Ares Management Corporation

Welcome to the Aries Management Corporation's first quarter 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 Monday, May 5, 2025. I will now turn the call over to Greg Mason, Co-Head of Public Markets Investor Relations for Aries Management. Please go ahead, sir.

Good morning, and thank you for joining us today for our first quarter 2025 conference call. I'm joined today by Michael Arrighetti, our Chief Executive Officer, and Jared Phillips, our Chief Financial Officer. We also have a number of executives with us today who will be available during Q&A. Before we begin, I want to remind you that comments made during this call contain certain forward-looking statements and are subject to risk 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 ARIES or 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 first 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 10-Q later this month. This morning, we announced that we declared a quarterly dividend of $1.12 per share on the company's Class A and non-voting common stock. representing an increase of 20% over our dividend for the same quarter a year ago. The dividend will be paid on June 30th, 2025, to holders of record on June 16th. Now, I'll turn the call over to Mike, who will start with some comments on the current market environment and our first quarter financial results.

Thank you, Greg, and good morning. We hope everybody's doing well. In the first quarter, ARIES continued to generate strong financial results in spite of increased market volatility and growing uncertainty. Our results included year-over-year growth in management fees of 18%, FRE growth of 22%, and after-tax realized income per share of Class A common stock growth of 36%. We also saw continued momentum in our fundraising and deployment activities, as well as strong investment performance across our platform. On the fundraising front, we raised over $20 billion in gross new capital commitments, which was the highest level for the first quarter fundraising on record, with broad contributions across all major strategies. We deployed over $31 billion in the quarter with an improving gross to net deployment ratio of 49% in our private credit strategies. In fact, capital deployment in our drawdown funds increased nearly 20% over the fourth quarter and was the highest first quarter on record. The first quarter also marked a significant milestone for ARIES as we crossed over half a trillion dollars and reached $546 billion of total AUM. including $45 billion of AUM added through the acquisition of GCP. Overall, both our AUM and fee-paying AUM grew by 27% and 25%, respectively, on a year-over-year basis. Coming into the new year, the market was anticipating that the new administration's pro-growth regulatory and tax policies would unlock a greater amount of M&A-led transactions. At the beginning of the year, as reflected in our strong deployment, we were seeing the early signs of a growing future pipeline of transactions and pent-up activity. However, anxiety and market volatility were building throughout the quarter. Following the announcement of the April 2nd tariffs and subsequent geopolitical events, the market entered a new phase of volatility and uncertainty over the ultimate outcome and impact of tariff policies. Activity in the liquid credit and equity markets dropped off significantly as most banks and liquid market investors moved to a risk-off position. Since then, the liquid markets have started to thaw, but they remain less predictable and highly selective. As one would expect, when traditional capital providers and public markets retrench, the stability and certainty of the private markets becomes even more valuable. Fortunately for Aries, we have a record amount of dry powder, and we operate a large array of flexible private market strategies that can take advantage and gain share during periods of retrenchment. Today, we have $142 billion of available capital, including over $99 billion in AUM not-yet-paying fees. This provides us with significant capital to deploy with meaningful capacity for additional management fee growth. As many of you know, ARIES has a history of demonstrating resilience and growth through periods of extreme market volatility and recession, such as during the global financial crisis and the COVID-19 pandemic. There are several reasons why we believe that we've fared well through these periods of dislocation. We operate a management fee-centric business, which is exemplified by our direct balance sheet investments being less than 0.5% of our assets under management. We have very low balance sheet leverage, and we don't carry any retail bank deposits or direct insurance liabilities on our balance sheet. Instead, we primarily operate with long-dated, locked-up third-party capital that is match-funded with our assets. This means that we can be patient when entering and exiting investments across our portfolios, and our fund structures are designed so that we are not a forced seller of assets. We maintain significant levels of available capital and operate flexible strategies so that we can be opportunistic and invest in primary and secondary markets through cycles. Finally, we have large and experienced portfolio management teams that can help us protect or reposition investments in periods of stress. These attributes of our business and operating philosophy have translated into stable to accelerating growth in AUM and management fees in past market dislocations. We believe that investors have come to value our ability to invest opportunistically, even in down markets, and some of our best performing funds have been in vintages covering recessions or market dislocations. We believe that our asset light business model places our third party clients first and foremost. Given the uncertainty over the path of economic growth, we believe that we also benefit from being overweight in assets that are senior to equity in the capital structure. We believe that these credit assets are more defensive and insulated from changes in cash flows and market values. In addition, when it becomes more difficult to sell companies or assets, it can be easier to deploy capital and credit as the need for more creative financing solutions increases. Including our credit products within our real estate infrastructure and secondary strategies, more than 72% of our total AUM is in credit-related products, and over 92% of these credit assets are senior loans. As we assess the quality of our corporate credit portfolios today, we believe that we are entering this period of uncertainty from a position of strength. The initial assessment of our portfolios reveals a limited direct exposure to changes in tariff rates. As a firm, we're more focused on domestic, middle market, service-oriented businesses that tend to have less exposure to international markets and global supply chains. While we will remain actively engaged with our portfolio companies and are carefully monitoring any primary or second-order impacts from tariffs, We are optimistic about our ability to navigate any issues that arise in the portfolio. And as Jared will highlight later, our corporate loan portfolios are performing well and remain conservatively positioned. We continue to believe that this is an opportune time for continued growth in our real estate business. Tariffs should drive up construction costs, which might constrain supply in markets that are already supply constrained. This, coupled with a decrease in cost of capital and lower interest rates, should improve values of real estate held and spur transaction activity. Now let me turn to some quarterly operating highlights to give you more details on our recent performance and key trends driving the business. We experienced the highest first quarter of fundraising activity in our firm's history, as we benefited from a wide product set of funds currently in the market. Over 45% of our quarterly fundraising came from outside the credit group as we experienced improving inflows across real estate, infrastructure debt, secondaries, and private equity. Within credit, our third opportunistic credit fund completed its first close this quarter, now having raised approximately $4.6 billion from a group of new and existing investors. This is a great start for the next vintage in this fund series, which is particularly well positioned to take advantage of market volatility in both the public and private markets. Our public and private BDCs combined raised over $4 billion of AUM in the quarter, and our semi-liquid European direct lending product raised over $630 million and now stands at over $3 billion in AUM after only 15 months. We believe it's the largest fund of its kind in the market, Our open-end core alternative credit fund raised approximately $400 million and surpassed $6 billion in AUM. And we also issued two new CLOs in the quarter, raising $1 billion in the aggregate. Within real estate, we raised over $3.1 billion of commitments across our 11th value-add real estate equity fund, our real estate debt funds, and our open-ended logistics real estate funds in the U.S. and Japan. Our first Japan data center development fund raised approximately $1.5 billion in a first closing, and we anticipate holding a final close for this fund in the near term. In infrastructure debt, we raised an additional $1 billion across our sixth infrastructure debt fund and related vehicles. We also saw pickup in flows to our non-traded REITs, which raised $400 million. Our secondaries group continues to generate significant investor interest with $2.3 billion in new commitments across PE, credit, infrastructure, and real estate funds. Our third infrastructure secondaries fund just crossed $2 billion in total commitments, more than double the previous vintage, and we expect to hold a final close this summer. In private equity secondaries, APMF now has exceeded $3 billion in AUM and we're also seeing good momentum across our institutional products. Finally, in credit secondaries, we raised $475 million in the quarter and another $700 million in April, exceeding the fund's target and bringing total equity commitments in the strategy to $3 billion. And within private equity, we raised an additional approximately $1 billion in our seventh corporate private equity fund, and we expect a whole final close this summer. So as we think about fundraising for 2025 and how it could be impacted by the current market uncertainty, we believe that we're well positioned due to the strength in the institutional channel and the global diversity of our investor base. We have deep relationships with our LPs who tend to be repeat investors across our funds and strategies as they seek to consolidate with key relationships. During the first quarter, nearly 63% of our fundraising came from institutional investors across more than 30 funds and numerous SMAs, of which over 85% was from existing investors. Our fundraising is becoming increasingly diverse across our fund strategies, and almost all of it is derived from third-party investors. Importantly, we've historically experienced more consistent capital allocations from institutional investors through periods of volatility as they systematically invest across vintages and asset classes with less reaction to immediate trends in the public markets. Within the wealth channel, we believe the largely underpenetrated opportunity to offer institutional quality alternative products to private wealth investors remains one of the best strategic growth avenues for Aries. Our team continues to expand into new regions and add new distribution partners across the globe. With the addition of two new products, our open-end infrastructure fund, which began taking monthly subscriptions in the first quarter and now has over $500 million in AUM, and our open-ended sports, media, and entertainment product, which is now open for monthly subscriptions, our lineup covering the market opportunity is extensive across durable income, real assets, and diversified growth products. During the first quarter, our strong momentum in the wealth channel continued as we raised a record $3.7 billion in quarterly equity commitments and $5 billion in total commitments across our eight perpetual semi-liquid products. These products accounted for approximately 25% of our gross inflows during the quarter. While it's early and the path ahead is uncertain, we're encouraged by the private wealth inflows that we saw in the month of April, which totaled $1.2 billion in equity commitments. Our expectation is that our differentiated fund performance, coupled with the less volatile nature of alternative assets and the ability to buy and sell at NAV, should demonstrate the relative advantages of private market investing over time. As we look forward to the remainder of the year, new M&A transactions and activity levels are likely to be slower until there's more certainty on tariffs and the impact to the economy. That said, there's great excitement and energy from our deal teams as they sense less competition from traditional capital providers and potentially enhanced investment opportunities due to the change in market conditions. While the full impact from the tariffs will take time to be absorbed across the markets, were encouraged that the size of our firm-wide investment pipeline across our investment groups is relatively unchanged compared to where it was three months ago. Our investment teams are continuing to see significant opportunities with some strategies, such as opportunistic credit, alternative credit, and secondaries, expecting to see an acceleration in deal flow. In direct lending, We're seeing interest from larger companies and sponsors as the broadly syndicated market is less attractive. And in real assets, we're continuing to see meaningful opportunities associated with the demand for data center capacity and the need for power generation. We're also seeing positive momentum in our private equity and secondaries businesses. Our corporate private equity team recently signed three new growth buyout transactions. and our secondaries group is originating a growing number of opportunities as traditional off-ramps for capital are becoming less available. Aspita is well-positioned following the completion of its equity raise last year and currently has over $20 billion of new investment capacity. Benefiting from its tech-enabled platform and growing scale, Aspita continues to have strong momentum in primary annuity originations. And on the reinsurance front, we're actively engaged with new partners across both the U.S. and the APAC regions. So overall, we expect to remain active and opportunistic during this volatile period. And before I turn the call over to Jared, I do want to mention that the integration with GCP International is going very well, and we are just beginning to execute on the many synergy opportunities that we identified. The business is performing well. Early fundraising momentum is encouraging, and we're excited for the growth opportunities ahead. And now, Jared, will you walk us through additional details on our financial results?