Ares Management (ARES) Q1 FY26 earnings call: guidance and Q&A

How is demand evolving across the institutional, insurance and retail channels within private credit given the deceleration in two newer retail funds?

Arougheti distinguished funding pools (traded BDC, institutional, non-traded) and high-grade vs sub-investment-grade credit. Slowing non-traded flows don't reduce global deployment because the same senior-secured assets flow into other funds; insurance is a separate, mostly investment-grade market. Of $20B credit raised, $5B was wealth ($3B US DL, ~$2B European DL + SME), with Europe and SME enjoying strong inflows; institutional investors are not allocating away from private credit.

“if you are beginning to see slowing inflows or increased redemptions in the non-traded part of our business, that does not detract from our global deployment opportunity. And those assets will find their ways into other funds and therefore, will not have an impact on our profitability.”

asked by Craig Siegenthaler · answered by Michael Arougheti

Which parts of the credit business show the biggest incremental deployment pickup, and are non-traded BDCs really the incremental buyer setting spreads?

Arougheti pushed back that non-traded BDCs (15-20% of the private-credit market, little dry powder) are the incremental buyer. Strong deployment came from infra, real estate, European direct lending, secondaries and ABF; US direct lending slowed on middle-market M&A. He flagged 'liquidity-generated opportunity' as an accelerating theme and expects US DL deployment to pick up aggressively into the back half.

“I don't actually think that they were the incremental buyer which goes back to our point earlier, just about the deployment opportunity that this creates.”

asked by Alexander Blostein · answered by Michael Arougheti

What are advisers/gatekeepers saying about retail appetite for non-credit strategies, and is the $125B 2028 fundraising target still credible?

Arougheti framed wealth-channel growth as a secular access story that will overwhelm periodic noise; eight-plus products are seeing rising demand outside US private credit. Redemptions concentrated among smaller family offices and non-US institutions, not well-advised high-net-worth investors, with 95% of BDC investors not redeeming. On the $125B target, he confirmed guidance is unchanged.

“Yes, we have not changed our guidance.”

asked by Steven Chubak · answered by Michael Arougheti

How does the more constructive direct-lending pipeline compare to historical periods, and when will it convert into announced deals?

Arougheti described a lag (deals closing now were in process for months), an aggregate firm pipeline at a record level and increasing direct-lending momentum. Longer-term catalysts remain — aging private-equity investments needing resolution, a pro-business/pro-M&A backdrop and stabilizing rates. He drew the April-2024 tariff-pause-then-reacceleration analogy that led to a record deployment year.

“the aggregate pipeline across the firm is at a record level and that the direct lending pipeline is increasing in momentum.”

asked by Patrick Davitt · answered by Michael Arougheti

How is the realization year playing out given a lighter Q1, and how should we think about FRE margins in 2027 given platform scaling?

Phillips said realizations track transaction activity; extended durations in European (mostly credit) waterfalls keep accruing interest, boosting later-recaptured balances. Prior full-year guidance is unchanged and 2027 is no different. On margin, the 0-150 bps guidance is deliberate to preserve flexibility to invest (e.g., FRE-negative data-center build) while remaining well within range.

“we're really excited to have our first harvest from our first U.S. company as a direct lending fund here in the first quarter.”

asked by William Katz · answered by Jarrod Phillips

Beyond backward-looking LTV and non-accruals, what gives confidence in the software book going forward, and how is Ares approaching new software exposure?

Arougheti emphasized diversification, sponsor backing and ~40% LTV (60% equity cushion below), with ARCC's equity markdowns nudging LTV up slightly. ~3-year weighted-average maturity means resolutions play out slowly; contractual revenues and ~10% EBITDA growth are still positive. Ares is selectively doing new software deals at incremental returns while exiting lower-conviction names — a driver of the quarter's gross-to-net figure. He argued AI mostly enhances rather than displaces core systems of record.

“when you're sitting at the top of the capital structure at 40% with 60% equity value below you, you have to eat through all of that equity before you're taking losses in your credit book.”

asked by Michael Brown · answered by Michael Arougheti

Does Ares have data-center AUM outside digital infrastructure, and how large could the market be?

Blair Jacobson said Ares has invested in digital infrastructure for 10-15 years across multiple groups with over $10B invested historically; the GCP acquisition added development capability plus a seed portfolio (~$2.5B raised last summer for Japanese assets), with a broader raise underway. The overall market is a multitrillion-dollar opportunity, with the third-party (non-hyperscaler) portion sized at ~$900B. Arougheti added the opportunity spans GPUs, power and energy, tying in Ares' renewables/energy-transition platform.

“we've sized the third-party market opportunity at around $900 billion for which when you look at the supply/demand imbalance in terms of capital being raised to address it, it's meaningful.”

asked by Wilma Jackson Burdis · answered by Blair Jacobson

Where do gross-to-net deployment trends shift from here and what drives them?

Arougheti said the playbook is unchanged — a broad origination funnel with rigorous diligence, a ~5% yes-rate and roughly half of direct-lending deployment from incumbent relationships, which underpins near-zero loss rates. Current selectivity is slightly higher and liquidity kept drier ahead of an expected spread-widening environment offering better economics.

“we typically have a yes rate of about 5%, meaning we only do 5% of the deals that we see.”

asked by Brennan Hawken · answered by Michael Arougheti