Ares Management Q1 Earnings Call Highlights

Key Points

• Ares reported strong growth with AUM up 18% to $644 billion and fee-paying AUM up 19% to $400 billion, management fees surpassed $1 billion for the first time and the firm declared a quarterly dividend of $1.35 (over 20% higher YoY).
• The firm had a record fundraising quarter, raising $30 billion of gross capital (highest-ever Q1, +46% YoY), including over $20 billion in credit and the final close of ASOF III at >$8.3 billion, with several large credit funds oversubscribed.
• Deployment exceeded $32 billion in Q1 while available capital totaled $158 billion (including >$100 billion of credit dry powder); executives said credit fundamentals look healthy (near 10% EBITDA growth, mid-40% LTVs, ~2.2x interest coverage) and reiterated 2026 targets for FRE and realized income growth and ~20% dividend growth.

Ares Management NYSE: ARES reported first-quarter 2026 results that executives described as “strong” across fundraising, assets under management, and profitability, while highlighting a growing deployment pipeline despite a slower U.S. direct lending transaction environment early in the quarter.

On the call, Co-Head of Public Markets Investor Relations Greg Mason said the company declared a quarterly dividend of $1.35 per share on its Class A and non-voting common stock, an increase of “over 20%” from the dividend paid in the same quarter last year. The dividend is payable June 30, 2026, to holders of record June 16.

Assets, fee-paying AUM, and profitability metrics

Chief Executive Officer Michael Arougheti said Ares’ AUM rose 18% year-over-year to $644 billion, while fee-paying AUM increased 19% to $400 billion. Arougheti said the growth supported “strong top-line growth and profitability,” noting management fees increased 22%, fee-related earnings (FRE) rose 26%, and realized income grew 24% from the year-ago quarter.

Chief Financial Officer Jarrod Phillips said quarterly management fees exceeded $1 billion for the first time in the firm’s history, driven by fee-paying AUM expansion. Fee-related earnings totaled $464 million, and the FRE margin expanded 90 basis points year-over-year to 42.4%. Phillips said the firm has “good visibility” into margin expansion toward the high end of its targeted range for the year, citing efficiencies from the GCP integration and an expected shift in the data center business from a negative to a positive FRE contributor as new global digital infrastructure funds begin paying on committed capital.

On performance-related results, Phillips said Ares generated $75 million in realized net performance income, up 84% from the year-ago period. He also cited interest expense of $51 million, which he attributed to “normal increased Q1 seasonality,” and said interest income “should remain around the Q1 level going forward.” Realized income was $503 million, while after-tax realized income per share was $1.24, up 14% year-over-year. Phillips reported a 13.5% tax rate, which he said was within the firm’s expected 11% to 15% range for the year.

Record first-quarter fundraising and new fund launches

Arougheti said Ares is “on track for another record year of fundraising,” after raising $30 billion of gross capital in Q1, its “highest ever first quarter” and up 46% from last year’s record first quarter. He said the firm’s pipeline of new institutional funds remains robust, including “three of our largest institutional private credit funds in the market over the next 12 months,” two of which have already launched.

Within credit, Arougheti said Ares raised over $20 billion in the quarter. He highlighted the final close of ASOF III, the firm’s latest opportunistic credit fund, at over $8.3 billion of equity commitments and “nearly $10 billion, including related transaction vehicles,” exceeding its target and the prior vintage. Ares also launched the third vintage of its alternative credit fund with a $6.5 billion target; Arougheti said demand is “well in excess of the target” and the firm expects to complete fundraising in the second quarter at the hard cap because it is “meaningfully oversubscribed.”

In U.S. direct lending, Arougheti said Ares is accelerating the launch of its fourth senior direct lending fund and anticipates a first close in late third quarter or early fourth quarter. He also described structural changes: SDL III raised about $15.3 billion in equity commitments across levered and unlevered sleeves “against a $10 billion cover,” while the fourth vintage will be fully levered alongside a new unlevered evergreen U.S. senior direct lending core product that will invest together with the commingled fund.

In real assets, Arougheti said the firm’s 11th U.S. value-add real estate fund closed at its increased hard cap of $3.1 billion in fund commitments and approximately $3.5 billion of total capital. He added that the firm expects a first close this spring for its fifth Japan logistics development fund and a first close in the back half of the year for its third real estate secondaries fund.

Wealth channel growth and private credit redemptions

Arougheti said Ares’ evergreen wealth products account for “just over 10%” of firmwide AUM, and wealth AUM increased 54% year-over-year to $68 billion. He said the firm raised $4 billion of gross and $3 billion of net equity capital in the wealth channel during the quarter, matching the prior quarter’s levels, driven by accelerating demand outside U.S. private credit.

Arougheti pointed to several products as examples of breadth in retail demand:

• Core infrastructure fund: $1 billion of equity subscriptions in Q1 and now over $3 billion of AUM; launched on its “first major platform,” with its first capital raise on that platform closing the day of the call.
• Two non-traded REITs: more than $640 million of inflows in the quarter.
• European direct lending wealth products: nearly $1.2 billion of equity flows.

Arougheti acknowledged that equity flows into the firm’s non-traded BDC moderated relative to prior periods, but said performance and credit fundamentals remain strong, citing an annualized return of “over 10%” for Class I shares since inception. He also said “over 95%” of investors did not request redemptions, and noted that repurchase frameworks are designed to align liquidity with underlying asset repayments.

He added that the firm’s two U.S. private credit wealth products represent about 4.5% of overall fee-paying AUM, and estimated that even in an unlikely scenario of 5% quarterly redemptions for a full year with no gross inflows, fee-paying AUM could be impacted by approximately 1% annually based on existing fund structures and redemption mechanics.

During Q&A, Arougheti told Bank of America’s Craig Siegenthaler that the firm views institutional, traded, and non-traded channels as complementary, emphasizing that “the assets are the same” and capital can be allocated across pools. He also separated insurance demand as a different segment, noting most insurance balance sheets are investment grade and describing growth in private high-grade credit as “exciting” but “a different asset class” from sub-investment-grade private credit.

Deployment, credit conditions, and portfolio positioning

Arougheti said firmwide deployment exceeded $32 billion in Q1 despite a “typical seasonal slowdown” that he said was “further amplified by heightened geopolitical issues.” He said the firm’s forward investment pipeline reached a “new record level,” with strength across European and U.S. direct lending, alternative credit, and infrastructure, and said available capital now totals over $158 billion, including “more than $100 billion” of credit dry powder.

Executives cited a slower U.S. direct lending transaction market in the quarter. Arougheti said industry-wide deal count and middle-market M&A declined 41% in Q1 2026 versus Q1 2025, attributing the decline to the Iran war and shifting inflation and rate expectations. However, he said the firm began seeing a pickup in new U.S. direct lending activity in recent weeks as participants adjusted to changing conditions.

Phillips said Ares is not seeing indications of a turn in the credit cycle and described credit fundamentals in direct lending portfolios as positive, citing “near 10% EBITDA growth,” loan-to-value ratios in the “mid-40% range,” and improving interest coverage ratios of 2.2x. He said non-accrual ratios are “well below historical norms,” and that the limited number of credit issues are “company-specific rather than indicative of broader trends.”

On software exposure and AI disruption risk, Arougheti said software exposure is 6% of overall AUM and less than 8% of private credit AUM, focused primarily on senior lending to companies providing core operational software in regulated industries. He said a third-party consulting firm conducted a nine-week review and concluded that 86% of the software-oriented portfolio was low risk for potential AI disruption, 13% medium risk, and 1% high risk. Arougheti added that, under that framework, medium-to-high risk exposure would represent less than 2% of U.S. and European direct lending AUM and “well under 1%” of total firmwide AUM.

In secondaries, Arougheti said the opportunity set is being driven by growth in GP-led activity and rising demand for “creative liquidity solutions.” He also noted that secondaries deployment relative to industry dry powder is roughly a “1-to-1 relationship,” which he described as attractive due to supply-demand imbalance.

Phillips closed by reiterating Ares’ 2026 longer-term goals of 16% to 20% compound annual FRE growth, 20% to 25% realized income growth, and 20% dividend growth, and said the firm expects FRE margin expansion “within the upper end” of its annual 0 to 150 basis points target range this year.

Separately, Arougheti highlighted the IPO of X-Energy, saying Ares’ balance sheet cost basis was “a little over $100 million,” and that the current fair value of the investment, net of employee compensation, was “close to $700 million” based on recent trading prices.

About Ares Management NYSE: ARES

Ares Management Corporation NYSE: ARES is a global alternative asset manager that provides investment solutions across credit, private equity and real estate. The firm originates and manages capital across a range of strategies including direct lending, syndicated and special situations credit, private equity buyouts and growth investments, and real estate equity and debt. Ares serves institutional investors, insurance companies, pension funds, sovereign wealth funds, and high‑net‑worth clients through both commingled funds and bespoke managed account structures.

Within credit, Ares offers strategies spanning leveraged loans, structured credit, opportunistic and distressed debt, and specialty finance, with an emphasis on underwriting, portfolio construction and active asset management.

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