Ares Management Corp Q2 2025 Earnings Call Transcript

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

Question: Alexander Blostein - Goldman Sachs & Company, Inc. - Analyst : I was hoping to start with a discussion around private credit, institutional demands and really a two-parter here. But one, was hoping you could comment on how compression in US direct lending spreads impacting institutional demands and fee rates, understanding that it's all probably relative to liquid markets, but I'm curious how they think about the products more in absolute terms and whether or not it's having any sort of fee implications. And then on the second part, similar line of questions for your alt business -- alt credit business. That feels like a much larger addressable market. So curious how you're thinking about forward dynamics there.

Question: Bill Katz - TD Cowen (Research) - Analyst : I know we've asked this in the past, and I know you said it's going to take a bit of time to get there, but it does seem like the backdrop for the 401(k) market is starting to sort of align itself for potentially inclusion for alts. I was wondering how your conversations are going with some potential partners and how you sort of see the opportunity set for Ares, particularly since your nonqualified positioning continues to strengthen?

Question: Patrick Davitt - Bernstein Institutional Services LLC - Analyst : I appreciate the helpful comments on how pipelines -- deployment pipelines are tracking so far in 3Q, but in a lot of news saw about some chunky refinancings out of DL back into the broadly syndicated market in July. So could you also update us on how you see the gross-to-net tracking in the second half after a positive surprise there in 2Q. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 01, 2025 / 3:00PM, ARES.N - Q2 2025 Ares Management Corp Earnings Call

Question: Kenneth Worthington - J.P. Morgan Securities LLC - Analyst : There's been a number of headlines in recent months about the growing attractiveness of European market for private assets, especially on the back of Trump tariffs. How does the health of the European direct lending market compared to the US when thinking about this from both a deployment perspective and a credit quality perspective. As we look beyond direct lending to asset-backed finance, how does the opportunity to grow there in Europe look from a fundraising perspective and maybe deployment as well?

Question: Kyle Voigt - Keefe, Bruyette & Woods, Inc. - Analyst : So Mike, you spoke a bit about your retail distribution with a number of firms you're partnering with up over 30% year-on-year. And it sounds like the source of your inflows continues to broaden as well. Can you just talk a bit about the investment you've been making in distribution to drive that? And how much more do you think there is to go there in terms of adding more partnerships and further broadening distribution over the next couple of years. And you also mentioned 1/3 of your retail flows coming from international, which already seems really healthy, but you're still adding partners there as well. So do you think there's room for that proportion to even move higher as we look out over the next coming years.

Question: Benjamin Budish - Barclays Capital Inc. - Analyst : Jarrod, you mentioned that FRE margins should be kind of flat year-over-year with the impact of GCP. I wonder if you could talk about what are the sort of swing factors, thinking in particular about net credit [FE] AUM growth if the environment shakes out a little bit better or maybe it stays a little bit more stagnant, how does that impact the near-term margin outlook? What's kind of embedded in that guidance?

Question: Michael Cyprys - Morgan Stanley & Co. LLC - Analyst : I just wanted to ask about alternative credit or ABF. Just curious if you could maybe provide a bit of an update on some of the progress expanding your sourcing funnel, including partnerships and flow arrangements. How that's contributing today, how you see that evolving over the next 12 to 18 months? And then just more broadly on ABF, I believe historically, you guys have played more in the sub-investment-grade space. So just curious just around opportunity, scope, appetite around extending more meaningfully into the fixed income replacement, investment grade part of the marketplace. Curious in what scenario might you have more appetite interest for that becoming a bigger part of the business?

Question: Brian McKenna - Citizens JMP Securities, LLC - Analyst : So I have a question on direct lending, credit quality and performance. Your portfolios have performed incredibly well in really all parts of the cycle. And even for the industry, many portfolios continue to perform well despite the significant increase in base rates in the last few years. Mike, it would be great just to get your perspective on why performance and credit quality continues to be so resilient across the industry. And then bigger picture, we haven't really seen a true credit cycle in some time now. So why is that? Could it be a function of the staying power of private credit, the sector's ability to provide capital in all parts of the cycle and the underlying structures of these vehicles? Or are there some other drivers there?

Question: Brian Bedell - Deutsche Bank Securities Inc. - Analyst : Most of my questions have been asked and answered. Maybe just one on deployment in terms of AUM not yet paying fees, that continues to build up nicely. Just in terms of timeline, I think typically, it takes -- you kind of say it's like one to two years or more like 18 months or so to deploy that has -- given the potential for deployment to improve in the second half, does that accelerate that timeline? Or is it -- do you still think this is that kind of window on the credit side business?