Ares Management Corporation

Good morning, everyone, and welcome to the Aries Management Corporation's second quarter earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing star 1 on your telephone keypad, and you may withdraw yourself from the queue by pressing star 2. Also, today's call is being recorded, and if you should need any assistance during the call today, please press star 0. And now at this time, I would like to turn things over to Mr. Greg Mason, Co-Head of Public Markets and Investor Relations for ARIES Management. Please go ahead, sir.

Good morning, and thank you for joining us today for our second quarter conference call. Speaking on the call today will be Michael Arrighetti, our Chief Executive Officer, and Jared Phillips, our Chief Financial Officer. We also have several executives with us today who will be available during the Q&A session. 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 any ARIES 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 second quarter earnings presentation available on the Investor Resources section of our website for reconciliations of the measures to the most directly comparable GAAP measures. Note that we plan to file our Form 10-Q later this month. This morning, we announced that we've declared our third quarter common dividend of 93 cents per share on the company's Class A and non-voting common stock. representing an increase of 21% over our dividend for the same quarter a year ago. The dividend will be paid on September 30th, 2024, to holders of record on September 16th. Now, I'll turn the call over to Michael Arrighetti, who will start with some quarterly business and financial highlights.

Thanks, Greg, and good morning, everyone. I hope everybody is doing well. The macroeconomic backdrop for our business improved in the second quarter with a stronger transaction environment solid and stable credit trends, and a recovering real estate market. The improving economic picture is driven by a combination of a better outlook for both inflation and interest rates, continued labor market strength, and increased confidence in a soft landing. Given the more constructive transaction environment, we were more active across many of our investment strategies. In fact, we invested $26 billion in Q2, our second highest quarter on record, and more than 70 percent higher than the same quarter a year ago. As we highlighted our investor day in May, we're continuing to see significant institutional and retail demand globally for alternative investment products, particularly within broad credit strategies, but also in opportunistic and value-add real estate, affiliated insurance, infrastructure, and a host of secondary strategies. Q2 was our single best quarter fundraising, in our history, with $26 billion in gross capital raised, bringing the total year-to-date funds raised to $43 billion. For the second quarter, our asset center management grew to a record $447 billion, up 18% versus a year ago. Our strong deployment and fundraising activities supported a 22% year-over-year growth in fee-related earnings for the quarter. We also had another strong quarter of fund performance, as Jared will highlight later. Overall, we're pleased with our momentum, the firm's positioning, and the promising outlook for our business. As we've expected for some time, we are seeing a gradual improvement in transaction volume this year for a variety of reasons. The nearly $1 trillion in private equity dry powder that's aging, significant demand from LPs for a return of capital, a stable rate backdrop, and the improving prospects for interest rate cuts, and an economy that remains on solid footing. For ARIES, looking across our seven private credit strategies in our credit and real asset groups, activity was very strong in the second quarter, with gross deployment up over 58% year over year. In Q2, we deployed approximately $20 billion in our private credit strategies, with net deployment totaling $7.7 billion. more than double Q1 net deployment of $3.3 billion. Looking forward, our investment pipeline suggests continued solid activity, and we have every indication that the second half of the year will continue to be an active deployment environment. The credit quality across our corporate credit assets remains very strong, and recent trends indicate stability. As an example, our U.S. direct lending portfolio companies experienced their second straight quarter of improving organic EBITDA growth, reaching 11% year-over-year. The portfolio's loan-to-value ratio remains in the low 40% range, which is meaningfully below historical average market levels, and portfolio company leverage multiples are a half a turn lower than the prior year. For instance, on its earnings call, ARCC reported a decline in loans on non-accrual to 1.5 percent and a decline in underperforming loans. Based on the fundamentals that we're seeing across our U.S. and European corporate credit book, our outlook is for continued solid economic growth in these markets and continued favorable credit performance. That said, we're intensely focused on executing our playbook in more active and therefore competitive markets by out-originating our competition, using our deep incumbency advantages, performing rigorous fundamental due diligence, negotiating tight documentation structures, and staying highly selective. In our real estate strategies, we're seeing market valuations and transaction activity stabilize. Operating fundamentals such as rents and occupancy rates remain positive for our core focus areas of industrial and multifamily which represented nearly three-quarters of our asset value. Within these segments, we continue to benefit from the growth in e-commerce, on-shoring, and positive longer-term supply-demand dynamics. Our deliberate strategy of extending the duration of our industrial lease terms is enabling us to effectively navigate the market as near-term peak levels of supply are being digested. We're also seeing positive trends in adjacent areas such as student housing, single-family rental, and self-storage. Based upon the improving market trends, our real estate team was significantly more active in the second quarter, with deployment more than doubling the year-ago period, and our pipeline for new transactions continues to build. We also see significant investment opportunities in data centers and the digital infrastructure needed to support the enormous demands of AI growth. We're investing in digital infrastructure across our various businesses, but particularly within infrastructure, alternative credit, and real estate. Collectively, we've committed nearly $5 billion in digital-related infrastructure, including data centers, towers, and new fiber broadband installations over the past five years. We're also focused on climate infrastructure opportunities and are actively investing in new clean energy projects, including solar, wind and renewable natural gas. Over the past five years, we've committed approximately $3.2 billion in debt and equity investments in these sectors to meet the growing energy needs across the U.S. Within our secondaries businesses, we continue to see opportunities for new investments across our range of liquidity solutions, including purchasing LP portfolios, working with GPs on continuation funds, and providing structured solutions for both GPs and LPs. Overall, the secondary market opportunity remains robust as managers and investors alike try to manage liquidity demands in what has been a transitioning valuation environment and a slower M&A and IPO market. Now let me provide some color on our record fundraising quarter. Across our broad distribution channels, we continue to benefit from increased investor allocations to alternatives, a loyal and expanding client base, and our growing scale. All three of our primary fundraising channels, institutional, wealth, and insurance, are highly productive, and we're seeing a meaningful acceleration in fundraising across our wealth management channel, which has more than tripled so far this year compared to last year. Our broad offering of credit strategies continues to lead the way as our benefits of scale and track record are differentiating factors. In Q2, we raised nearly $20 billion in funds, managed accounts, and CLOs within our credit group. As you may have seen from earlier this week, we announced the final closing for our U.S.-focused Senior Direct Lending Fund III, or SDL III, with $33.6 billion of investment capacity. This is the largest institutional private credit fund in the market and is roughly double the $14.9 billion of total investment capital that we raised in SDL 2. SDL 3's investment capacity included $15.3 billion in fund equity commitments, along with related vehicles, closed leverage, and anticipated leverage of up to $8 billion that could be raised over the next 12 months. We raised $6.4 billion of capital in Q2, and another 1.8 billion in July for this fund. We're also well underway investing SDL3, having already committed $9 billion of capital to more than 165 companies to date. With respect to our other large private credit institutional fund in the market, ARIES' sixth European Direct Lending Fund, we raised another 750 million euros of equity commitments in the second quarter. This brings total equity commitments to 12.2 billion euros today, or over 18 billion euros of total investment capacity, including anticipated leverage. We expect to raise another 1 to 1.5 billion euros in equity commitments in the third quarter, with additional commitments in the final close expected in Q4. During the quarter, we also continue to raise various funds within our liquid and illiquid credit strategies across our platform. One example is the launch of our specialty healthcare fund, which focuses on direct loans to life sciences companies. We're currently holding our initial closings for this inaugural fund, and we expect to receive commitments totaling approximately $750 million in the coming weeks. We believe that this is a great start for a new product. In addition, we've priced five new CLOs in the quarter. Year-to-date, we've already priced seven CLOs, raising $3.6 billion. exceeding our full-year record of seven CLOs for $3.3 billion in 2022. Overall, we've raised over $65 billion in the past 18 months across our direct lending strategies. When combined with our fundraising across our other private credit strategies in alternative credit, APAC credit, real estate debt, and infrastructure debt, we've raised approximately $85 billion in private credit AUM over the past 18 months. In our real assets group, we're aiming to hold a final close in the third quarter for our fourth U.S. opportunistic real estate fund, bringing total commitments to $2.7 billion. Based on this anticipated final close size, we expect the fund will exceed the commitments of its predecessor fund by 59%. And we believe that this demonstrates meaningful investor support for the strategy and the investment opportunity. We're also off to a great start with our recently launched fourth European Value Add Real Estate Fund, raising approximately 600 million euros in the second quarter, including related vehicles, with additional capital expected for the first close in the third quarter. We also raised another 1.1 billion in our U.S. real estate debt strategy, as we continue to see attractive values and compelling market dynamics with less competition in this sector. In addition to significant fundraising and our commingled funds, we're also seeing meaningful demand for managed accounts across the platform. For the second quarter and year-to-date periods, we raised $5.4 billion and over $10 billion, respectively, in new commitments in these managed accounts. As I stated earlier, our wealth management business continues to have significant momentum as we penetrate existing distribution, expand into new channels, market to new geographies, and broaden our product set. We're in the early phases of the largest generational wealth transfer in history, and importantly, we believe that we are seeing a very divergent trend with how baby boomers and the younger generations invest. Baby boomers manage their investment wealth primarily in stocks and bonds, but younger investors are seeking to expand their investing toolkit by optimizing their portfolios with increased allocations to private market assets. This trend could have significant positive implications for growing wealth allocations, and we believe that we're beginning to see these trends play out in our current results. During the second quarter, We raised more than $2.5 billion in new equity commitments across our six non-traded products, and inclusive leverage, we raised $4.5 billion. For the year-to-date period, new equity commitments totaled over $4.5 billion, which is over 3.5 times the capital raised in the same period a year ago. Since our last earnings call, we've launched certain non-traded solutions with three additional global distribution partners. Based on these expanded partnerships, we expect flows into our wealth-focused products to continue to gain momentum through the second half of the year. Aspita, our minority-owned insurance affiliate, is on a strong growth trajectory. This quarter, it secured nearly $600 million in additional institutional equity from third-party investors. With more equity capital expected to be raised in Q3, Asfida is well capitalized and poised for continued expansion. The annuity market is thriving, with sales exceeding a record $400 billion on an annualized run rate in the first half of 2024. Asfida is benefiting from these industry tailwinds, experiencing robust flows from new retail annuity sales and increased flow reinsurance opportunities. So overall, with $43 billion raised in the first six months, We're ahead of where we expected to be mid-year, and we believe that we're in a better position to match or potentially exceed the $74.5 billion that we raised in 2023. Our strong first half puts us in an excellent position with record amounts of available capital to deploy. Looking ahead to the next six months, our fundraising is likely to see contributions from a broader and more diverse set of funds. For the year, we expect to have 35 funds in the market across 17 strategies to take advantage of the expected growth in alternative asset allocations. And I will now turn the call over to Jared to discuss our financial results in more detail. Jared?