sachs2: Sure. Thanks for the question, Craig. I’m going to step back and just contextualize the answer with some things that I know I’ve talked to you about and others on the line, which is when you think about how the private credit market has been evolving and how Ares has chosen to participate in it, if folks remember, we actually started in private credit with Ares Capital Corporation, a traded BDC. As we referenced on the call, obviously that entity has a substantial public track record through cycles. If you look at the 21-year-plus track record there, the return coming out of ARCC has beaten the S&P 500, the syndicated bank loan market, the high-yield bond market, and probably most anything else that people have invested in. It’s a wonderful company and a wonderful structure.

What we learned was that because of the ebbs and flows, particularly within the retail market, it was challenging to take full advantage of cycles when they developed only in that traded BDC fund structure. We launched in earnest our institutional fund platform with the SDL and ACE series, which have obviously scaled with similarly strong performance. Watching those two work together, what you learn is, A, diversification of funding is critically important to navigate cycles and drive out performance. Also the ability to have those funds working hand in hand is performance enhancing for both funds, given our ability to continue to invest into the franchise, drive new originations, have the dry powder to support our best performing companies, et cetera, et cetera. You kinda need both.

Then we got into this world where wealth was developing, and we were actually last in our space to come into the market in earnest, just given some of the learnings that we had, and we’ve talked about this before, kind of the pro-cyclicality of flows sometimes within that channel, both good and bad. We’ve been very measured as we’ve thought about how to build the fund complex to capture, you know, the full complement of opportunities across the cycle within traded, non-traded, and institutional. What we’ve always tried to articulate is the assets are the same, and I said this in the prepared remarks. If we originate a senior secured loan and we have availability of capital in each of those three pools, each of those three pools will get to participate.

Not surprisingly, if you are beginning to see slowing inflows or increased redemptions in the non-traded part of our business, that does not detract from our global deployment opportunity, and those assets will find their ways into other funds and therefore will not have an impact on our profitability. Insurance is something slightly different. I think it’s important that we talk about it separately because 90% plus of insurance company’s balance sheet is investment grade rated and high grade. I do think it is exciting to talk about the growth of the private high grade market, but it is a different asset class in many respects from the, you know, traditional private credit and sub-investment grade credit market.

When you think about the demand, I think you have to think about it in terms of not just the channels, Craig, but also high grade versus sub-investment grade. What I can tell you is if you look at our $20 billion of capital, I think it is absolutely indicative of what’s happening in the market. We raised $20 billion of capital in our credit strategies in the quarter, $5 billion of which was in wealth. If you break down that $5 billion in wealth further, $3 billion was in our two U.S. direct lending funds, and about $2 billion was actually in our European direct lending fund and our sports media and entertainment fund, which we would characterize as a quasi private credit product.

Those two, Europe and SME, are actually enjoying very strong gross and net inflows, as well, despite the noise in U.S. private credit. As I referenced on the call, we’re seeing our third vintage of opportunistic credit fund, ASOF, hit its hard cap. We’re seeing our third vintage of our ABF fund hit its hard cap and be meaningfully oversubscribed. We talked about the early momentum that we see in the next vintage of our senior direct lending fund. Everything we’re seeing on the ground is that the institutional investor is not anxious. They’re not allocating away from private credit.

In fact, I think they’re looking at this as a huge opportunity to take advantage of a bizarre dislocation and bring liquidity into the market to capture excess return. I apologize for the long answer there, Craig, but I do think it’s important that we all get in the habit of not just talking about private credit as one thing or one channel. We’ve been, you know, get a little bit more granular in terms of what we’re seeing and what it’s telling us. Thanks for the question.

Craig Siegenthaler, Analyst, Bank of America: Thank you, Mike.

Alex Blostein, Analyst, Goldman Sachs4: We’ll go next now to Alex Blostein with Goldman Sachs.

Alex Blostein, Analyst, Goldman Sachs: Hey, Mike. Good morning, everybody. I was hoping we can dig a little bit more into your comments around deployment pipelines increasing. I think you made a point that they’re currently at a record in the credit business. I was hoping you could expand maybe which parts of the credit business you’ve seen the biggest incremental pickup in your deployment opportunities, how the market has really evolved in the last several months, especially considering that the non-traded BDCs and the evergreen vehicles have, for the most part, been kind of the incremental buyer in the last few years, and how that might change the market structure and the spreads you currently see available in the space. Thanks.

Alex Blostein, Analyst, Goldman Sachs2: Thanks for the question. I would just comment, Alex, I don’t know that they are the incremental buyer. I think if you know, you look at the market structure, whether you include certain portions of high-grade private credit or exclude, what you’ll see is that the non-traded BDCs in aggregate, just not new flows, but AUM is somewhere between 15% and 20% of the overall private credit market. Obviously, because they don’t operate with a significant amount of dry powder, I actually think when you were to look at the net flows into non-traded BDCs relative to aggregate dry powder in the institutional market, I don’t actually think that they were the incremental buyer, which goes back to our point earlier just about the deployment opportunity that this creates.

In terms of the pipelines, you know, it was interesting because the diversification of the platform really shined through in the quarter. We saw really strong deployment in our infra and real estate businesses. Our European direct lending business, very strong deployment. Secondaries and structured solutions, very strong. ABF, we saw a little bit of a slowdown in the U.S. direct lending part of the business. I think that’s more reflective of what’s happening in middle market M&A and the private equity market as they digest the war in Iran and, you know, what the implication is for inflation and the rate backdrop. As Kort said on the ARCC call, at least over the last, you know, number of weeks, we’ve seen people pick their pencils back up, and the pipeline is reengaged.

As we saw last year, I think there’s a strong possibility that the deployment will pick up in that part of the market, you know, pretty aggressively as we head into the back half of the year. It’s been pretty broad-based, which is part of the value of having the global diversification that we have. If there was one theme that I would point out that’s accelerating, it’s this idea of liquidity-generated opportunity, meaning there’s a lot of companies in the public and private markets that either because of the rate environment or flows are gonna need to seek creative liquidity solutions through opportunistic credit, secondaries, and even direct lending and recap solutions that I think are gonna, you know, drive some pretty significant deployment.

We’re pretty excited about the setup here, Alex, and I’d say that pretty much every investment team is incredibly active right now.

Alex Blostein, Analyst, Goldman Sachs: Great. Thanks so much.

Alex Blostein, Analyst, Goldman Sachs2: We’ll go next now to Steven Chubak with Wolfe Research.

Alex Blostein, Analyst, Goldman Sachs6: Hi. Good morning, and thanks for taking my question.

Alex Blostein, Analyst, Goldman Sachs2: Good morning.

Alex Blostein, Analyst, Goldman Sachs6: Was hoping to double-click into some of the comments on retail. While non-traded BDC flows have come under pressure, you know, flows in other products, which you alluded to, Mike, such as infrastructure, secondaries, have been much more resilient. Some of the flows are even beginning to accelerate. And we’re hoping you could speak to what you’re hearing from advisors and gatekeepers as it relates to retail appetite for strategies outside of credit. And given the fundraising pressures on the private credit side, whether you see a credible path to hitting the recently revised 2028 fundraising target of $125 billion.

Alex Blostein, Analyst, Goldman Sachs2: Yeah. Thanks for the question. Again, zooming out, I think it’s important that people appreciate that the development in the wealth channel is about investor access, and it’s about bringing differentiated solutions to a part of the market that heretofore didn’t have, you know, the opportunity to invest in. I think for the large wealth platforms and the large RIA and advisory platforms, they would tell you that their clients are meaningfully underinvested to the types of solutions that we and others like us are offering around differentiated equity exposure, differentiated yield exposure, tax advantaged access to real assets.

There’s a major secular trend at play here that will overwhelm, in my opinion, whatever, you know, periodic noise we see, whether it was the periodic noise we had in the real estate part of the market a couple of years ago or the periodic noise that we’re seeing now in U.S. direct lending. You know, as I mentioned on our prepared remarks, and you see it in the numbers, we have 8 products in the channel. You could maybe add 2 because we have 2 exchange, 1031 exchanges in our REIT platform that continue to see demand pull through. While the U.S. private credit funds are seeing slowing demand, we’re seeing increasing demand elsewhere because of the secular, you know, secular momentum I talked about.

I’d also remind people because we did put this out when we talked about our redemptions. If you were to look at our non-traded BDC, which is generating, you know, top market performance. If you were to really see where those redemptions were coming from, it was smaller family offices and some smaller institutions in non-U.S. regions. It was not what I would call the well-advised, you know, high net worth investor that tends to be the, you know, the consumer of this product. If you look at it from a different angle, 95% of our investor base in the BDC did not want to redeem, and that was in addition to the, you know, the inflows that we saw that were meaningful in the period.

I’m not even sure that people have the redemption narrative right because it’s not a broad-based repudiation of alts in the wealth channel. It seems to be something different. The advisor community, you know, we spend a lot of time on education and support with the individual advisors and their investors. I think that’s why you’re just not seeing broad-based requests for redemptions. It tends to be a little bit more isolated. I think once people understand that, hopefully we’ll kind of get on with it.

Alex Blostein, Analyst, Goldman Sachs0: The confidence around the $125 billion?

Alex Blostein, Analyst, Goldman Sachs2: Oh yeah, we have not changed our guidance.

Alex Blostein, Analyst, Goldman Sachs0: Okay. That’s great. Thanks for taking my questions.

Alex Blostein, Analyst, Goldman Sachs2: Sure.

Alex Blostein, Analyst, Goldman Sachs4: We connect now to Patrick Davitt with Autonomous Research.

Alex Blostein, Analyst, Goldman Sachs5: Hey, good morning, everyone.

Alex Blostein, Analyst, Goldman Sachs2: Morning.

Alex Blostein, Analyst, Goldman Sachs5: Good to hear the more constructive direct lending pipeline commentary, obviously can’t really see that in the hard numbers that have been put out there yet. Could you maybe put a bit more meat around how that, I guess, shadow pipeline it sounds like you’re talking about compares to historical periods and/or when you think we can expect to start converting into real announcements? Thank you.

Alex Blostein, Analyst, Goldman Sachs2: Yeah. I think Kort did a good job talking about this on the call. There’s a lag obviously. The deals that we’re closing now have been in process with visibility here for months. As you would expect, we have a top-down view of all the transaction flow that’s working its way through, you know, through the business, including the direct lending business. I would say that the aggregate pipeline across the firm is at a record level, and that the direct lending pipeline is increasing in momentum. You know, we would hope that that pulls through. A lot of times when you see things like, you know, the conflict in Iran, you get a little bit of a pause as everybody just evaluates.

Once people understand what it is that we’re working with, the pipeline will pick up. A lot of the longer term, you know, catalysts are still in place. You just have a significant amount of private equity invested that is aging that needs some form of resolution through a, you know, a transaction, sale transaction refinancing, or, you know, other means of dealing with its capital structure. That’s still in play. You still do have an administration that is very pro-business in a regulatory backdrop that is pro-M&A, and I think that will play through. I think with rates stabilized, even if they’re not necessarily coming down the way the market anticipated a few months ago, I think with a stable rate backdrop, that should also continue to be constructive for transaction activity.

Not to say that it’s perfectly, you know, perfect analog, but if you looked at last year, with the tariffs in April, you saw a similar pause in the market where you had meaningful pipeline build through January, February. Tariffs hit, there was a pause, then there was a re-acceleration of the pipeline through the back half of the year and actually turned out to be a record deployment year. I can’t guarantee that that’s the case, but you do see these periodic pauses. I think a lot of the catalysts are still intact and just the weight of money that needs to get resolved is gonna drive people to the deal table.

Alex Blostein, Analyst, Goldman Sachs4: Thank you. We’ll go next now to Bill Katz with TD Cowen.

Bill Katz, Analyst, TD Cowen: Great. Excuse me. Thank you very much for taking the questions. Maybe one for Jarrod Phillips. I maybe I missed it. I apologize if you did. A lot of things going on this morning. Just on the realization side of the equation, I know the Q1 came out a little bit lighter than maybe many of us are anticipating. Sounds like there’s a ton of momentum, not only for you guys, but the industry at large. Can you give us a just general sense of how you think about the years playing through a little bit? Then just maybe cheat a second question. Given the momentum on the FRE margins for this year, how do we think about.

I know it’s early here, how should we think about 2027 just given the what seems to be significant scaling across the entire platform? Thank you.

Alex Blostein, Analyst, Goldman Sachs0: Yeah. Thanks, Bill Katz. Great to hear from you. On realizations, it’s not too different in terms of the pattern of what Michael Brown just said. The more active you have in transactional backdrop, the more you have the ability to pull realizations forward. The less active you may have some extended durations. The nice thing about our European waterfalls, and we’ve talked about in the past, is they’re predominantly from our credit funds. That means if the duration’s extended, you’re actually continuing to earn interest back on those, which actually increases your accrued balance.

Alex Blostein, Analyst, Goldman Sachs2: To be recaptured later as part of the European waterfall. We had just put out an 8-K when we were explaining what we thought would happen for this quarter and put the same guidance that we had provided prior for the year in there. You know, looking into next year, we’ve talked a little bit about that, and there’s really no change there. I think when you think about it, I’ve told you this before, Bill, the hardest thing for us is to pick the exact quarter because you don’t really control whether a deal is refinanced or whether transaction activity results in a lot of deal turnover. The good thing is because of the nature of these assets, you’re not dependent on a market price coming to fruition through a transaction.

That’s one of our favorite parts about the waterfall. And we’re really excited to have our first harvest from our first U.S. communal direct lending fund here in the first quarter. In terms of margin, look, we go with that 0 to 150 basis points guidance on purpose. As we get closer to year, as you know, our business is built so that as we deploy, it creates natural scale. What we don’t wanna do is take away from investment opportunities. As we see the opportunity to do something like invest in the data center business, which we know will be FRE negative for a period of time until we’re able to launch a fund, then it’ll be very, very accretive to the firm overall and margin accretive.

That’s the type of thing that we want to keep our flexibility to do. I’d say that, you know, we expect to still be well within that 0-150 guidance, and we’ll look at what the opportunities present themselves through the current volatility we’re in and into the back half of the year.

Bill Katz, Analyst, TD Cowen: Thank you.

Alex Blostein, Analyst, Goldman Sachs4: Thank you. We’ll go next now to Adam Dziarski at RBC Capital Markets.

Adam Dziarski, Analyst, RBC Capital Markets: Great. Thanks. Good morning, everyone.

Alex Blostein, Analyst, Goldman Sachs2: Morning

Adam Dziarski, Analyst, RBC Capital Markets: Ask around the secondaries market opportunity. You know, it sounds like we’re seeing an acceleration this year compared to last, and you’ve got secondaries across four asset classes, so pretty built out. Just can you give us an update on what you’re seeing on the ground with regards to the secondary opportunity accelerating? Thanks.

Alex Blostein, Analyst, Goldman Sachs2: Sure. I’m gonna give context as I always do, so I apologize before I get there. Just I remind people that we came into the secondaries business, at least in earnest, through the acquisition of Landmark, gosh, almost, you know, six years ago. The working thesis behind that acquisition was that we saw a transformation happening in the secondary space along three critical axes. One was a shift from LP-led to GP-led, meaning not just the sale of portfolios by LPs, but the desire for GPs to use the secondary market for, you know, creative liquidity solutions, everything from NAV loans to GP pref to minority stake sales. That was kind of an evolution that was taking place that we felt was gonna transform the industry.

We also were beginning to see that the installed base or the primary market for other parts of the alternatives landscape, real estate, infrastructure, and credit, were growing to a level that would also require more robust secondary solutions. Third, we were beginning to see a growth in wealth and retail that were going to wanna access more diversified draw-based private equity exposures, and we would be able to deliver from our core buyout business. We made that acquisition. Post that acquisition, we obviously launched into the wealth channel, scaled the product set to attack the GP-led market, then launched, I think pioneered the credit secondaries business and have now grown that into a meaningful, you know, meaningful growth engine for the, for the firm.

The reason I give you that context is because that’s exactly what is happening in the secondary space. The primary markets have grown and evolved. LPs and GPs alike are looking for creative liquidity. The GP-led part of the market represents half, if not more, of the current deployment opportunity. That market, I think, is here to stay. The combination of all those trends that we invested behind is why you’re just seeing, you know, such a significant amount of opportunity there.

What’s most interesting to me, though, is if you were to look at the annual deployment that happens in secondaries against the industry dry powder, it’s about a 1-to-1 relationship, which probably makes it the least well-capitalized segment of the alternative asset space, which we like because you tend to generate excess return in markets where there’s a supply-demand imbalance of capital. Not only is the market opportunity growing, but the fundraising has not kept pace with the growth and demand, and that’s one of the reasons why we’re scaling as nicely as we are.

Adam Dziarski, Analyst, RBC Capital Markets: Very helpful. Thanks for that, Mike.

Alex Blostein, Analyst, Goldman Sachs2: Yeah. Thanks.

Alex Blostein, Analyst, Goldman Sachs4: We’ll go next now to Kenneth Worthington with J.P. Morgan.

Alex Blostein, Analyst, Goldman Sachs1: Hi. Good morning. Thanks. A good question. Can you talk about the deployment opportunity for direct lending in Europe? I know the M&A backdrop is a little bit different there than we see in the U.S., but you’ve got a record size fund, and just curious to better understand what you’re seeing there.

Alex Blostein, Analyst, Goldman Sachs2: Yeah, Europe similar to, you know, it has a lot of the same dynamics that the U.S. market does. We have fully developed businesses in credit across Europe, opportunistic direct lending, real estate infrastructure, and kind of all things in between. The deployment there has been quite robust. I was pleasantly surprised with the deployment in Q1 in the European market. I think that, you know, going into this year, some may have had the view that the transaction activity would be slower, but I think that some of the geopolitical, you know, reorganization that’s happening around the world has brought more focus and attention to investing in the Eurozone. I think the market opportunity is probably better than we would’ve expected.

You know, if the first quarter is an indication, the European direct lending business is in a good spot. You know, the benefit of the diversification that I keep harping on. Last year, Europe had a slower year than the U.S. as the U.S. accelerated into that back half opportunity that I talked about. U.S. direct lending was a little slower this quarter, European direct lending, I think, you know, surprised to the upside. You do have balance when you zoom out and look at the credit business from the top down. I think we’ve been pretty happy with the pace of deployment there. Again, we get a look at the pipelines, the pipelines in Europe are as healthy as they are here.

Alex Blostein, Analyst, Goldman Sachs1: Great. Thank you.

Alex Blostein, Analyst, Goldman Sachs2: Yep.

Alex Blostein, Analyst, Goldman Sachs4: We go next now to Michael Brown with UBS.

Alex Blostein, Analyst, Goldman Sachs3: Hey, good morning. Almost good afternoon. How are you guys?

Alex Blostein, Analyst, Goldman Sachs2: Good. How are you?

Alex Blostein, Analyst, Goldman Sachs3: Good. Mike, I just wanted to maybe ask a question on the software side. You emphasized the low LTVs, the near zero non-accruals. It’s talked a lot about on the ARCC call. I guess, you know, much of this is a little bit backwards looking. Maybe give us a little bit of color into the forward look or maybe how you think about kind of stress-testing the portfolio. You know, what do you kind of see in those underlying fundamentals that like give you confidence that these companies will continue to operate successfully? How are you approaching software now? Are you kind of leaning in, leaning back within direct lending? You know, is there any interesting opportunities emerging on like the credit ops side or even on the secondary side?

Alex Blostein, Analyst, Goldman Sachs2: Yeah, it’s a good question. The most important thing for people to appreciate, at least in terms of our exposure, then I’ll try to come at this from one slightly different angle. The software portfolio is incredibly well diversified in terms of the number of names. It is sponsor backed, it sits at roughly a 40% loan to value. If you were to look at ARCC’s current quarter as a proxy, you will have seen that we marked down the equity value within the software portfolio commensurate with what we’re seeing in the broader markets. The LTV in the portfolio actually went up slightly.

When you’re sitting at the top of the capital structure at 40% with 60% equity value below you have to eat through all of that equity before you’re taking losses in your credit book. That is going to be the most significant mitigant to loss as we see all this play out. The weighted average remaining maturity, if you will, in our software portfolio, which is probably, you know, what the general market is about 3 years. What that means is there is going to be a moment here over the next couple of years where owners of these businesses and lenders to those businesses are gonna have to evaluate where that company sits, how disrupted it’s been, whether it is going to benefit into the future and how it’s going to get resolved.

That’s either gonna be transfer of ownership, a debt pay down, a debt repricing. You know, this is going to play out slowly over time. What’s interesting about what we’re seeing in our book now is the contractual revenues at these businesses are actually growing, and we’re seeing EBITDA growth in the 10% range, and that’s a reflection of new customer adds. As you’re adding new customers, the contract length is probably outside the maturity date. You know, in a lot of these businesses, the financial picture will not erode even if there’s a view that the business model needs to adapt or, you know, has or hasn’t adapted. This is not a tomorrow thing. We are very confident in the quality of the software book, and we have been since underwriting.

We think that we are getting very well paid for the risk that we’re taking there. As a result, when new software deals come in, Kort talked about this, there are deals that are getting done because people understand that there are competitive moats around those businesses, and you can get paid incremental return because of the anxiety around software. We’re also using this market opportunity to actually exit some names where maybe we have less conviction. One of the reasons we saw the gross to net number that we did in the direct lending portfolio this quarter is we actually took the opportunity to get out of a couple of names where maybe we didn’t have as much, you know, as much confidence.

The way I oversimplify in my own brain is I think about as the CEO of Ares, what are we doing here? We have over 500 core systems that run our company. Everything from our core financial systems and general ledger to our cybersecurity platforms to our order management and trade management systems. We are not ripping those systems out. We are putting an AI layer in at the company and investing in that to make sure that we get the most efficient output from those systems and the data that sits within it. We’re not moving away from those systems. In fact, those system providers are using AI to deliver a better product to us.

If you just try to personalize it a little bit and think about the use of AI in your own life, you’re probably not ripping Excel out of your computer, but you’re using AI to supplement a core system in your daily work stream. I think, you know, a lot of the opportunities that exist in AI are, you know, not gonna be displacing core systems. They’re gonna be there to enhance them. Those are the types of things that we’ve obviously focused on investing on.

Alex Blostein, Analyst, Goldman Sachs3: Well said. Great color. Thanks, Mike.

Alex Blostein, Analyst, Goldman Sachs2: Yep. Thank you.

Alex Blostein, Analyst, Goldman Sachs4: We’ll go next now to Benjamin Budish with Barclays.

Benjamin Budish, Analyst, Barclays: Hi. Good afternoon, I guess now. Thanks for taking the question. Maybe another one for Jarrod. You know, typically, I think you give us a few more guidance tidbits. Just curious if there’s anything you can share around your expectations for the European style realization revenues for the year, G&A growth? Usually or sometimes you’ll give us a little help with, you know, expectations for FRPR. I know that’s a Q4 thing. We may be a little bit ways off, but just anything else, you know, you can share to help kind of fine-tune. It sounds like on the margin expansion, maybe a little bit predicated on the cadence of deployment just quarter to quarter. Anything else you could share that would be helpful? Thank you.

Alex Blostein, Analyst, Goldman Sachs0: Yeah. Thanks, Ben. I feel like I covered most of the main ones that we normally give out through Investor Day and things of that nature. On G&A, you know, that’s obviously encompassed within the margin guidance. The one thing I’d highlight, Mike mentioned it earlier in the prepared remarks, we had an amazing AGM with over 1,100 attendees there. Normally, we have AGMs throughout the year. So in terms of our G&A, you’ll probably see a little bit more of an increase in G&A next quarter. But that means that we won’t have that travel and AGM expense for all of the different strategies in the third and fourth quarters. There’ll be a little bit of imbalance just in terms of the trending there.

You can look back to 2024 as a similar time that we had that. We talked a little bit about it there. It’s gonna be somewhere, you know, in the high single digits, low double digit, type of increase in G&A for the travel and all the expense related to that. Otherwise, everything’s pretty well in line as we’ve talked about with all the guidance that we’ve given prior. You know, we’re again, as Mike said in the prepared remarks, as I said, we feel really well positioned in the current market environment with the breadth of the platform. That there’s a lot of things that are extremely active right now that are gonna help drive us towards those goals.

Benjamin Budish, Analyst, Barclays: All right. Thank very much, Jarrod.

Alex Blostein, Analyst, Goldman Sachs4: Thank you. We’ll go next now to Brennan Hawken with BMO Capital Markets. Mr. Hawken, your line is open, sir. You might be on mute.

Brennan Hawken, Analyst, BMO Capital Markets: Yes, I was. Thank you for taking my question. Good afternoon. Sorry about that. Mike, you just spoke a bit to credit selection impacting recent gross to net trends. You know, if we think about based upon your expectations today and we play the tape forward, you know, where do you see those trends shifting and what primary factors are going to drive that?

Alex Blostein, Analyst, Goldman Sachs2: Yeah. I don’t think we’re changing anything in the playbook, Brendan. I mean, if you look at the history of our direct lending business, and, you know, we’ve been doing this for over 30 years, over 20 years here. The model is the same, is that you know, you go out and originate the broadest possible funnel of opportunities and apply rigorous diligence and portfolio management to drive return. But, you know, what may be underappreciated are two things that I think are hallmarks of our outperformance. One is our selectivity rate. So if you look at our private credit portfolios, and this is true across all of the things we do in private credit, we typically have a yes rate of about 5%, meaning we only do 5% of the deals that we see.

That’s just a function of, you know, having some pretty high conviction on the types of things that we like to invest in and the types of things that we don’t. Then within the core direct lending portfolios, roughly half of our deployment tends to come from incumbent relationships within the portfolio, which makes for a much easier high conviction underwriting because these are companies that we’ve been living with for years and years. We have a deep relationship with the management team, understand the, you know, risks and opportunities within the business. We’ve seen it perform. You know, if you think of those two things working hand in hand, low selectivity rate, and then the compounding effect of those incumbent relationships, I think it’s one of the reasons why we’ve had the performance that we’ve had.

If you were to look at the loss rates, you know, across the board in private credit, they’ve all been, you know, trending close to zero. That’s not, that’s not by accident. I wouldn’t say that we’re doing anything different now. You know, you’re probably being a little bit more selective just given a lot of the anxieties in the market. You’re probably making sure that you’re keeping your liquidity a little bit drier because we’re heading into a spread-widening environment where we’re gonna get better economics, in my opinion, next month than this month. You know, that’s probably driving some of it. But I think the core tenets of how we underwrite credit and how we think about driving outperformance have not changed regardless of what we’re seeing in the broader market.

Brennan Hawken, Analyst, BMO Capital Markets: Great. Thanks for taking my question.

Alex Blostein, Analyst, Goldman Sachs2: Great. Thank you.

Alex Blostein, Analyst, Goldman Sachs4: We’ll go next now to Brian McKenna with Citizens.

Brian McKenna, Analyst, Citizens: Okay, great. Thanks for squeezing me in here. In the past, you’ve talked about the benefits of managing flexible pools of capital across both the public and private markets. I’m curious, given the first quarter volatility, did you take advantage of any of this dislocation across your funds? Can you just remind us why having this type of AUM base is so important in delivering outperformance for your clients through cycles?

Alex Blostein, Analyst, Goldman Sachs2: Yeah, sure, Brian. That is another hallmark of how we set the business up. Obviously, I talked about the diversification and the value of having these different access points. Within individual fund strategies, we also have flexible mandates. Our opportunistic credit business, where we just had that meaningful, you know, $10 billion capital raise, that is a pool of capital that can invest private and public. One of the reasons I said in my prepared remarks that the closing is coming at a very opportune moment is there are dislocations beginning to form in both the public and private market. Having the ability to look at the relative value being offered in both of those and drive to the better risk-adjusted return is a, you know, a good thing in terms of performance.

It’s not just the public-private. It could be senior versus, you know, junior, or it could be debt versus equity. You know, you’re constantly looking at relative value across the markets, across geographies, and at different, you know, different points of the capital structure. If you are a single asset, single point in the capital structure, everything you look at is gonna try to get squeezed into that framework, which by definition means that in certain parts of the cycle you’re gonna misprice risk. I think that because we’ve developed with a real high conviction around flexibility, in asset class position and market, it’s created a, an investment culture here around relative value and risk-adjusted return that I think is pretty unique.

Brian McKenna, Analyst, Citizens: Thanks, Mike.

Alex Blostein, Analyst, Goldman Sachs2: You asked specifically. Yeah, you asked specifically. I think, yes, there are in parts of the public and traded credit markets, there are increasing opportunities to start to pivot. I wouldn’t be surprised if we actually do see that pick up as we get into the next couple of months here.

Brian McKenna, Analyst, Citizens: Got it. Thanks so much.

Alex Blostein, Analyst, Goldman Sachs2: Yep.

Alex Blostein, Analyst, Goldman Sachs4: We’ll go next now to Wilma Burdis with Raymond James.

Alex Blostein, Analyst, Goldman Sachs7: Hey, good afternoon. Could you go into a little bit more detail on your data center business? Do you have data center AUM outside the digital infrastructure business? What do you think the total market size could be for data centers in the intermediate term? Thanks.

Alex Blostein, Analyst, Goldman Sachs2: I’m gonna let Blair answer that one because that’s one of the places where he’s spending a significant amount of time, obviously, given the opportunity set there, and I can come back and add some color.

Blair, Executive, Ares Management Corporation: Maybe to give a little bit of background, we’ve been investing in the digital space broadly for the past 10 or 15 years, broadly defined, and that’s everything from towers to networks to data centers themselves. We’ve been doing it across several different areas within the firm. That includes real estate, infrastructure, special situations, asset-backed, as well as our direct lending business and secondaries, both real estate and infrastructure. This has been a longstanding investment focus for us. We have over $10 billion historically in the space.

One of the exciting developments with the GCP acquisition last year was adding that Ada digital development capability that Mike mentioned, which came already with a very, very attractive seed portfolio for which we raised about $2.5 billion last summer for some of the initial assets in the Japanese market. Currently going out with a broader fundraise to address not only the seed assets that we have in-house, but the significant pipeline behind it. The answer to your question is, yes, we have it elsewhere, but adding this new development capability is just very powerful for us in the future. In terms of the market size, it is absolutely massive. It is a multi-trillion dollar market opportunity. Some of that will be in the domain of the hyperscalers themselves.

However, we’ve sized the third-party market opportunity at around $900 billion, for which when you look at the supply-demand imbalance in terms of capital being raised to address it’s meaningful. We are really excited about that market opportunity ahead. Certainly, you know, the interest in what we’re doing in the market, very exciting.

Alex Blostein, Analyst, Goldman Sachs2: Yeah. I would also add one other overlay here, and I think people are beginning to make this part of the conversation. When you’re talking about data centers, it’s not just data centers, it’s GPUs, it’s power and energy and we are one of the leaders also in the renewable energy and energy transition space, and you saw what we were able to do with our X-Energy IPO. The digital infrastructure opportunity here is pulling together all of these different teams at scale to address the market opportunity. We obviously have a large infrastructure debt business as well, where we are one of the larger lenders to other platforms and portfolios in the institutional market.

Alex Blostein, Analyst, Goldman Sachs7: Thank you.

Alex Blostein, Analyst, Goldman Sachs2: Thank you.

Alex Blostein, Analyst, Goldman Sachs4: We’ll go next now to Daniel Fannon with Jefferies.

Daniel Fannon, Analyst, Jefferies: Thanks. I just wanted to follow up on your comments around the strength in institutional market and demand that’s continuing. Was wondering if there’s any differentiation amongst that subset, whether that be, Middle East or sovereign wealth, given some of the dynamics happening globally, or if it’s truly broad-based in terms of where that’s still strong?

Alex Blostein, Analyst, Goldman Sachs2: It’s, it’s pretty broad-based. We’re not seeing major shifts by geography or by channel. I, I do think, consistent with what I said earlier, there’s a consolidation theme that is emerging in terms of the larger institutions are doing more with fewer GP partners. I think the larger platforms are the net beneficiaries of that. When you look at gross dollars that are getting raised in the market, I think you’re gonna see a disproportionate share of, you know, those assets going to the larger incumbent platforms in many of the asset classes that we play in. That’s probably the predominant takeaway. I, I’m not seeing major shifts in flow.

I think it’s also important as we talk about diversification, obviously, that you have businesses in all of these regions, Europe, U.S., Middle East, Asia, because what we do see is from time to time, those investors want to increase allocation in their home region, and being able to kind of meet them there, not just on the fundraising side, but also on the investment side, I think is becoming increasingly differentiated.

Alex Blostein, Analyst, Goldman Sachs4: Thank you. Ladies and gentlemen, that is all the time we have for questions today. This will bring us to the conclusion of the call. If you missed any part of today’s call, an archived replay of the conference will be available through June 1, 2026 to domestic callers by dialing 1-800-839-2393 and to international callers by dialing 1-41

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