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    ARES
    Earnings call· Sep 2025(Q3 FY25)

    Ares Management Corp ARES

    Nov 3, 2025 Source

    Executive summary

    Ares Management Q3 FY25 — Record Capital Raise and Strong FRE Growth

    Ares Management delivered a record-breaking quarter, driven by unprecedented capital raising and deployment across its diverse investment platform, leading to significant growth in management fees and fee-related earnings. The firm is expanding its global wealth and institutional channels, raising its semi-liquid wealth AUM target, and actively investing in strategic areas like infrastructure and asset-based finance. Management remains confident in its credit portfolios and ability to outperform in various market conditions, including potential credit cycles.

    Highlights

    6

    • Management fees grew 28% YoY to $971 million.

    • Fee-related earnings (FRE) increased 39% YoY to $471 million.

    • Raised over $30 billion of new capital in the quarter, a new record, and over $105 billion in the last 12 months (up 24% YoY).

    • Gross deployment exceeded $41 billion in the quarter, 55% higher than Q2.

    • AUM increased to over $595 billion and fee-paying AUM to $368 billion, both up 28% YoY.

    • Semi-liquid wealth products AUM target raised from $100 billion to $125 billion by 2028.

    Concerns

    3

    • GCP integration temporarily compressed FRE margins in Q3 FY25.

    • Anticipate catch-up management fees to return to more normalized levels next quarter.

    • Fee-related performance revenues (FRPR) for Q4 FY25 are anticipated to be $125 million, reflecting a 100 bps decline in base rates.

    Guidance & targets

    8
    CategoryTargetConfidence
    Capital Raised
    meaningfully exceed $93 billion
    high materiality
    High
    Full-year FRE Margins
    at or slightly above 2024 levels
    medium materiality
    Medium
    Annual FRE Margin Expansion
    closer to the top end of 0 to 150 basis point annual margin expansion guidance
    medium materiality
    Medium
    American-style Performance Fees Recognition
    more material amounts
    medium materiality
    Medium
    Total Net Realized Performance Income (European-style funds)
    $500 million
    high materiality
    High
    Net Realized Performance Income (European-style funds)
    approximately $450 million
    high materiality
    High
    Fee-Related Performance Revenues (Credit Group)
    approximately $125 million
    medium materiality
    High
    Semi-liquid Wealth Products AUM Target
    $125 billion
    high materiality
    High

    Operational metrics

    45
    Management Fees
    $971 million28% YoY increase
    Q3 FY25

    Record management fees.

    Catch-up Fees
    $29 million
    Q3 FY25

    Generated during the quarter.

    Management Fees (Excluding Catch-up)
    21%annualized rate increase QoQ
    Q3 FY25

    Due to strong net deployment and annualized run rate increase in FPAUM.

    Other Fees
    up modestlyover Q2
    Q3 FY25

    Largely due to small leasing fees from new Japan data center development fund.

    Fee-Related Performance Revenues (FRPR)
    $85 million
    Q3 FY25

    Most notable contribution from annual payment from open-ended core alternative credit fund.

    Compensation and Benefit Expenses
    4.6%QoQ increase
    Q3 FY25

    Reflecting headcount growth and higher performance expectations, but increased at a slower rate than non-Part I management fees.

    Non-Part I Management Fees
    7.6%increase
    Q3 FY25

    Grew faster than compensation and benefit expenses.

    Supplemental Distribution Fees
    $4 millionincrease over Q2
    Q3 FY25

    Due to record fundraising in the wealth channel.

    G&A Expenses Growth Rate
    slower ratethan management fees
    Q3 FY25

    Expected continued improvement in percentage as various strategies scale.

    FRE Margins
    41.4%up slightly from Q2
    Q3 FY25

    Integration of GCP continued to temporarily compress margins.

    Net Accrued Performance Income (Unconsolidated)
    $1.2 billion9.2% increase QoQ
    end of Q3 FY25

    Experienced very strong market appreciation across investment portfolios.

    Realized Income
    $456 million34% YoY increase
    Q3 FY25

    Strong growth in after-tax realized income per share of Class A stock (25% YoY).

    Effective Tax Rate on Realized Income
    8.6%
    Q3 FY25

    In line with 8% to 12% range for 2025.

    Credit Strategy Returns
    10% to 23%
    LTM Q3 FY25

    Primary strategies generated double-digit returns.

    APAC Credit Strategy Gross Returns
    7.2%
    Q3 FY25

    Solid quarterly returns.

    Alternative Credit Gross Returns
    5.6%
    Q3 FY25

    Solid quarterly returns.

    U.S. Junior Direct Lending Gross Returns
    4.8%
    Q3 FY25

    Solid quarterly returns.

    Opportunistic Credit Gross Returns
    4.2%
    Q3 FY25

    Solid quarterly returns.

    U.S. Senior Direct Lending Gross Returns
    2.6%
    Q3 FY25

    Solid quarterly returns.

    European Direct Lending Gross Returns
    2.3%
    Q3 FY25

    Solid quarterly returns.

    Americas Real Estate Equity Composite Gross Returns
    9.1%
    LTM Q3 FY25

    Continued improvements in rent growth and property values.

    Diversified Non-Traded REIT Net Return
    7.9%
    first 9 months of FY25

    Strong performance.

    Secondaries Group APMF Gross Returns
    14.7%
    LTM Q3 FY25

    Continued strong performance.

    Net Realized Loss Rates (Direct Lending)
    very lowconsistent with 1 basis point cumulative average annual loss rate
    over 2 decades

    Reflects strong fundamental credit performance.

    Corporate Credit Senior Debt Exposure
    >93%
    Q3 FY25

    Of credit exposures.

    ARCC Loans on Nonaccrual
    1%decline from Q2, 100 bps below historical average
    Q3 FY25

    At fair value.

    U.S. Direct Lending EBITDA Growth
    double-digit
    YoY

    Healthy fundamental growth.

    U.S. Direct Lending Loan-to-Value (LTV)
    ~42%near historic lows
    Q3 FY25

    Conservative loan-to-value ratios.

    European Direct Lending Loan-to-Value (LTV)
    ~48%
    Q3 FY25

    Conservative loan-to-value ratios.

    ABF Non-Residential Consumer Assets
    <5%
    Q3 FY25

    Materially underweight.

    Alternative Credit Subprime Consumer Assets
    <1%
    Q3 FY25

    Negligible exposure.

    Alternative Credit Total Auto Exposure
    ~1%
    Q3 FY25

    Low exposure.

    Alternative Credit Nonaccrual Rate
    essentially 0
    Q3 FY25

    No material change in loss curves relative to underwritten estimates.

    Proprietary/Limited Process Investments
    >90%
    Q3 FY25

    Investments are directly structured, allowing collateral protections.

    Corporate Investment Portfolio
    >$2.6 billion
    end of Q3 FY25

    Minimal direct exposure to loans and bonds.

    Credit Assets (within Corporate Investment Portfolio)
    ~$331 million
    end of Q3 FY25

    Compared to $368 billion in fee-paying AUM.

    Management Fees CAGR (GFC)
    27%
    2007-2010

    Growth during the Global Financial Crisis.

    ARCC Annual Incremental Return (GFC)
    540 basis pointsabove bank loan index
    2007-2010

    Outperformance during the Global Financial Crisis.

    Management Fees CAGR (2019-2021)
    27%
    2019-2021

    Growth during the 2020-2021 period, combining credit outperformance with deployment of dry powder.

    Annual Revenue from Management Fees
    >85%
    annual

    Management fees and fee-related earnings are generally insulated from credit losses.

    Private Credit Spreads vs. Traded Alternatives
    ~225 basis pointsin excess
    Q3 FY25

    Offering meaningfully better risk-adjusted returns.

    Real Estate Deployment Growth
    51%QoQ
    Q3 FY25

    Green shoots materializing in real estate.

    BlueCove AUM Growth
    from $1.8 billion to $5.5 billion
    since 2023

    Significant growth in demand for BlueCove's systematic IG capability.

    Data Centers Under Development
    $6 billion
    Q3 FY25

    In ground for development and management, leading next series of funds.

    Promote Giving Pledged Charitable Contributions
    >$45 million
    to date

    Accrued from Ares Pathfinder series of funds.

    Industry KPIs

    4
    MetricValueDetails
    Fundraising inflows$30 billionUSD
    Performance revenue$85 millionUSD
    Fee related earnings$471 millionUSD
    Deployment realizations$41 billionUSD

    Product announcements

    10
    ProductTypeDetails
    Third Infrastructure Secondaries Fundmilestone
    Sixth Infrastructure Debt Fundmilestone
    Inaugural Specialty Healthcare Fundmilestone
    Fifth Japan Industrial Development Fundroadmap
    Eleventh U.S. Value-Add Real Estate Fundroadmap
    ACOF VIImilestone
    Seventh Special Situations Fund in Asiaroadmap
    Tenth Real Estate Secondaries Fundroadmap
    New Large Global Fund in Digital Infrastructureroadmap
    Fourth U.S. Senior Direct Lending Fundroadmap

    Deals & partnerships

    1
    BlueCoveAcquisition of a systematic IG capability to complement existing actively managed loan and bond business and enhance insurance platform.

    Ares made a minority investment in BlueCove in 2023, collaborated, and saw AUM grow from $1.8 billion to $5.5 billion. Full acquisition expected to close in Q1 FY26.

    Risks & headwinds

    4
    Potential for a credit cycle turn

    Idiosyncratic and isolated high-profile bankruptcies or instances of fraud in the news

    Mitigation: Ares' credit portfolios remain healthy with no deterioration in credit fundamentals; over 93% senior debt exposure; low nonaccrual rates (1% FV, 1.8% cost for ARCC); double-digit EBITDA growth in U.S. direct lending; conservative LTVs (42% U.S., 48% Europe); materially underweight non-residential consumer assets (<5% of ABF portfolio); negligible subprime consumer assets (<1% in alternative credit); open source investment model; >90% proprietary/limited process investments; deep underwriting; significant dry powder ($150 billion); large portfolio management and restructuring teams; historical outperformance in previous cycles (e.g., 27% management fee CAGR during GFC and 2020-2021).

    Temporary compression of FRE marginsQ3 FY25

    FRE margins totaled 41.4% in Q3, up slightly from Q2, but compressed by GCP integration.

    Mitigation: Expected full-year FRE margins at or slightly above 2024 levels; FY26 expected to be a better year for margin expansion, closer to top end of 0-150 bps annual guidance due to GCP expense reductions and revenue growth.

    Catch-up management fees returning to normalized levelsNext quarter (Q4 FY25)

    $29 million in catch-up fees generated in Q3 FY25.

    Mitigation: Pipeline for new deployment remains elevated; $81 billion of AUM not yet paying fees available for future deployment; $4.6 billion of development assets could generate over $770 million in additional management fees.

    Impact of lower base rates on Fee-Related Performance Revenues (FRPR)Q4 FY25

    100 basis point decline in base rates impacting anticipated Q4 FRPR.

    Mitigation: Anticipated Q4 FRPR of $125 million reflects strong net additions in FRPR eligible funds and solid credit performance, which more than offsets the base rate decline.

    What to watch in Q4 FY25

    5

    FRE Margin Expansion from GCP

    FY26
    CurrentQ3 FY25 FRE margin 41.4%, temporarily compressed by GCP
    TargetCloser to top end of 0-150 bps annual expansion guidance

    Why it matters

    Successful integration and realization of synergies from GCP are key to achieving targeted FRE margin growth and overall profitability.

    Given the expense reductions and growth in revenue we expect in GCP throughout 2026, next year is expected to be a better year for margin expansion, and we expect to be closer to the top end of our 0 to 150 basis point annual margin expansion guidance.

    Q&A highlights

    6

    How is Ares positioned to benefit from green shoots in the real estate market, especially with LP appetite normalizing across institutional and wealth clients?

    Mike Arougheti highlighted Ares' global real estate business as the third-largest institutional manager, benefiting from scale, vertical integration, and focus on high-conviction sectors like industrials and multifamily. He noted tailwinds from supply constraint recovery and declining rates, leading to increased transaction volumes and deployment (Q3 deployment up 51% QoQ, 78% YoY).

    “If you were to look at our real estate deployment quarter-over-quarter, Q3 versus Q2, we deployed about 51% more than we did last quarter. And if you were to look at year-over-year deployment in real estate around the globe, we're about 78% higher year-on-year.”

    asked by Alex Blostein · answered by Michael Arougheti

    2 min read6 chapters

    Detailed Narrative

    01

    Record Fundraising and Deployment

    Ares achieved its highest-ever quarterly capital raise of over $30 billion and gross deployment of over $41 billion, significantly surpassing previous records. This momentum is broad-based across strategies and channels, including institutional and wealth, with year-to-date capital raised exceeding $77 billion and LTM capital raised over $105 billion, up 24% YoY.

    02

    Wealth Management Expansion

    The firm's semi-liquid wealth strategies saw record quarterly equity inflows of $5.4 billion, with year-to-date inflows up over 70% YoY to $12 billion. Market share in Q3 exceeded 10%, ranking #2 in the industry. Ares raised its 2028 AUM target for semi-liquid wealth products from $100 billion to $125 billion, driven by global demand and multi-product expansion opportunities.

    03

    Infrastructure Platform Growth

    Ares is experiencing significant momentum in its infrastructure platform, raising over $10 billion across various products in the last 12 months. This includes the final close of its third infrastructure secondaries fund at $3.3 billion (plus $2 billion in related vehicles), making it one of the largest in the market, and the first close of its sixth infrastructure debt fund at $5.3 billion.

    04

    Credit Market Outlook and Performance

    Management observes a rebound in transaction activity, narrowing bid-ask spreads, and improving financing conditions, which are expected to drive strong M&A volumes into 2026. Credit portfolios remain healthy with low net realized loss rates (1 bp in direct lending over two decades) and strong fundamental performance, including double-digit EBITDA growth in U.S. direct lending and conservative loan-to-value ratios (42% U.S., 48% Europe).

    05

    GCP Integration and Strategic Acquisitions

    The integration of GCP is progressing well, with expected margin expansion in FY26 due to expense reductions and revenue growth. The acquisition has significantly expanded Ares' real estate platform, making it one of the largest alternative real estate managers, and opened opportunities in data centers, with $6 billion in ground for development. The firm also acquired BlueCove, a systematic IG capability, to complement its liquid credit business and enhance its insurance platform.

    06

    Credit Cycle Resilience

    Ares emphasizes its balance sheet-light, management fee-centric model, which is largely insulated from credit losses. The firm highlights its historical outperformance during previous credit cycles (e.g., 27% CAGR in management fees during GFC and 2020-2021) due to deep underwriting, diversification, restructuring teams, and significant dry powder ($150 billion firm-wide).

    AI-generated summary of the company’s earnings call. Not investment advice.