Ares Management Corporation (ARES) Q4 2025 Earnings Call Transcript

Ares Management Corporation (NYSE: ARES) Q4 2025 Earnings Call dated Feb. 05, 2026

Corporate Participants:

Greg Mason — Head of Public Markets Investor Relations

Michael Arougheti — Director, Co-Founder, Chief Executive Officer & President

Jarrod Phillips — Chief Financial Officer

Mitchell Goldstein — Partner, Co-Head

Analysts:

Craig Seigenthaler — Analyst

Alex Blowstein — Analyst

Bill Katz — Analyst

Ken Worthington — Analyst

Brennan Hawken — Analyst

Brian McKenna — Analyst

Brendan Butisch — Analyst

Mike Brown — Analyst

Michael Cypress — Analyst

Presentation:

operator

Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press star zero and a member of our team will be happy to help you. Sa. Sam. Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press star zero and a member of our team will be happy to help you. Please stand by. Your meeting is about to begin. Welcome to ares Management Corporation’s fourth quarter and year end 2025 earnings conference call. At this time all participants are in a listen only mode.

As a reminder, this conference call is being recorded on Thursday, February 5, 2026. I will now turn the call over to Greg Mason, Co Head of Public Markets Investor Relations for Ares Management.

Greg Mason — Head of Public Markets Investor Relations

Good morning and thank you for joining us today for our fourth quarter and year end 2025 conference call. I’m joined today by Michael Arighetti, our Chief Executive Officer and Jared Phillips, our Chief Financial Officer. We also have other executives with us today who will be available during qa. Before we begin, I want to remind you that comments made during this call contain forward looking statements and are subject to risks and uncertainties, including those identified in our risk factors in our SEC filings.

Our actual results could differ materially and we undertake no obligation to update any such forward looking statements. Please also note that past performance is not a guarantee of future results and nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in Ares or any Ares fund. During this call we will refer to. Certain non GAAP financial measures which should not be considered in isolation from or as a substitute for measures prepared in accordance with Generally Accepted Accounting principles. Please refer to our fourth quarter earnings. Presentation available in the Investor Resources section of our website for reconciliations of these non GAAP measures to the most directly comparable GAAP measures. Note that we plan to file our Form 10K later this month. This morning we announced that we declared a 20% year over year increase in our first quarter 2026 common dividend of $1.35 per share on the Company’s Class A and non voting common stock. The dividend will be paid on March 31, 2026 to shareholders of record on March 17. Jared will provide additional color on the drivers of this increase later in the call.

Now I’ll turn the call over to Mike who will start with some fourth quarter and year end business highlights and our outlook for 2026.

Michael Arougheti — Director, Co-Founder, Chief Executive Officer & President

Thank you Greg and good morning everybody. I hope you’re doing well. Our strong fourth quarter cemented another Record year for ares we reached several important milestones and made significant progress on our strategic initiatives by expanding our investment platform and geographic reach. We crossed $600 billion in AUM and we exceeded 100 billion in both our 2025 fundraising and investing activities. Our record $113 billion in total fundraising for the year was capped off by a record $36 billion in the fourth quarter.

It’s noteworthy that we surpassed our previous record by such a wide margin without our two largest private credit campaign funds in the market. This success, along with the closing of our GCP acquisition in March, resulted in aum growth of 29% over the previous year to reach over $622 billion. We also saw a notable increase in our investment activity in the second half of the year following a brief market pause around the April tariff announcements. Fourth quarter deployment was a record $46 billion and for the full year gross deployment totaled 146 billion, an increase of 37% over 2024.

These activities drove a 32% year over year increase in our FPAUM to $385 billion and new annual records in management fees, FRE and after tax realized income per share of Class A stock which all increased more than 20% year over year. And as Jared will discuss a little bit later, we continue to generate attractive performance across our major strategies. In our view, these results demonstrate that our continued investment in growth and diversification is taking hold and that we have significant momentum entering 2026. It was also a year of significant strategic enhancements with new products, expanded distribution efforts and gains in internal operating efficiencies.

The acquisition of GCP expanded our real estate and digital infrastructure offerings and vaulted our real estate business into a global top three owner and operator of industrial real estate. The scale expansion and diversification of our product suite also drove growth in our wealth management business to over $66 billion in AUM, up 69% year over year. We also made significant investments in new data Systems including over 25 AI projects across the firm focused on enhancing our investment decision process, optimizing sales efforts and increasing back office productivity, which all should ultimately assist margin growth and productivity in the years to come.

And in December we were both pleased and honored to be added to the S&P 500 index. As evidenced by our strong fund performance, our investment portfolios continue to exhibit solid fundamentals and our credit portfolios generated attractive return premium over the traded market equivalents within credit productivity. Improvements in portfolio companies are translating into solid revenue and EBITDA growth loan to value ratios are near historical lows in the 40% range, interest coverage continues to strengthen and quarter to quarter non accruing loan trends are generally flat while remaining well below historical average levels. As an example, in our US Direct lending strategy portfolio company EBITDA growth was in the low double digits for the last 12 months and net realized loss rates were essentially zero on a net basis, which is in line with our 20 year average of 1 basis point in annual losses.

Across real assets, valuations are steady to improving, rent growth is constructive, market transaction activity is returning and demands for digital infrastructure are driving both data center and energy infrastructure investment opportunities. Secondaries are benefiting from a strong economic backdrop and positive fundamentals across their underlying asset classes and within private equity. Organic portfolio company ebitda growth was 13% for the last 12 months in our latest VE Fund ACOS 6. Over the past several years, we’ve invested in scaling our global origination and investment capabilities across credit, real assets and secondaries. In 2025, our investments paid off as our investment activity accelerated and broadened across products and geographic regions, we saw real asset deployment more than Double from approximately $10 billion in 2024 to over 23 billion in 2025.

Deployment across all credit increased 29% and a rebound in the liquid markets along with stronger inflows drove a 46% increase in in our liquid credit deployment after a slower first half. Our US And European direct lending deployment also increased sharply year over year with investments into more than 240 different portfolio companies, and together these two strategies represented just over half of our deployment for the year. Looking ahead, we’re optimistic that the improving transaction environment from the second half of last year will segue into increased activity in 2026. We continue to see significant pent up demand, particularly as private equity sponsors seek liquidity solutions for mature portfolios.

This is supported by a large inventory of seasoned assets, open financial markets, an improving interest rate environment, greater business confidence and gradually narrowing bid ask spreads. Our private equity business is positioned to take advantage of a meaningful pipeline of new investments and and potential realizations. As these dynamics evolve, our origination capacity plus greater market transaction volumes should lead to further growth in our deployment in 2026, barring any unforeseen global market disruptions. And while we would normally expect lower seasonal volume in the first quarter, as January and February are typically slower, our aggregate investment pipeline across the firm measured in mid January increased from a quarter ago and now stands at a record level.

As we look to 2026 and beyond, we’re confident that our business is well positioned for future opportunities. We operate in vast, addressable and growing markets that span tens of trillions of dollars globally, and while we’re among the largest alternative managers, we continue to view our business as being in the early stages of global expansion. Visibility into our future growth is high, as we’ve already raised $100 billion of AUM that will earn fees once it’s invested Institutional and individual investor demand continues to be broad and persistent. Attractive private market returns and underweighted allocations continue to drive additional inflows from both institutional and individual investors.

Supporting this A November market survey highlighted that approximately 90% of institutional investors plan to add or maintain private credit allocations over the longer term. We also continue to see strong demand from individual investors. Despite over $300 billion in private market gross inflows from the wealth channel over the past three years, the average allocation to private markets for individual investors remains unchanged and at approximately 3 to 4%, primarily due to rising overall market values. As a result, we believe that there are meaningful opportunities for private market allocations in the wealth channel to move towards the much higher allocations that we see among institutional investors.

Turning to our fundraising results for the quarter and the year, our institutional channel led the way as it continues to account for the majority of our fundraising. Starting with the credit group, we raised over $18 billion in the fourth quarter across all our channels, with U.S. and European direct lending strategies accounting for over $12 billion with an opportunistic credit. Our third fund raised an additional $1.2 billion in the fourth quarter, bringing total commitments to just under $7 billion at year end. We anticipate a final close for the fund at the end of the first quarter at a level over the $7.1 billion that we raised in the previous vintage.

Our liquid credit Strategy raised over $3 billion in equity commitments in Q4 through several sizable new SMA mandates. In January, we launched our third closed end commingled Alternative Credit fund. Given the strong initial demand, we anticipate completing the full fundraise by the end of the summer, if not sooner at a similar level to the previous vintage of 6.6 billion. As a reminder, before launching the new fund, investors in the second vintage were offered the election to extend the investment period of the fund for two additional years. Approximately half of the LP base, representing $3.5 billion of commitments, in fact elected to extend and with the previous fund extension, if the fundraise meets the previous vintage’s size, Aries will have over $10 billion of incremental investment capacity in the strategy and manage four of the five largest institutional ABF funds.

For the full year, we raised more than $65 billion across our six strategies within the credit group and as these results demonstrate, demand for our credit products remain robust going forward. We expect to launch our fourth US Senior Direct Lending Fund later this year and our seventh European Direct Lending Fund in early 2027, representing our two largest closed end commingled funds. The timing and sizing will depend on deployment pace and other fundraising activities, but for our US Fund we anticipate a potential first close in the fourth quarter. The fourth quarter capped a very strong year for our real estate group where we raised more than $16 billion for the year, including over $7 billion in the fourth quarter.

Highlights in the quarter include 4 billion raised in our real estate debt strategy and an additional $1.3 billion in our 11th US Value Add Fund, bringing total commitments to $2.3 billion. We’re already above our $2 billion target and we anticipate hitting the fund’s hard cap of 3.1 billion in the first half of 2026. Going forward, we have a strong lineup with our fifth Japan Industrial Development Fund, the return of our fifth US opportunistic fund, our second self storage fund and new European Real Estate products along with additional flows from our perpetual institutional and wealth products in infrastructure.

During the fourth quarter we raised approximately $3 billion across our sixth infrastructure debt fund, certain SMAs and our open End Core Infrastructure Fund. This concluded a strong year where we raised more than 7 billion and we expect 2026 will be even better. Notably inclusive of flow since year end, our Open End Core Infrastructure Fund now stands at over $2.5 billion of assets following closing of our inaugural $2.4 billion data center fundraise in 2025. We expect to raise significant additional capital around our Digital Infrastructure equity strategy in 2026 which has distinctive advantages due our vertically integrated model and our significant global pipeline of seed assets which include cloud and AI Data center projects already underway, our Digital infrastructure team and pipeline continue to grow as we source opportunities to execute through ADA infrastructure.

Our in house Data Center Development and Operations team. Although data center exposure is a relatively small component of our current AUM and at just under 2%, we expect digital infrastructure to be a key contributor to our business in 2026 and beyond. In our Secondaries group, we held a final close for our inaugural Credit Secondaries fund raising nearly $1 billion in the fourth quarter, bringing total equity commitments to 4 billion. This is a remarkable achievement for a first time fund, the largest inaugural institutional fundraise for Aries, including anticipated leverage in related vehicles. Total investment capacity for our credit secondary strategy now exceeds $7 billion.

We believe that our team is well positioned as a first mover in the burgeoning credit secondaries market with substantial capital and differentiated knowledge and experience in the asset class. Our PE secondaries team raised over 1.8 billion in equity commitments across our new GP LED secondaries products and our wealth product and in December we launched our 10th Real Estate Secondaries Fund and anticipate new commitments throughout 2026. For the full year our Secondaries group was a standout performer with $12.9 billion raised and an increase in AUM of 45%. We ended the year with our secondaries business having nearly doubled in size since we acquired landmark in mid-2021.

In the wealth channel, 2025 was a transformational year with equity flows into our semi liquid wealth products totaling $16 billion and net flows of $14 billion which drove our AUM and our semi liquid wealth products to $66 billion at year end. Third party sources indicate that we gained market share for the year including within the direct lending and real estate sectors which positions us as within the top tier of alternative managers in the wealth sector. The fourth quarter was our second best quarter ever with $4.1 billion raised across our eight products with positive net inflows across all eight semi liquid solutions totaling $3 billion.

Performance across our funds continues to be a meaningful differentiator with strong performance across direct lending, private equity secondaries and our real estate products. As Jared will highlight further, we’ve specifically designed our wealth products to combine the best of what Ares offers with the evolving client needs for durable income, diversified equity growth and tax advantaged real assets exposure. The result is that we’re seeing strong demand across each of our eight semi liquid strategies and we now have AUM exceeding $2 billion in seven of our eight strategies. Our near term focus is to complement our existing flagship products by extending these strategies with new distribution channels, geographic regions and expanding products with our existing 80 distribution partner platforms.

In the retirement sector, we introduced our US direct lending credit product to the 401k market last month and we expect to add more plan sponsors in the future as we look to 2026. Total equity inflows in January were approximately 1.2 billion and we expect to raise a similar amount in February. Based on industry dynamics along with our product breadth and differentiation, performance leadership and platform scale, we expect our equity inflows for this year to meet or exceed our prior year levels. Our third distribution channel in insurance is also expanding through our dedicated Insurance Solutions group.

Our insurance AUM growth accelerated with strong flows from a SBITA and third party insurance clients. At Aspeda, sales volumes totaled 8.8 billion for the year, a 39% increase over 2024 and we continue to see interest from third party insurance companies as total insurance related AUM increased 20% year over year to $86 billion. Going forward, we expect to further broaden our private investment grade origination capabilities. We have an excellent foundation with a private investment grade business embedded in within our alternative credit strategy which manages approximately 25 billion across private IG solutions. Notably, our private IG strategy within ABF generated a return premium of approximately 200 basis points over IG corporate bonds last year.

We plan to expand our private IG capabilities beyond asset backed, investing into corporate direct lending infrastructure debt and real estate debt through our expansive direct origination platform. We’d expect to raise more third party insurance capital around these expansion efforts across our credit strategies over time. When we include the significant product lineup that we have on the institutional side, including the launch of two of our largest credit funds along with the momentum of our wealth and insurance platforms, we expect the strength in our fundraising to continue into 2026. At this point, we expect our total fundraising for 2026 to be as good or better than our record year in 2025.

And now I’m going to turn the call over to Jared for his comments on our financial results and outlook. Jared.

Jarrod Phillips — Chief Financial Officer

Thanks Mike. We continue to build on our strong momentum in the year end, extending the financial records we set in prior years across management fees, frequency, realized income and after tax RI per share, each of which exhibited strong year over year growth. We were also able to generate a meaningful year over year increase in fre margins in the fourth quarter and a modest increase for the full year. Even with the margin headwinds from the GCP acquisition, we enter 2026 with a high level of optimism about the continued success and growth of our business. We’re seeing improved conditions for future deployment across a broader range of investment strategies than we have in several years and we’re well prepared to invest with substantial dry powder of $156 billion.

This year we’re raising our largest funds in alternative credit and US Direct lending and anticipate strong demand from institutional investors. The GCP acquisition integration is going well and in 2026 we expect to see more expense savings and revenue enhancements and finally 2026 is expected to be our most significant year yet for the realization of some of our European style performance fees which have been accruing for a number of years and we have a meaningful opportunity for significant growth in our FRPR due to the growth in underlying fee eligible AUM and the rebound in the real estate market which we expect to continue.

Turning to our quarterly results, management fees were a record $994 million in the fourth quarter and totaled $3.7 billion for the full year. Management fees grew 27% and 25% on a quarterly and full year basis versus comparable periods driven by strong growth in our FPAUM fourth quarter fee related performance revenues totaled $171 million and full year FRPR increased 30% versus the prior period as we saw increased contributions from secondary products as well as a contribution from our diversified non traded REIT for the first time since 2022. As I mentioned, there is the potential for significant growth in FRPR from both of our non traded REITs assuming a continued recovery in the real estate market, the diversified REIT has now surpassed its high water mark and our industrial non traded REIT is within 2.5%.

To put this in perspective, if our non traded REITs had not faced the high water mark in 2025, the two REITs would have recognized $79 million in gross FRPR for the year based on their respective returns. Fee related earnings for the full year increased 30% over the prior period and accelerated to 33% year over year growth in the fourth quarter to a record $528 million full year FRE margins came in at 41.7% ahead of 2024’s FRE margin of 41.5% which was in line with our guidance from last quarter’s call. Heading into 2026, we have good visibility into improving margin contributions from continuing back office efficiencies from the GCP integration, the data center business, flipping from a negative FRE business to a positive FRE contributor and our expectations for continued strong growth in AUM and fee paying AUM.

As a result, we expect the 2026 FRE margin to come in at the high end of our annual target range of 0 to 150 basis points. Our realization activity increased in the fourth quarter with net realized performance income totaling $102 million for the first quarter. We expect to realize $52 million this upcoming week and have visibility of approximately 50 million of additional net realized performance Inc. European style funds. Therefore, we’re on track with the guidance we gave on our Q3. Call about generating $200 million in realized net performance income over Q4 and Q1 of 2026.

For the full year of 2026, we continue to expect our European style net realized performance income will total approximately $350 million, which would more than double 2025 levels. For the full year we realized a record $169 million in net performance income. Even with the record realizations during the year, our net accrued performance income on an unconsolidated basis rose by approximately $102 million or 10% to $1.1 billion at year end with approximately $984 million or 89% in European style funds. As Mike mentioned earlier, the private equity transaction backdrop is improving so we believe there’s the potential for us to realize a modest portion of our 123 million net accrued carry balance in our American style funds, most likely in the second half of 2026.

Realized income for the fourth quarter totaled a record 589 million and for the full year it exceeded $1.8 billion, a 26% increase from 2024. For the full year 2025, our effective tax rate on our realized income was 10.3% and rose to 13.5% in the fourth quarter. Our tax rate was higher in the fourth quarter due to a greater amount of net realized performance income which generally has less deductions and therefore results in a higher effective rate. For 2026, we anticipate an effective tax rate on our realized income to be in the range of 11 to 15%.

As you can see from the earnings presentation, our funds and assorted composites continue to perform very well. For the full year. We experienced double digit returns in our US Direct Lending, Alternative Credit, Opportunistic Credit and APAC Credit Strategies. As Mike stated, credit quality underlying our US And European direct lending portfolios remains strong and stable. In our US Direct lending portfolios, our companies generated year over year EBITDA growth of 10% and interest coverage improved to 2.2 times. Our non traded BDC had zero nonaccruals across its nearly 900 portfolio companies with stable dividends throughout the year and a 9.3% net return.

As of November 2025, our non traded BDC was the number one performer measured by comparing the one year return of Class I shares reported in SEC filings among the five largest non traded BDC peers as identified by Stanger’s AUM Data. Our public BDC Ares Capital also reported strong credit metrics with non accruing loan ratio of 1.8% at cost and 1.2% at fair value which was unchanged from the level a year ago and this ratio remains well below its long term average and the industry group average. Ares Capital generated a 10.3% fund level return on its NAV for 2025.

Ares Capital has generated an average annual total stock return over its 21 year history of 12.4% which is double the average annual return of the broadly syndicated Bank Loan Index and nearly double the High Yield Index over that same period. In real estate, the recovery of many asset class values is clearly underway and we’re seeing strong performance across our funds. Notably, our diversified non traded REIT generated an 11.6% total net return in 2025. As of November 2025, our diversified non traded REIT was also the number one performer among our five largest non traded REIT peers as measured by the one year return of Class I shares reported in SEC filings and Stanger’s AUM data.

And our industrial non traded REIT remains the number one performing non traded REIT over the past five years using the same metrics in peer set. In infrastructure, our open ended Core infrastructure fund generated 9.9% net returns for the year. In private equity secondaries, our semi liquid wealth vehicle generated a 13.4% net return for the year. And within private equity, our most Recent Vintage Fund ACOF 6 remains a top quartile fund in its vintage and has generated a gross IRR since inception of over 21% with a net return in 2025 of 16%. Finally, as Greg stated earlier, we’ve elected to increase our first quarter dividend up to $1.35, up 20% from last year.

This increase reflects our continued confidence in hitting our target of 20% plus for realized income in 2026 which is supported by strong growth fundamentals in our management fees and fee related earnings and enhanced by accelerated growth in our net realized performance income in our European style funds. I’ll now turn the call back over to Mike for his concluding remark.

Michael Arougheti — Director, Co-Founder, Chief Executive Officer & President

Thanks Jared. Before wrapping up our prepared comments, I would love to address questions that we’re getting about our software exposure given the recent market volatility across our firm. We have a highly diversified portfolio of investments in software companies which are nearly all senior secured loans and represent about 6% of our total AUM and less than 9% of what we consider private credit AUM inclusive of real asset lending but excluding liquid credit. Importantly, not all software exposure is the same since private equity is in the first loss position and most of our senior loans are compounding cash returns in the 10% range and are short duration, typically three to four years of remaining maturity.

The traded equity and debt market indices and software reinforce this point, with the Public Equity Software index down roughly 20% year to date versus only 2.3% for the software index in the broadly syndicated loan market. Our software portfolio is highly diversified across many subsectors with a very small percentage of the portfolio that we deem to have high risk of AI disruption. We lend it lower loans to value on software which are in the high 30% range compared to mid-40s LTV on the rest of the portfolio. Our software portfolio companies generate significant cash flow with ebitda margins over 40%, average EBITDA over $350 million and a growth rate that is faster than the overall credit portfolio over the past year.

We don’t focus on ARR loans which represent less than 1% of our global direct lending portfolio and non accruals in software are close to zero. As a balance sheet light manager, we have negligible look through exposure to software on our balance sheet and any potential credit losses would also have a limited impact on management fees and earnings. In fact, anytime there’s a material disruption in any industry, there’s always two sides of the coin. Our opportunistic credit and secondaries business should see more investment opportunities which provides a natural hedge and an acceleration in AI adoption should actually be a meaningful contributor to management fee and earnings growth overall for Ares as our digital infrastructure business would generate meaningful AUM management fees and fre growth.

As a result, we see no change to our earnings growth outlook from AI risks in our existing portfolio and our business can naturally adapt to the risks and opportunities as they’re presented. So in our view, we enter 2026 in a position of strength with strong underlying performance across the portfolio, an improving capital markets and MA backdrop, a large and expanding footprint of origination capabilities across asset classes and geographies, and a significant amount of dry powder to take advantage of the many investment opportunities that we’re evaluating in the market. As Jared mentioned, we have a number of earnings tailwinds including our significant AUM not yet paying fees, our prospects for margin improvement, revenue and expense synergies from the GCP integration, and our potential growth in performance income and frpr.

We believe our business is well prepared to navigate any challenges arising in the markets including AI software related risks, and while we have seen some credit dispersion among the peer group, we’re seeing strong fundamentals across our credit portfolios. As I stated earlier, the fundamentals are actually improving with loan to value ratios and non accruals near historic lows, leverage multiples declining, interest coverage multiples increasing and growth intact. We have large and experienced teams across each of our businesses and within our credit group we believe that we possess the largest portfolio monitoring and restructuring teams in the industry.

As you heard me emphasize before, our balance sheet light management fee centric business model insulates the impact from credit losses to our earnings and our ample dry powder allows us to invest opportunistically during periods of market dislocation and grow at a time when many capital markets participants are forced to pull back. I’m so proud and grateful for the hard work and dedication of our employees around the globe, delivering yet another year of record results. And I’m also deeply appreciative of our investors continuing support for our company and with that Operator, could you please open the line for questions?

Questions and Answers:

Michael Arougheti

Certainly at this time, if you would like to ask a question, please press Star then one on your touch tone phone.

If you would like to withdraw your question, please press Star then two. Please limit yourself to one question. Please wait a minute while we assemble the question queue. Thank you. Our first question comes from Craig Seigenthaler with Bank of America. Please go ahead. Your line is open.

Craig Seigenthaler

Good morning, Mike, Jared. Hope everyone’s doing well. My morning. Good morning. I wanted to start where you left off on the software disruption theme and really appreciate the additional commentary at the end of the call. But you know, if you look over the last like five years or so, software was a large source of credit origination for the industry and we’ve seen a transition to data centers and power.

Really the picks and shovels around AI, which is, which is benefiting other parts of your business. But as you take a step back, how do you see your overall deployment effort impacting from a from a lack of potential business from the software industry in the future, but the shift to areas like data centers and power which fuel the growth of AI?

Michael Arougheti

Yeah, thanks Greg. I appreciate the question and again I hopefully the prepared remarks gave some color, but I also think my partner Cort did a great job on the ARCC call yesterday just articulating the approach that we have to software investing and frankly investing in general.

You know, obviously we’ve been doing this for 30 years and one would expect, but maybe not that. The first question one would ask when investing in software is do I have technology or obsolescence risk? So it would be pretty unlikely that someone who is investing in software has not been underwriting with a primary view as to whether or not there’s a risk of disruption. So again, we feel very, very confident that we have our arms around our existing exposures. We feel very confident that the types of software businesses that we’ve invested in have meaningful characteristics that will protect them and if not create opportunity.

Companies that are part of foundational infrastructure, they sit at the center of companies tech stacks. They manage complex workflows, they benefit from ownership and collection of proprietary data that they’ve built over many years with diverse customer bases. They operate in highly regulated industries like healthcare and financial services. So again, it is interesting to see how the markets are thinking about software companies as all being equal and not really understanding the difference between companies that could get disrupted by AI in places like digital content creation or data analytics and visualization versus like real entrenched enterprise systems.

And so we’ll just keep, we’ll just keep talking about the exposures and hope people will get it in terms of the origination. I think the easier way to think about it, Craig, is, you know, over a 30 year period, new markets open and close and the best way to think about what we do is we’re just trying to capture our broad slice of GDP and economic growth around the world, obviously maintaining a high degree of industry and company selectivity. So, you know, as software and healthcare continued to grow into meaningful contributors to gdp, not surprisingly, we and others followed with the same level of underwriting discipline that we always have had.

And now that we’re moving into, you know, a super cycle on infrastructure and energy, we’re following there. So 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. So yeah, we’re feeling pretty good about it.

operator

Thank you. We’ll now move on to Alex Blowstein with Goldman Sachs. Your line is now open.

Alex Blowstein

Hi, good morning. Thank you for the question as well. I was hoping to piggyback on your comments, Mike, around what you’re seeing in the wealth channel real time.

Obviously not the first time. We’re going through volatile periods. We know the retail channel tends to pull back a little bit. I think you’ve said that what you’ve seen so far resembles your January flows. I think you said $1.2 billion across the suite of products. Can you unpack that a little more between direct lending products versus other wealth. Vehicles that you guys have sort of. What you’re seeing for February 1st and I guess more importantly just the sentiment on the ground from distributors and gatekeepers and how they view direct lending wealth products in the current backdrop. Thanks.

Michael Arougheti

Sure. I’ll try to give you a deep answer on that. But before I do, Alex, I just want to remind folks back to how we’ve tried to position our fund families and capital base. Right. We were frankly a little bit slow to grow and deepen our penetration in wealth because it’s a little bit more pro cyclical and frankly harder to manage flows against the deployment opportunity.

And so it was critically important to us that we looked at wealth, yes, as an opportunity to open up access to retail investors who previously couldn’t get to this product. But from a fund management standpoint, it was critical that we felt that we had a real deep base of institutional drawdown capital in the form of commingled funds and SMAs that sat alongside these products to make sure that we could navigate the flows. And I think where people have tripped up is they’ve been frankly a little too dependent and over indexed to the wealth flows and they’ve been pro cyclical when the money’s coming in and either unable to defend or unable to capture the highest quality vintages.

So we’ve been very, very intentional and measured about how we’re thinking about the product set, how we’re thinking about the pace of growth in wealth relative to our institutional client flows, and making sure that if we find ourselves in a period where there are headwinds on flows in wealth, that it doesn’t do anything to diminish our ability to take advantage of the market. And that is actually where we sit here today. We had record flows last year, as we mentioned, about $16.5 billion of equity and close to $25 billion of total flows into wealth. That was a 61% increase year over year.

We have seen some cyclicality in how the wealth channel is looking at different asset classes. Obviously we saw a big ramp up in real estate exposures three or four and then we saw some headwinds there. Some of our peers obviously saw meaningful net outflows. If you look at our experience in real estate, we actually enjoyed net inflows even through the period of dislocation in real estate. And now with some of this, in my opinion, overblown noise around private credit, you are seeing some outflows. But on a net basis the inflows are still quite strong. And what we’re hearing on the ground from advisors and you could see this just in the investor count, looking to take advantage of the liquidity opportunity.

About 95% plus of all the investors are not looking for liquidity. So typically what’s driving these redemption queues are small handful of investors that then have to continue to get back in the queue to the extent that they don’t get the liquidity they need. So you do tend to see overinflated numbers coming through the redemption queue as people are trying to get to the front of the line. In January we saw very strong flows, as you said, 1.2 billion. We’re seeing similar numbers coming in line through February. The demand is broad based. We’re seeing good flows in the private credit product, good flows in the core infrastructure product, you know, and that’s been a big bright spot for us and ACI as an example, we saw 750 million of inflows I think in January and February versus about 200 last year.

So good momentum I think from the Ares perspective and it’s important. That’s why I started the answer where I did, Alex, that if we do see a modest slowdown, which we’re not calling for, but if we do, it’s not going to do anything to impact our ability to continue to drive FPAUM and FRE through the deployment and the other products that we manage.

Alex Blowstein

Perfect. Thanks for that.

Alex Blowstein

Thank you. We’ll now move on to Bill Katz with TD Cowan. Your line is open.

Bill Katz

Great, thank you very much. So I appreciate all the comments and also the work on the ARCC side which we listened into as well.

So maybe a big picture question for you, Mike, as you think ahead, last couple of years have been defined by private credit and the retail side. You talked about sort of the real estate cycle prior to that, when you look at the data, it does seem like that’s starting to slow. I was curious your thoughts on two areas that we think could be a really big opportunity just given the shifting macro backdrop. Real assets, specifically real estate, and then the secondary platform is just another form of liquidity. And then I think you mentioned that your flagship credit vehicles might be back in the market.

I just missed the timelines of that. Could you sort of refresh what you said? I apologize. Busy morning. And how big could those be relative to the prior sizes?

Michael Arougheti

Yes. So when we think about our large credit funds, our opportunistic credit fund, our third one we said has been having rolling closings, we expect to have a final close on that fund early this year and it will be at or above the prior vintage of 7.1 billion. We also mentioned in the prepared remarks, Bill, that we have launched the third vintage of our quote unquote flagship ABF fund, Pathfinder.

We expect that that will likely be wrapped up by the end of the summer, if not sooner, has really good momentum. And again the expectation there would be that we would have a closing on that fund at or above the prior vintage, which was 6.6 billion. And that’s on top of having extended duration on about $3.5 billion of investor capital from the prior fund. So net $10 billion effective pool of capital increase there. We are likely to be bringing our fourth US Direct Lending Fund, flagship, back to the market this year and expect that we could have a close as early as the fourth quarter of this year.

And then we will be bringing our seventh European Direct Lending Fund into the market and would likely have a close probably early in 2027. So all of those are starting to work their way through. I think in terms of you highlighted real assets and secondaries and I appreciate you doing that because I think one of the things that we’ve been very focused on here as we build our capabilities and capacity over the last 10 years has been to diversify by asset class and geography and try to identify where there’s going to be breakout growth and where we can accumulate scale and talent and capital to go after it.

Secondaries being one place where we mentioned on the prepared remarks, you know, we acquired Landmark four and a half years ago with a view that we were going to see transformational changes in secondaries that were going to be driven by a move to GP led, continued growth in primary market exposures, diversification away from just PE into places like real assets and credit. And as we said, we doubled the AUM and profitability of that, that business here over the last four and a half years. And the momentum continues real estate as well. Obviously you’ve seen us making meaningful investments in vertically integrating and developing.

The capability set there. And real estate is in a very interesting cyclical place. Having seen real estate values draw down 18 to 20%. And now you have markets that have been under supplied where we saw construction down over the last couple of years, a constructive rate backdrop and some secular tailwinds now in certain parts of the market like logistics that have us pretty excited about the deployment and return opportunity in the real estate complex. So I want to emphasize, which I think was the point of your question, Bill, that there may be a misperception that we’re kind of over reliant on private credit deployment and fundraising and while that obviously continues to be a big part of the business, we have 19 to 20 global credit strategies that are driving deployment.

And when one is turned on, sometimes others are turned off. But because of the diversity of strategy, I think you’re going to see continued deployment at, you know, pretty much across the platform. But I would expect to see continued, you know, breakout growth in real estate and secondaries or real assets and secondaries for sure.

operator

Thank you. We’ll now move on to Ken Worthington with JP Morgan. Your line is now open.

Ken Worthington

Hi, good morning. Thanks for taking the question. Wanted to flesh out the comments in your prepared remarks on ABF and really the outlook for fundraising and deployment as we think about 2026.

So it seems like the episodic or periodic credit quality fears that we’re seeing in direct lending back half of 25 and early 26 might be focusing more demand on alt credit and ABF. I’ll break down in two parts. You mentioned the 25 billion on the rated side. Would you expect interest there to be improving? And as we think about Pathfinder and Pathfinder Core, how is the deployment opportunities on that side of the business?

Michael Arougheti

Sure. Thanks Ken. Again, I just want to table set here. When we think about the ABF business there’s a huge addressable tam globally but people are articulating the opportunity in different ways because there is a high grade rated ABF market and then there is a sub investment grade and non rated that work hand in hand but require in my opinion different skill sets, different forms of capital, different networks, et cetera.

So where we have been laying groundwork building capability and capacity since we acquired indicus 15 years ago, was to really focus on being the largest, broadest investor on the non rated side because we felt like that’s where we were going to be able to generate the highest return premia and generate the most alpha in the market. And with that capability set now very well entrenched here, we’ve been moving up the capital stack into the high grade of the market to the point now when you look at the business, it’s roughly 50, 50 kind of bottom of the stack, top of the stack.

And I think that positions us well to meet the needs of our institutional clients on the non rated side with the types of returns that you see we can generate and then also to continue to feed the demand for the rated product into our affiliated insurer Osbita and our third party insurance clients. Maybe back to the credit quality point and I want to hit it again because there’s so many Kind of false narratives out there. When you look at where we have positioned our ABF book historically. Number one, we have zero exposure to E commerce aggregators.

Number two, we have de minimis exposure to subprime consumer. It’s less than 1% of what we do. We have de minimis exposure to auto, it’s about 1% and it’s all prime. So back to kind of underwriting standards. As these markets are growing, we have seen people moving into segments of the market, you know, trade finance, where we just never tread. There are probably 25 subsectors that we cover within the broad waterfront of ABF and there’s plenty of attractive deployment opportunity to go around. We’re spending a healthy amount of time still around digital infrastructure, partnering with our bank and insurance clients, around all the various forms of fund finance.

And as we said in the prepared remarks, the growth in deployment on both the rated and non rated side has been pretty significant and I’d expect that to continue. I think you will continue to see consolidation play out in this market similar to the ways that you saw it play out in kind of the core corporate direct lending market. Because the benefits of scale are actually big drivers of return here. A lot of These deals are $1 billion plus transactions. They require a significant capital base in order to drive diversification and they require a pretty unique set of skills to understand how to underwrite the underlying.

So it has been one of our fastest growing businesses here. I think it will continue to be one of our fastest growing businesses here. And I think the deployment’s going to probably still look 5050 when all is said and done. But remember, a dollar of deployment on the Pathfinder side of the house is worth significantly more profit dollars to Aries than a dollar of deployment on the rated side. And we think that’s important for people to understand.

Ken Worthington

Great. Thank you very much.

operator

Thank you. We’ll move on now to Brennan Hawken with bmo. Please go ahead.

Your line is open.

Brennan Hawken

Good morning. Thanks for taking my question. I had one sort of ticky tack question and then one sort of longer, longer term perspective. So on the ticky tax side, the catch up fees in secondaries, it looked like the full year was less than what we’ve seen year to date. So was there actually negative catch up fees in the fourth quarter or was just the prior quarters revised down? And then appreciate that the wealth management channel is a smaller source of fundraising for you, but what does your wealth management AUM look like across like major geographic regions? Particularly interested in the portion of AUM from Asian investors.

Thanks.

Jarrod Phillips

Hey Brandon, it’s Jared. Thanks for the question. I’ll take that first part there, the ticky tack one. It’s just because the Secondaries fund, which is our third infrastructure secondaries fund, had a close in the third quarter that had the first three quarters of it. So as you get to the fourth quarter there’s amounts that were in that catch up in the third quarter that pertain to this year. So when you look at it for a full year you have the full year run rate. So that’s why the number operates in that manner is because when you have a full year it’s already catching all of those.

There’s no technical catch up but there is for a particular quarter within the year. So that’s the difference that you’re seeing there.

Michael Arougheti

I think with regard to wealth it’s a good question because we have seen in some of the prior periods of outflow that you had Asian investors who have been buying the semi liquid product on leverage begin to look for liquidity. At least we saw that on the real estate side. I don’t know exactly the in force book in Asia Pacific, but maybe just to frame it. One of the things that has differentiated us on the wealth side is the way that we built out our European and rest of world distribution over the last two years.

A little over 30% of our capital gathered has been outside of the US which we think is quite unique. I think it’s been challenging for some of our peers to get that type of penetration and growth. When I look at where that 30% rest of world is coming from, it is mostly non APAC and we’re seeing probably most of our APAC flows in the Australian New Zealand Market vs Rest of Developed Asia. We’ve had some early successes in the Japanese market that I would expect to continue. So I just making a based on what I know the inflows have been, I would venture to say it’s a, you know, single digit type exposure to the APAC region and pretty diversified by geography.

Brennan Hawken

Great. Thanks for taking my questions.

operator

Thank you. We’ll move on to Brian McKenna with Citizens. Your line is now open.

Brian McKenna

Great, thanks. So on the RCC call yesterday the team talked about the acceleration in activity and deal flow in the non sponsored channel. What is the incremental opportunity in this channel today from a deployment perspective? Any specifics you can share on the size of the pipeline today versus a year ago and then I suspect spreads have been more resilient in this part of the market. So how should we think about spreads here versus sponsor backed deals and then how that is impacting overall spreads and all in yields for your direct lending strategies.

Michael Arougheti

Yeah, Mitch is here who runs our credit group. I’ll let him take that one. And I can provide any additional color.

Mitchell Goldstein

Yeah, it’s a good question. As we’ve talked about over the last couple years in our US Direct lending and now increasingly in our European direct lending business, we’ve invested heavily in non sponsored origination. A number of industries, health care, consumer financial services, infrastructure, debt, et cetera, et cetera. There are about six or seven industries and historically it’s been probably, you know, 10% of our originations and every time we think it’s growing, our sponsor business continues to outpace it, we continue to invest it, we’re going to be adding people, but you should expect 10% ongoing and then hopefully in the next three to five years we’re hoping to get it to 15 plus percent of our gross originations in the United States.

In terms of the spread, I think we’ve always had a historic view here that you should generally get paid more for the non sponsored business just because it comes with a different set of risks in terms of counterparty liquidity and ability to support growth and ultimately institutionalize the exit. And generally speaking I think that that is true. There are going to be certain pockets of the non sponsored business around places like sports media and entertainment that may buck that historical view. But I’d say generally we would agree with you that we’re going to be generating modestly higher spreads and when we’re down the capital stack on junior debt and equity, that there’s an expectation of higher return just given that you’re not facing off with a well capitalized institutional sponsor.

Michael Arougheti

Yeah, and it’s not just spreads. You know, typically our non sponsored businesses, a family office, a small public company, an entrepreneur, they tend to be less aggressive in leverage. So not only are you getting more spread spreads, but it is that lower leverage that is less risk and your documentation is a lot better. So there are a lot of different reasons why we like the non sponsored business. Fortunately or unfortunately, given our presence in the industry, our sponsored business continues to grow at pace and adds a lot of assets to our book globally.

Brian McKenna

Very helpful.

Thank you guys. Thanks.

operator

Thank you. We’ll move on to Brendan Butisch with Barclays. Your line is now open.

Brendan Butisch

Hi, good morning, this is Ben from Barclays. Thanks for taking the question. Maybe a quick two parter on performance fees. Just first, wondering if you could give any color on FRPR for The year. I know you talked about a potential ramp coming from the REITs. I’m just curious though. I know there’s a lot of open ended credit vehicles that crystallize periodically. So anything you can share to help us think about that then in terms of your net accrued performance income, it looks like the private equity business saw a bit of a decline just sequentially curious if there’s anything there to call out.

It sounds like you’re optimistic that if markets are constructive you could see more American style realizations in the back half of the year. So just wondering if there’s anything else going on there to be aware of. Thank you.

Michael Arougheti

Jared, you want to take that?

Jarrod Phillips

Yeah, I got it. Good to hear from you Ben. On the, on the first part of your question on FRPR and I tried to walk through my prepared remarks there. Always tough to say with what inflows will be and then what returns will be, what the contribution could be from the REITs. But as I walked through I kind of gave an example of how it would have looked this year. And you can certainly see within those filings that happen on a quarterly basis. While we don’t record balances at the management company level, you can see within their filings on a quarterly basis what amounts are ticking towards accrual.

So we’re obviously hopeful to see those return as we’ve crossed the high water mark in areit and AI REIT is just within spitting distance. The credit side of that equation, as you asked, is really driven by two things. It’s the incentive generating pool which continues to increase as we raise new SMAs and it’s what credit spreads do for any given period. You did note that we do have some that crystallize on rolling three years. We did have that a year ago, so we’re in the second year of that roll. I would expect we’re probably another year out from that.

So the big drivers this year credit will be that incentive generating AUM and credit spreads during the year as well as what interest rates do. I think we’re really well positioned there. So you’ll continue to see FRPR increasing over that time period and then certainly pmf, which is our non traded secondaries fund that continues to grow and as it grows it generates more FRPR for the platform. So we’re really seeing it from multiple fronts this year. Not just credit, not just real estate, but really across the board and across the platform. The AUM that we have in credit for example, that grew 16% just from the SMA raises and other Types of raises.

Jarrod Phillips

On the private equity side, we have a liquid name in that portfolio that bounces around a little bit with some volatility. So you see that move in and out of the accrued carry, period over period. So it’s really driven by that fair value and some of the moves. And again, in general, the portfolio is relatively in line. I walked through how ACoff6 is performing and that’s beginning to become the lion’s share of that carry, with the older vintages monetizing a little bit as we’ve gone through it. So I think we’re really well positioned there, but there’s always going to be a little bit of noise because of the publicly traded nature of one of those holdings.

Brendan Butisch

All right, thank you, Jared.

Mike Brown

Thank you. We’ll move on now to Mike Brown with ubs. Your line is now open.

Mike Brown

Great. Thanks for taking my question. Just wanted to ask on private equity. So, Mike, in a recent interview with the ft, the idea of getting bigger in private equity came up as part of that interview and it sounds like an acquisition was something that could be considered to get scale there. So can you just unpack that comment a little bit and just spend a minute talking about how you would think about the kind of strategic benefits of being bigger in pe, what that could mean to the platform, and then how do you assess the right fit for Aries in terms of style and size, either AUM or relative to Ares.

Total 600 billion of AUM. Thank you.

Michael Arougheti

Sure appreciate the question. And as was reported in that article, no deal is imminent. And you know, it was really a conversation just about our history of inorganic growth and how we think about it. And this is really no different. You know, we have a very simple framework which is we want to see cultural accretion and cultural fit. We want to see strategic accretion where we can make the acquiree stronger, bigger, faster, and they bring something to the table that we don’t have. And then obviously we want to see meaningful financial accretion, which I think we’ve demonstrated handily in places like wealth and real estate and secondaries, et cetera.

The argument for getting bigger in PE is number one, given the size of our global business and how deep we are with the largest allocators, it’s an asset class that people want to be invested in. Obviously we’ve been in the business for 20 plus years with our own strong track record, but we’re not keeping up the growth pace that we are with the rest of the business. And so we feel like we can continue to serve the demands of our client base without over indexing to private equity. Two, I do think it’s important when we talk about capability that you continue to nurture the skill set that comes with equity ownership and value creation within equity portfolios.

And the larger that we get there, the deeper that capability set becomes and the more we can leverage that capability set across the platform. And so, to the extent that we were bigger in private equity, we would be able to obviously begin to add value in other parts of the business, like direct lending or our minority stakes business, et cetera, et cetera. Three, comes with a different set of management and board relationships and operating advisors that we think could be additive to other parts of the business. Fifth, it is a very relevant business for our counterparties on the street in terms of generating leverage, finance business and advisory business.

Obviously, one of the things that comes with our diversification of scale is that we get to leverage our relationships with the street for deal flow and execution. And if we were bigger in private equity, that would give us another arrow in the quiver to lean into those relationships in a differentiated way. And then lastly, and maybe most importantly is as the world continues to move and consolidate, I think that you are going to see the bigger players in private equity get bigger. And I think as the world of defined contribution and wealth open up to increase private equity exposure, the only way, in my opinion, that you can really deliver direct exposure away from secondaries if you have a large enough platform to generate a diverse enough book to actually deliver the right outcome to the end client.

And so as we’re beginning to see the structural changes happening around 401k and wealth, there’s a really strong argument that accumulating scale to drive diversity to sit next to our large secondaries business will create a really differentiated product in terms of financial accretion. I think this is important. Private equity is not a growth business. My colleagues here have heard me say that that is neither good nor bad. It’s just you’re not supposed to be driving growth in that business the way that you are in other parts of the firm around real assets and credit. When it does grow, it grows episodically, but it’s very difficult to get it to grow linearly at 20% plus the way that we do in other parts of the business.

And so that growth differential absolutely needs to get reflected in what we’re willing to pay to acquire scale and capability in private equity. And then obviously, as we continue to focus on a real management fee fre centric business, we also have to be thoughtful about the way performance fees roll in from growth in private equity relative to where we are today. So there’s a financial component to this that has to check a lot of boxes in order for us to get excited about it.

Mike Brown

Great caller. Thank you, Mike, for all of that.

operator

Thank you. We’ll move on now to Michael Cypress with Morgan Stanley.

Your line is now open.

Michael Cypress

Hey, good morning. Thanks for taking the question. Just want to circle back to some of the commentary on the software exposure. So heard software about 9% of private credit. I’m just curious on how that looks across the direct lending book. And then if you could just maybe elaborate a little bit on how the software credits are performing, what trends you’re seeing there. And when we think about your underwriting discipline that you spoke to, curious what portion of software deals you passed on and avoided over the last couple of years, last 5 years or so versus ones you participated in.

Michael Arougheti

Yeah, I appreciate that question. I gave a lot of data. I’ll try to specifically answer. If you look at direct lending Specifically, it’s probably 12% of direct lending against 8.7% of private credit. I don’t have an answer for how much we passed on, but what I can tell you over the 30 years we’ve been doing this, our yes rate ranges between 3 and 5% generally across the entire portfolio, meaning we’re saying no 95% to 97% of the time. I think it’s one of the reasons why we’re able to generate the low loss rates that we do.

I would imagine just having sat around the investment committee table, that the selectivity rate on software would be, you know, no different than, you know, within that range. One way to also think about it, Mike, I mentioned was kind of the almost near avoidance of exposures at a time when people were ramping up that category. And if you were to look at the way that we’ve approached that part of the business, I said it’s less than 1% of the exposure. So that was part of the underwriting funnel.

Michael Cypress

Great. Thanks so much. Yep.

operator

Thank you. I will now turn the call back to Mr.

Arogetti for closing remarks.

Michael Arougheti

I don’t have any. I appreciate everybody spending so much time with us and look forward to talking again next quarter. Thank you.

operator

Ladies and gentlemen, this concludes our conference call for today. If you missed any part of today’s call, an archived replay of this conference call will be available through March 5, 2026, to domestic callers by dialing 1-800-723-5154 and to international callers by dialing 1 402-220-2661. An archived replay will also be available on a webcast link located on the homepage of the Investor Resources section. Goodbye.