Ares Management Corp Q1 2025 Earnings Call Transcript

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

Question: Craig Siegenthaler - Bank of America - Analyst : Hey, good morning, Mike. Hope you and the team are doing well. We have a question on private credit, credit quality. So defaults, nonaccruals realized losses. And I heard Jarrod's prepared remarks on ARCC. But my question is, what do you expect for the remainder of 2025, just given we might have a few quarters of negative GDP growth.

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

Question: Bill Katz - TD Cowen - Analyst : Great, thank you very much for taking the questions this morning. So maybe coming back to wealth management, where it seems like you have a tremendous amount of momentum. I was wondering if you could just maybe talk a little bit about where you see the incremental growth either from a product perspective or I think you mentioned more distribution partners coming along. And then to the extent you're willing to provide it, how did the hold up through the turbulence of April post Liberation Day. Thank you.

Question: Bill Katz - TD Cowen - Analyst : Thank you.

Question: Steven Chubak - Wolfe Research - Analyst : Hi, good morning, Mike, and good morning, Jarrod. Hope you're both well. So wanted to ask on the FRE margin outlook. Just given recent market dislocation, the drag you cited from GCP, which is burdened by their lower margin whether you still believe that 0 bps to 150 bps of margin expansion is achievable in the coming year. I was hoping you could just speak to some of the moving pieces, just underpinning your FRE margin outlook.

Question: Steven Chubak - Wolfe Research - Analyst : That's right.

Question: Alexander Blostein - Goldman Sachs - Analyst : Hey, good morning, everybody. Thanks for the question as well. I was hoping we can build a little bit on your commentary around the forward pipeline when it comes to M&A. Obviously, still lots of uncertainty in the marketplace despite the fact that market conditions have gotten a little bit easier. But can you maybe talk a little bit about if the M&A backdrop remains subdued for the next several quarters, what are the more likely areas of deployment where the firm could stay active? And how much dry powder do you guys have in those pockets within your credit franchise?

Question: Alexander Blostein - Goldman Sachs - Analyst : Great, very helpful. Thanks, Mike.

Question: Kyle Voigt - Keefe, Bruyette & Woods - Analyst : Hi, good morning. Maybe just a question or a follow-up on GCP. I think the fee-paying AUM that came over was about $30.5 billion. I think at the time of the deal announcement is $32 billion, just assuming that's primarily on FX, but wondering if you could update us on the trajectory of fee-paying AUM growth at GCP in 2025. And then also just wondering if you could comment on the $245 million of 2026 FRE, which I think was synergized. Is that still the right number for a 2026 FRE run rate when considering the current FX rates and then the state of the macro environment we're in.

Question: Kenneth Worthington - JPMorgan - Analyst : Hi, good morning. Thanks for taking the question. We've seen a number of articles mentioned that Europe is looking to be increasingly attractive as an investment market with private credit being called out specifically given Ares just recently completed the largest direct lending fund, I think ever, what are you guys seeing in terms of the pipeline and the opportunity set in Europe? And how does that compare to what you're seeing in the US? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 05, 2025 / 3:00PM, ARES.N - Q1 2025 Ares Management Corp Earnings Call

Question: Kenneth Worthington - JPMorgan - Analyst : Great, thank you.

Question: Michael Brown - Wells Fargo - Analyst : Great, thanks for taking my question. Mike, you touched on the opportunity in the secondaries market clearly a hotspot in private markets. So for the industry in Ares, can you just maybe expand on the potential in '25 versus '24? And what are your thoughts on some of the large plant exits from a few of the endowments out there that kind of a unique one-off? Or do you think that's a strong read across to some of the other LP cohorts? Thank you.

Question: Patrick Davitt - Autonomous - Analyst : Hey, good morning, everyone. Going back to direct lending, you mentioned pipelines have been steady. It seems like we're still seeing some bigger sponsor-backed deals get announced despite the volatility, and I think you guys have been on some of those. So could you also give us an idea of how the spreads have been tracking for these newer commitments? Any widening as a result of the BSL market closing? Or is there enough competition from other direct lenders to keep those spreads tight? Thank you.

Question: Benjamin Budish - Barclays - Analyst : Hi, good morning and thanks for taking the question. Just thinking about some of the fundraising themes, DPI, it wasn't that long ago we were hearing about the denominator effect. Just curious where would you say currently institutional allocations to private credit are, and do you think there's some resiliency there if things were to, steer in a more negative direction. And then I'm also curious, last year you guys started talking a little bit more about opportunities outside of the traditional alternatives bucket. It's a thing we've heard about from one of your competitors on the investment grade side, but it sounds like you guys are doing some stuff there on the high yield side as well. I'm curious how you see the opportunity in that bucket as well to approach fixing commanders rather than the alternative that's kind of unfolding.

Question: Benjamin Budish - Barclays - Analyst : Okay, great. Thanks for that, Mike.

Question: Brian McKenna - Citizens - Analyst : Thanks. Good morning, everyone. So a follow-up on private wealth, Mike, you noted that institutional fundraising is more consistent during periods of volatility. On the other hand, while the historical look back is shorter, private wealth flows have typically been more cyclical, and it takes time for allocations to reaccelerate after market volatility. It does seem like retail flows to date have held up better for you. But do you think private wealth behavior and their mindset around allocating capital during periods of volatility ultimately changes over time to something more similar to institutional investors. And then if it does, is it really just a function of more education and then these investors having a better understanding of how the private markets work and ultimately, what areas can deliver for them through the cycle.

Question: Brian McKenna - Citizens - Analyst : Okay, that's great. Super helpful. Appreciate it.

Question: Michael Cyprys - Morgan Stanley - Analyst : Hey, good morning. Thanks for squeezing me in here. Just a question on asset-based finance. I was hoping you could elaborate a bit on the opportunity set that you see in today's marketplace for ABF, how you expect that to evolve over the next 12 to 24 months? And talk about some of the steps you're taking to expand your origination access, including progress on bank partnerships. Thank you.

Question: Michael Cyprys - Morgan Stanley - Analyst : Great, thanks so much.