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    ARES
    Earnings call· Dec 2025(Q4 FY25)

    Ares Management Q4 FY25 earnings call ARES

    Feb 5, 2026 Source

    Executive summary

    Ares Management Corporation Q4 FY25 — Record Fundraising and AUM Growth

    Ares Management achieved record results in Q4 FY25, driven by significant AUM growth and robust fundraising across its diverse platform. The firm expanded its investment capabilities and geographic reach, with strong performance in credit, real assets, and secondaries. Management expresses optimism for 2026, anticipating continued growth and strategic opportunities despite market volatility in certain sectors.

    Highlights

    5

    • Crossed $600 billion in AUM, reaching over $622 billion, up 29% YoY.

    • Achieved record $113 billion in total fundraising for 2025, including $36 billion in Q4.

    • Management fees, FRE, and after-tax realized income per share increased over 20% year-over-year.

    • Declared a 20% year-over-year increase in Q1 2026 common dividend to $1.35 per share.

    • Wealth Management AUM grew 69% YoY to over $66 billion.

    Concerns

    3

    • Real estate values drew down 18% to 20% in prior periods, though now recovering.

    • Potential for cyclicality in wealth channel flows, though net inflows remain strong.

    • Software exposure represents 8.7% of private credit AUM, with market volatility concerns.

    Guidance & targets

    12
    CategoryTargetConfidence
    FRE margin
    high end of our annual target range of 0 to 150 basis points
    high materiality
    High
    European style net realized performance income
    approximately $350 million
    high materiality
    High
    Wealth channel equity inflows
    meet or exceed our prior year levels
    medium materiality
    High
    Total fundraising
    as good or better than our record year in 2025
    high materiality
    High
    Realized income
    20% plus
    high materiality
    High
    Opportunistic Credit Fund III final close
    over the $7.1 billion that we raised in the previous vintage
    medium materiality
    High
    Pathfinder III full fundraise
    similar level to the previous vintage of $6.6 billion
    medium materiality
    High
    11th U.S. value-add fund hard cap
    $3.1 billion
    medium materiality
    High
    Fourth U.S. senior direct lending fund first close
    potential first close in the fourth quarter
    medium materiality
    Medium
    Seventh European direct lending fund launch
    early 2027
    medium materiality
    Medium
    Digital infrastructure equity strategy capital raise
    significant additional capital
    medium materiality
    High
    Effective tax rate on realized income
    11% to 15%
    medium materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Credit Group
    Institutional channel led fundraising for the credit group. Demand for credit products remains robust.
    Q4 Fundraising: $18 billionU.S. and European Direct Lending Q4 Fundraising: $12 billionOpportunistic Credit Fund III Q4 Fundraising: $1.2 billionOpportunistic Credit Fund III Total Commitments: $7 billionLiquid Credit Strategy Q4 Equity Commitments: $3 billionFull Year Fundraising: $65 billionDeployment Growth: 29% YoYLiquid Credit Deployment Growth: 46% YoYU.S. and European Direct Lending Deployment: Increased sharply YoY into 240+ portfolio companies
    		————
    Real Estate Group
    The fourth quarter capped a very strong year for the real estate group, with significant fundraising across strategies.
    Full Year Fundraising: $16 billionQ4 Fundraising: $7 billionReal Estate Debt Strategy Q4 Fundraising: $4 billion11th U.S. Value-Add Fund Q4 Fundraising: $1.3 billion11th U.S. Value-Add Fund Total Commitments: $2.3 billion
    		————
    Infrastructure
    Concluded a strong year for infrastructure fundraising, with expectations for 2026 to be even better, especially in digital infrastructure.
    Q4 Fundraising: $3 billionFull Year Fundraising: $7 billionOpen-End Core Infrastructure Fund Assets: Over $2.5 billionData Center Exposure: Just under 2% of current AUM
    		————
    Secondaries Group
    A standout performer with remarkable achievement for a first-time fund in credit secondaries.
    Credit Secondaries Fund Q4 Fundraising: Nearly $1 billionCredit Secondaries Fund Total Equity Commitments: $4 billionCredit Secondaries Total Investment Capacity: Exceeds $7 billionPE Secondaries Q4 Equity Commitments: Over $1.8 billionFull Year Fundraising: $12.9 billionAUM Growth: 45%AUM Size: Nearly doubled since mid-2021
    		—45%——
    Wealth Management
    2025 was a transformational year, with strong demand across semi-liquid strategies and market share gains.
    AUM: Over $66 billionFull Year Equity Flows into Semi-Liquid Products: $16 billionFull Year Net Flows: $14 billionQ4 Fundraising: $4.1 billionQ4 Net Inflows: $3 billionStrategies with AUM Exceeding $2 billion: 7 of 8January Equity Inflows: Approximately $1.2 billionFebruary Equity Inflows: Similar amount expectedACI January/February Inflows: $750 million (vs $200 million last year)
    		—69%——
    Insurance Solutions Group
    Insurance AUM growth accelerated with strong flows from Aspida and third-party clients.
    Total Insurance-Related AUM: $86 billionAspida Sales Volumes (Full Year): $8.8 billionAspida Sales Volumes Growth: 39% over 2024Private IG Business within Alternative Credit Strategy: Manages approximately $25 billion
    		—20%——

    Operational metrics

    56
    Total AUM
    $622 billion29% over previous year
    Q4 FY25

    Crossed $600 billion in AUM.

    Total Fundraising
    $113 billionrecord
    FY25

    Record year for Ares, capped off by record Q4.

    Q4 Fundraising
    $36 billionrecord
    Q4 FY25

    Capped off the record full year fundraising.

    Total Investing Activities
    $100 billion
    FY25

    Exceeded in 2025.

    Gross Deployment
    $146 billion37% over 2024
    FY25

    New annual record.

    Q4 Deployment
    $46 billionrecord
    Q4 FY25

    Contributed to record full year deployment.

    FPAUM
    $385 billion32% year-over-year increase
    Q4 FY25

    Driven by strong deployment activities.

    Management Fees
    $994 million27% growth
    Q4 FY25

    Record management fees driven by strong FPAUM growth.

    Management Fees (Full Year)
    $3.7 billion25% growth
    FY25

    New annual record.

    Fee-Related Performance Revenues (FRPR)
    $171 million
    Q4 FY25

    Increased contributions from secondaries products and diversified non-traded REIT.

    Fee-Related Performance Revenues (FRPR) (Full Year)
    increased 30%versus prior period
    FY25

    Driven by increased contributions from secondaries products and diversified non-traded REIT.

    FRPR Potential (Non-traded REITs)
    $79 million
    FY25

    Represents potential FRPR if high watermarks were not a factor, based on their respective returns.

    Fee-Related Earnings (FRE) (Full Year)
    increased 30%over the prior period
    FY25

    Accelerated to 33% year-over-year growth in Q4.

    Fee-Related Earnings (FRE) (Q4)
    $528 million33% year-over-year growth
    Q4 FY25

    Record FRE for the quarter.

    FRE Margins (Full Year)
    41.7%vs 41.5% in 2024
    FY25

    Ahead of 2024's margin, despite margin headwinds from GCP acquisition.

    Net Realized Performance Income
    $102 million
    Q4 FY25

    Increased realization activity in the fourth quarter.

    Net Realized Performance Income (Q1 2026 expected)
    $52 million
    Q1 2026

    Expected this upcoming week.

    Additional Net Realized Performance Income (European style funds)
    approximately $50 million
    Q1 2026

    Visibility of additional from European style funds.

    Net Realized Performance Income (Full Year)
    $169 millionrecord
    FY25

    Record realizations during the year.

    Net Accrued Performance Income (unconsolidated)
    approximately $1.1 billionapproximately $102 million or 10% rise
    year-end

    Rose despite record realizations.

    Net Accrued Performance Income (European style funds)
    approximately $984 million89% of total
    year-end

    Represents 89% of the total unconsolidated net accrued performance income.

    Net Accrued Carry Balance (American style funds)
    $123 million
    year-end

    Potential for modest realization in H2 2026 if private equity transaction backdrop improves.

    Realized Income (Q4)
    $589 millionrecord
    Q4 FY25

    Record realized income for the quarter.

    Realized Income (Full Year)
    Exceeded $1.8 billion26% increase from 2024
    FY25

    Record full year realized income.

    Effective Tax Rate (Full Year)
    10.3%
    FY25

    On realized income.

    Effective Tax Rate (Q4)
    13.5%
    Q4 FY25

    Higher in Q4 due to greater amount of net realized performance income.

    U.S. Direct Lending Portfolio EBITDA Growth
    10%
    YoY

    Portfolio companies generated double-digit growth for the last 12 months.

    U.S. Direct Lending Portfolio Interest Coverage
    2.2x
    Q4 FY25

    Continued to strengthen.

    Non-traded BDC Non-accruals
    0
    Q4 FY25

    Across its nearly 900 portfolio companies.

    Non-traded BDC Net Return
    9.3%
    FY25

    With stable dividends throughout the year.

    Public BDC (Ares Capital) Non-accruing Loan Ratio (cost)
    1.8%unchanged from a year ago
    Q4 FY25

    Remains well below its long-term average and industry group average.

    Public BDC (Ares Capital) Non-accruing Loan Ratio (fair value)
    1.2%unchanged from a year ago
    Q4 FY25

    Remains well below its long-term average and industry group average.

    Public BDC (Ares Capital) Fund Level Return on NAV
    10.3%
    FY25

    Strong credit metrics.

    Public BDC (Ares Capital) Average Annual Total Stock Return (21-year history)
    12.4%double the average annual return of the broadly syndicated bank loan index
    21-year history

    Nearly double the high-yield index over the same period.

    Diversified Non-traded REIT Total Net Return
    11.6%
    2025

    Recovery of asset class values underway.

    Open-ended Core Infrastructure Fund Net Returns
    9.9%
    FY25

    Strong performance for the year.

    Private Equity Secondaries Semi-liquid Wealth Vehicle Net Return
    13.4%
    FY25

    Strong performance for the year.

    Private Equity Fund ACOF VI Gross IRR (since inception)
    over 21%
    since inception

    Remains a top quartile fund in its vintage.

    Private Equity Fund ACOF VI Net Return
    16%
    2025

    Strong performance for the year.

    Q1 2026 Common Dividend
    $1.3520% year-over-year increase
    Q1 2026

    Reflects continued confidence in hitting realized income target.

    Software Exposure (% of Total AUM)
    6%
    Q4 FY25

    Across the firm, highly diversified portfolio of investments in software companies.

    Software Exposure (% of Private Credit AUM)
    8.7%
    Q4 FY25

    Inclusive of real asset lending, but excluding liquid credit.

    Software Exposure (% of Direct Lending AUM)
    12%
    Q4 FY25

    Specific to direct lending.

    Software Portfolio Loan-to-Value Ratios
    high 30%compared to mid-40s LTV on rest of portfolio
    Q4 FY25

    Lend at lower LTVs on software.

    Software Portfolio EBITDA Margins
    over 40%
    Q4 FY25

    Software portfolio companies generate significant cash flow.

    Software Portfolio Average EBITDA
    over $350 million
    Q4 FY25

    Strong average EBITDA for software portfolio companies.

    Software Portfolio Growth Rate
    faster than the overall credit portfolio
    past year

    Strong growth rate for software portfolio companies.

    ARR Loans (% of Global Direct Lending Portfolio)
    less than 1%
    Q4 FY25

    Do not focus on ARR loans.

    Deal Selectivity Rate (Acceptance)
    3% to 5%
    general

    Generally across the entire portfolio, meaning saying no 95% to 97% of the time.

    Institutional Investors Planning to Add/Maintain Private Credit Allocations
    approximately 90%
    longer term

    Broad and persistent institutional investor demand.

    Private Market Gross Inflows from Wealth Channel
    over $300 billion
    past 3 years

    Despite significant inflows, average allocation for individual investors remains low.

    Average Allocation to Private Markets for Individual Investors
    approximately 3% to 4%unchanged due to rising overall market values
    Q4 FY25

    Believed to have meaningful opportunities for growth towards institutional levels.

    Dry Powder
    $156 billion
    Q4 FY25

    Substantial dry powder to take advantage of investment opportunities.

    Real Estate Values Drawdown
    18% to 20%
    prior periods

    Real estate is in a very interesting cyclical place, now recovering.

    Non-sponsor Origination (historical)
    10%
    historical

    Historically, non-sponsor originations have been around 10% of total.

    Non-sponsor Origination (target)
    15%+
    next 3 to 5 years

    Target to grow non-sponsor originations in the U.S.

    Industry KPIs

    6
    MetricValueDetails
    AUM$622 billionUSD
    Dry powder$156 billionUSD
    Fundraising inflows$113 billionUSD
    Performance revenue$171 millionUSD
    Fee related earnings$528 millionUSD
    Deployment realizations$146 billionUSD

    Product announcements

    1
    ProductTypeDetails
    U.S. direct lending credit productlaunch

    Deals & partnerships

    1
    GCPacquisition

    Acquisition closed in March [2025]. Integration is going well.

    Risks & headwinds

    3
    Market volatility and potential AI disruption in software sectorYear-to-date (2026)

    Public equity software index down roughly 20% year-to-date; software index in broadly syndicated loan market down only 2.3%. Software exposure is 6% of total AUM and less than 9% of private credit AUM.

    Mitigation: Highly diversified software portfolio (senior secured loans, low LTVs, high EBITDA margins, strong cash flow, low ARR loan exposure). Opportunistic credit and secondaries business provide a natural hedge by seeing more investment opportunities. Digital infrastructure business expected to contribute meaningfully to AUM/fees from AI adoption.

    Cyclicality in wealth channel flowsCurrent period (Q4 FY25 / early 2026)

    Some outflows seen, but net inflows remain strong.

    Mitigation: Intentional positioning with deep institutional drawdown capital base to navigate flows. Not over-reliant on wealth flows.

    Real estate market dislocationPast periods, but now recovering

    Real estate values drew down 18% to 20% in prior periods.

    Mitigation: Markets undersupplied, constructive rate backdrop, secular tailwinds in logistics. Firm enjoyed net inflows even through dislocation.

    Q&A highlights

    8

    How will the shift away from software origination to data centers/power impact overall deployment efforts, given software was a large source of credit?

    Management asserts that software underwriting has always considered obsolescence risk, focusing on foundational infrastructure and regulated industries. They do not perceive a meaningful impact on aggregate origination volumes, as new markets open and close, and the firm's pipeline is at record levels. The shift to infrastructure and energy is a natural evolution.

    “I don't perceive that this disruption is going to have a meaningful impact in any way on aggregate origination volumes. And as we said in the prepared remarks, our pipeline across the entirety of what we do is up at record levels right now.”

    asked by Craig Siegenthaler · answered by Michael Arougheti

    2 min read7 chapters

    Detailed Narrative

    01

    Strategic Growth and Diversification

    Ares achieved significant milestones in 2025, expanding its investment platform and geographic reach. The acquisition of GCP enhanced real estate and digital infrastructure offerings, while investments in new data systems and over 25 AI projects aim to boost efficiency and productivity. The firm's inclusion in the S&P 500 Index in December underscored its market position.

    02

    Investment Performance and Credit Quality

    The firm's investment portfolios demonstrated solid fundamentals, with credit portfolios generating attractive return premiums. Portfolio companies showed strong revenue and EBITDA growth, with loan-to-value ratios near historical lows and stable non-accruing loan trends. Real assets valuations are improving, and secondaries are benefiting from a strong economic backdrop.

    03

    Deployment Acceleration

    Investment activity accelerated in the second half of 2025, with record deployment of $46 billion in Q4 and $146 billion for the full year, a 37% increase over 2024. Real asset deployment more than doubled, and liquid credit deployment increased by 46%, driven by a rebound in liquid markets and stronger inflows.

    04

    Fundraising Momentum

    Ares reported record total fundraising of $113 billion in 2025, including $36 billion in Q4, without its two largest private credit campaign funds in the market. Institutional channels led fundraising, with strong demand across credit, real estate, infrastructure, and secondaries strategies. The firm's wealth management business also saw significant growth, with AUM up 69% year-over-year.

    05

    Wealth and Insurance Channel Expansion

    The wealth channel experienced a transformational year with $16 billion in equity flows into semi-liquid products, driving AUM to $66 billion. Ares gained market share in direct lending and real estate sectors within wealth. The insurance solutions group also saw accelerated AUM growth, reaching $86 billion, with plans to broaden private investment-grade origination capabilities.

    06

    Software Exposure and AI Strategy

    Ares addressed concerns regarding software exposure, noting it represents about 6% of total AUM and less than 9% of private credit AUM, primarily in senior secured loans. The firm emphasizes its diversified portfolio, low loan-to-value ratios, and strong cash flow generation from portfolio companies. AI adoption is viewed as a potential contributor to management fees and earnings through its digital infrastructure business, providing a natural hedge against industry disruption🌐s.

    07

    Market Outlook and Dry Powder

    The firm is optimistic about the improving transaction environment in 2026, driven by pent-up demand from private equity sponsors and narrowing bid-ask spreads. Ares holds substantial dry powder of $156 billion, positioning it to capitalize on investment opportunities. The firm expects continued strong demand from institutional and individual investors for private market allocations.

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