Ares Management Corporation

Welcome to ARIES 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 5th, 2026. I'm going to turn the call over to Greg Mason, Co-Head of Public Markets Investor Relations for ARIES Management.

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 Arrighetti, our Chief Executive Officer, and Jared Phillips, our Chief Financial Officer. We also have other 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 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 ARIES or any ARIES fund. During this call, we will refer to certain non-GAAP financial measures, which should not be considered an 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 10-K 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 31st, 2026, to shareholders of record on March 17th. 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.

Thank you, Greg, and good morning, everybody. I hope you're doing well. Our strong fourth quarter cemented another record year for ARIES. We reached several important milestones and made significant progress in 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 FPA UM 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 premia 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 U.S. 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 one 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 PE fund, ACOF VI. 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 our liquid credit deployment. After a slower first half, our U.S. 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 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 spend 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 percent 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 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 and 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, Aeries 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 U.S. 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 U.S. 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 U.S. 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 U.S. 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 flows 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 to 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 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 gain 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 ARIES 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 U.S. direct lending credit product to the 401 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 Espida and third-party insurance clients. At Espida, 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 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?