Ares Management Corp at Citizens Financial Services Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Brian Mckenna - Citizens Financial Services - Analyst : Kip, maybe to start with you, I'd love to just hear about how the new role is going as co-president, how your day-to-day has changed a little bit. I'm assuming you're doing a lot of this stuff, seeing investors, et cetera. And then the two co-President announcements at the firm. How does that coincide with just the natural evolution of Ares?

Question: Brian Mckenna - Citizens Financial Services - Analyst : That's great. And then, Marc, you're looking at the early days of Blue Owl, Owl Rock, going back to 2016, really a direct lending business fast forward to today, it's not just direct lending, you have asset-based lending, you have digital infrastructure, GP stakes, et cetera. So talk about the evolution over the last decade, you've been acquisitive, and it would just be helpful to kind of from your perspective, think through and walk through just kind of the natural evolution of your business as well.

Question: Brian Mckenna - Citizens Financial Services - Analyst : That's great. And I guess sticking on the point of scale, I think a lot of folks that look into the industry from the outside, like they see firms getting bigger and bigger and they think it's a bad thing. But to your -- both to your point, like scale is critical, scale creates the outperformance. So maybe just talk through this a little bit more, like from your seat, why is scale so important? And what are the competitive advantages and really how to scale, create differentiated returns for your investors?

Question: Brian Mckenna - Citizens Financial Services - Analyst : Anything to add, Kip?

Question: Brian Mckenna - Citizens Financial Services - Analyst : And I guess just going back to the business models a little bit because I think this is important. 5, 10 years ago, the industry was primarily some private equity funds, some direct lending funds, some liquid credit. You fast forward to today, you have capital-light businesses, you have capital intense, you have on balance sheet insurance liabilities, you have transaction fees, et cetera. So the models have evolved quite a bit. And I think all -- you and your peers, you're all kind of doing the same thing, but you're going at it at a little bit of a different angle. But I look at Ares and Blue Owl, both models are capital light, they're fee-driven, they're FRE-centric. So just walk through -- I don't think it's a coincidence that both of those models are like that. So just walk through why capital light and why you operate the business that you do? Maybe to start, Kip?

Question: Brian Mckenna - Citizens Financial Services - Analyst : And it kind of goes into my next question. I feel like every period of volatility we get -- I've covered the space, again, 12 years. So it's like every few quarters, you get these periods of volatility, people are very negative on the sector. When I take a step back, I look at my alt coverage collectively, there's $600 billion, $700 billion of dry powder. And so I think some folks forget volatility is actually a good thing for your businesses. And so spreads have been tight, you get some volatility, they gap out, you can deploy capital into higher-quality companies, better spreads, et cetera. So just from your standpoint, like -- why is that so relevant? And I think, too, like you go back and look at where the outperformance comes from through the cycle, it's periods of volatility.

Question: Brian Mckenna - Citizens Financial Services - Analyst : And so on the point of pretty healthy valuations, things have really recovered off of the April lows. I mean, you still have capital to deploy, right? And there's a lot of perpetual strategies in the industry that are raising capital on a monthly basis. And so I guess, where are you leaning in from a risk-reward perspective, right? You have capital coming in, it has to get deployed. And so where -- how do you make sure you're deploying into the right assets, the structure is right and you're getting paid for that risk?

Question: Brian Mckenna - Citizens Financial Services - Analyst : Yes. Got it. And I guess on the flip side of that, kind of going back to periods of volatility because, I guess, the way the stocks are trading, it feels like you're going into this credit cycle, things is going to get really bad. And so I think -- and I believe I asked it on the ARCC call, but when you look back at periods of volatility, I mean, how much excess return has been generated across some of your strategies? And again, I think the beauty of the model is you're not a fore seller, you can lean in during periods of volatility. But like is there any way to quantify that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 18, 2025 / 5:00PM, ARES.N - Ares Management Corp at Citizens Financial Services Conference

Question: Brian Mckenna - Citizens Financial Services - Analyst : Yes. And kind of transitioning a little bit, but covering the BDCs as well, I have a whole new appreciation for the portfolios, ARCC, OBDC. They're performing incredibly well. And I think people don't understand or fully appreciate the diversification that sits in both of those vehicles, right? The average position size at ARCC is sub-20 basis points. If you look at OBDC, I think it's about 40. And then the non-traded, it's somewhere in between. So talk about the diversification of kind of the direct lending portfolios. You have a turn of leverage. LTVs are at 40%, 45%. To your point, the amount of equity cushion that sits in these deals. And because I feel like I have a lot of conversations where it's just educating on some of those dynamics. But when you kind of put all those things together, I mean, what -- how bad could things really get?

Question: Brian Mckenna - Citizens Financial Services - Analyst : So what do you think changes that perception, the misinformation that I see is incredible. And it's -- part of my job is getting the facts out into the market, I'm bullish on the sector. But it feels like every period of volatility like -- there's a new cynical narrative that is coming into the market. 10 years ago, it was private equity marks are garbage. Those portfolios are worthless. Then it was the energy and then it was PIK and here we are, it's all private credit. And so I mean, is there like -- is it education or maybe it's just how the markets will always be but like does that ever change? And if it does, why?

Question: Brian Mckenna - Citizens Financial Services - Analyst : Got it. Another topic, I know you guys are getting a lot of questions about it. Software lending. So in this new era of AI, I think there are concerns about the quality of that portfolio. Again, I'm quite familiar with OTF, the Blue Owl's tech lending, BDC, ARCC gave some great color on the earnings call on the software portfolio. I mean, you look at all direct lending, that sector, those portfolios are probably the highest performing highest quality parts of the portfolio. So why is that -- you're getting paid additional incremental spread, lending to those types of companies. So like let's just walk through why that portfolio is performing so well. Are there any like -- how do we, from the outside, think about the risks as AI continues to come into our lives more and more? And kind of just walk through that and what's driving that?

Question: Brian Mckenna - Citizens Financial Services - Analyst : And then LTVs of the software portfolio, can you just remind us where those sit today? Because I think that's another important stat. Is it 30%?

Question: Brian Mckenna - Citizens Financial Services - Analyst : Shifting gears a little bit. So I mean it's funny. Like people talk about private credit, the last few years, five years like it's really been direct lending, right? And so now we're getting it -- I kind of call it Private Credit 1.0, 2.0 is all asset-based lending. And really, that's where a lot of the growth is going to be coming from. So Kip, you and Ares have built an incredible alternative credit business really from scratch organically. And just talk a little bit about that strategy, the assets you're acquiring and it's pretty similar to direct lending in terms of the process and how you underwrite, but where -- what does some of the differences look like just to the regular direct lending space?

Question: Brian Mckenna - Citizens Financial Services - Analyst : Yes. And I guess thinking about like the adoption of private capital solutions, right, started it as private equity and then direct lending and then carry our alternative credit digital infrastructure, and you kind of keep going down the list. But when you look at the adoption of private capital today, I mean like where are we across the spectrum, Direct lending is probably a little bit more mature, but you look at some -- like digital infrastructure and asset-based lending. I mean like what's the opportunity? I mean, is there a way to think about the TAM there at $50 billion, I'm assuming that could be multiples and even Atalaya now alternative credit, that could be $12 billion, $13 billion today in three to five years, like what is some of these end markets in terms of your business look like? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 18, 2025 / 5:00PM, ARES.N - Ares Management Corp at Citizens Financial Services Conference

Question: Brian Mckenna - Citizens Financial Services - Analyst : Just a couple of final questions to wrap. I mean kind of going back to the macro. I mean, again, another thing, dynamic that's underappreciated is the amount of data that sits in both your firms, right, all the different data points. But from a macro perspective and underlying growth perspective, I mean, what are your firms seeing in terms of revenue growth, EBITDA growth, maybe some of that has to do with the sectors you're allocating to, but I mean, what is the house view on the macro over the next year, one to two years?

Question: Brian Mckenna - Citizens Financial Services - Analyst : Okay. And then maybe just the last question, let's fast forward, call it, five years outside of maybe a robot asking you guys questions on stage about PIK income.

Question: Brian Mckenna - Citizens Financial Services - Analyst : And we're getting fed the same answers we see today. What does the industry look like? Who are the winners? Are the winners of the last decade the winners of the next 5 to 10 years? And I guess just thinking about AUM and longer term, like where do we go?

Question: Brian Mckenna - Citizens Financial Services - Analyst : All right. Great. I think we're a few minutes over. So we'll leave it there. Thank you both for being here. Great perspective, as always, and good luck.