Ares Management Corp at Morgan Stanley US Financials, Payments & CRE Conference Transcript

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

Question: Mike Cyprys - Morgan Stanley - Analyst : <_ALACRA_META_ABSTRACT>Why don't you start big picture? Let's set the stage with the macro backdrop. Clearly, a lot of debate in the markets today, whether it's around inflation rates, credit, health of the consumer and on and on, what are you seeing at the macro level through the lens of your portfolio investments? And as you look at the portfolio today, are there any sort of areas of concern or softness and any areas that are maybe holding up better than expected? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 11, 2024 / 2:15PM, ARES.N - Ares Management Corp at Morgan Stanley US Financials, Payments & CRE Conference

Question: Mike Cyprys - Morgan Stanley - Analyst : So portfolio performing well, soft landing you guys are in for, any house view on rate?

Question: Mike Cyprys - Morgan Stanley - Analyst : Fair enough. And you started to address some of the cracks that we were seeing in some areas. Maybe just thinking in there a little bit, if we do remain at a 5% level of interest rates for some extended period of time, I guess how do you think about some of the risks, but also opportunities from that as well, where might we start to see cracks? How are you monitoring this? We did see headlines the other week around a potential restructuring of a software LBO, how is Ares positioned here?

Question: Mike Cyprys - Morgan Stanley - Analyst : Just on that point, I think some people were concerned around maybe potentially or ledge assets, stripping movement of assets IP from one vehicle, one part of the business to another than raising money against that to then fund interest payments because anything about the covenant protections you have in your field?

Question: Mike Cyprys - Morgan Stanley - Analyst : Alright. Why don't we shift gears and talk about capital markets recovery from bid-ask spreads to the financing market to market volatility. It's it's been challenging to get deals done over the past 18, 24 months or so. But it seems like the tide might be starting to turn first quarter for you guys was pretty strong little bit heavier on [refi] activity. I guess where are we in capital market turnaround as you see it? And what might catalyze the pipeline to manifest in some more meaningful conversions as you look out.

Question: Mike Cyprys - Morgan Stanley - Analyst : Great. Just to dig in on a couple of those points. It sounds like the election, you don't think it's going to be much of a lead to a slowdown in activity among sponsor side is that correct?

Question: Mike Cyprys - Morgan Stanley - Analyst : Private side. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 11, 2024 / 2:15PM, ARES.N - Ares Management Corp at Morgan Stanley US Financials, Payments & CRE Conference

Question: Mike Cyprys - Morgan Stanley - Analyst : And then the gross to net conversion was a challenge in the first quarter, as you flagged sounds like that's more sort of these synchronic to events in 1Q. And you're not really seeing that it's normalizing here in the second quarter, is that fair?

Question: Mike Cyprys - Morgan Stanley - Analyst : Great. And maybe just more broadly on deployment. You guys have over $115 billion of dry powder across the platform. Maybe talk about some of the best opportunities you're seeing in terms of where to put capital to work today, how that maybe differs from 6 or 12 months ago, particularly when you contrast that versus, say, the regional bank challenges a year ago, how things have evolved in any areas you're avoiding?

Question: Mike Cyprys - Morgan Stanley - Analyst : Maybe just coming back to the synthetic risk transfers that you are referencing. Maybe just you could talk a little bit about the latest partnerships, conversations with banks, how that's progressing as banks are digesting an evolving regulatory landscape as they're looking to become more efficient with their balance sheet, talking about the opportunity set that you see and what are the different areas that you may become more involved with over time?

Question: Mike Cyprys - Morgan Stanley - Analyst : Great. Why don't we shift gears at your recent Investor Day, you outlined a number of different targets, including to grow fee-related earnings at a 16% to 20% CAGR over the next five years. With underlying that, I think you are growing around 12% or so in margin expansion annually up to 150 basis points, potentially taking the margin from the low 40% to 50%-plus over time. So maybe you could just help unpack the key building blocks and contributors to this growth algorithm as you see it. And where might the guy that you put out the 16% to 20% where might that be conservative?

Question: Mike Cyprys - Morgan Stanley - Analyst : Now along with the growth in fee-related earnings that you outlined at Investor Day. You also outlined expectations for performance fees to grow meaningfully, particularly the European-style waterfall performance fee funds to contribute more meaningfully in the years ahead. So just how do you see the CAGR of that playing out? And is there any -- what's the risk around that?

Question: Mike Cyprys - Morgan Stanley - Analyst : Great. Maybe pivoting over to private wealth topic of interest to many across the space, including you guys large addressable market that is under allocated to alternatives. Can you just give us a sense of the conversations you're having with intermediary platforms? What sort of traction you're seeing, I think you have about six products or so in the channel. What sort of traction are you seeing here? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JUNE 11, 2024 / 2:15PM, ARES.N - Ares Management Corp at Morgan Stanley US Financials, Payments & CRE Conference

Question: Mike Cyprys - Morgan Stanley - Analyst : So that kind of gets to the next question, which is just around the product pipeline, sounds like some of that is bringing the existing products that you have to investors overseas and US and Europe.

Question: Mike Cyprys - Morgan Stanley - Analyst : And what it also makes sense on the European and Asian side to have local deployment level vehicles --

Question: Mike Cyprys - Morgan Stanley - Analyst : Great. And the final minutes we have left here when we talk about AI, getting a lot of traction these days across industries, including at Ares with the recent acquisition of a bootstrap glass, you've also formed an AI and innovation group, so how are you thinking about the impact of AI on the private markets and talk about how you're experimenting with that today?

Question: Mike Cyprys - Morgan Stanley - Analyst : So on efficiency save opportunities, have you had any sort of notable use cases yet? Are you able to quantify what that can mean in terms of margin uplift or expense saves there?

Question: Mike Cyprys - Morgan Stanley - Analyst : Great. I'm afraid we're out of time. Thank you, so much. Jarrod, appreciate the time.