Ares Management (ARES) 27 Oct 222022 Q3 Earnings call transcript

Welcome to Ares Management Corporation's Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode.

As a reminder, this conference call is being recorded on October 27th, 2022. I will now turn the call over to Carl Drake, Head of Public Markets, Investor Relations for Ares Management.

Good morning, and thank you for joining us today for our third quarter conference call. Michael Chief Chief Financial by Jarrod Officer; today our Phillips, Officer. joined Arougheti, Executive our and I'm

Before we and begin. in comments risks made I uncertainties, Risk want to this and SEC contain remind Factors call in forward-looking filings. those statements including are our to during subject identified you that

not and Our statements. that note Please materially, no a of to results. we is future guarantee actual results could update obligation also past undertake differ any forward-looking performance such

financial solicitation an dividend fourth-quarter interest or common sell our of purchase $X.XX directly-comparable in earnings for note morning, we Ares that dividend measures, declared Fund. common isolation our XXth, principles. an call, GAAP refer be of increase available generally will considered stock, any of over in a non-voting presentation The XX% dividend paid constitutes certain the December representing same Investor of non-GAAP year-ago. a on of accepted the to not nothing for our this on in per December third-quarter this which reconciliations Resources offer During of measures website announced record the we call holders and This share from substitute XXXX, to quarter a to we our on to that section most an be measures. will for accordance accounting Class-A our as or offer refer measures of an Please Please prepared to with on the to XXth.

and to business with the will quarterly Now, financial start over call who Arougheti, turn I'll Michael highlights. some

performance of costs, tensions well. our morning generate investors. rates, everyone. business and and growth continues strong In Carl, rising and the hope I Great. relative energy deliver good you're and Thank steady our for to interest inflation, doing geopolitical face you,

despite market fee-related the environment AUM continued overall activity. the slowdown in primary growth we earnings our in continued During and third-quarter, a challenging strong our and

funds. earnings, with total year-ago. our year-to-date fundraising flat $XX investment resonate basis. XX% strategies growth which We're These date, XX% commingled than gross to which remains more to drove flexibility our in raised AUM included reflected billion products our the and our relatively The and more investors of year as continues our for $XX pleased steady largest ranging factors breadth Our fundraising income from to this than billion in to fundraising our activity metrics, $X.X of activity bringing year-over-year suite also of realized commitments from of quarter, strong the a we with levels is only billion. in fees, a was versus fee-related management our on deployment, the

starts some by so quarterly been highlights, more provides our all business, framing we're resilient balance let which our in business with like today. I business Before performance It during realized fee-centric fee-based why management business has models. more a me to stable markets compared sheet volatile heavy walk-through start income and

realized fee the income past steadily management This basis, For FRE mix we over been increasing the our from fees earnings. XX% period from fee-related earnings more a same XX% and revenues has also rich was total year-to-date of our example, over on three our of based than derived our years. generated of

asset-light important total our balance representing balance of component our is AUM. business of our less investments X.X% Another than sheet, sheet with

to generally AUM XX% funds changes vehicles either earn particularly are our of and assets, fees our provides be to across and private higher during equity, the believe In We range The are assets, new our XX% meaningful AUM as to increase. our AUM We nature firm support in structure and and our vehicles. of perpetual is credit for capital, the perpetual a that significant investors other management this we means investments of significant issues not provides Ares stockholders in Management income words, and as AUM fund also enables to in-market are strategies. have stability. rates capital powder have floating-rate and and susceptible from the the generally investors declines of risk tied during provide investments. withdrawals. we're downturns believe this volatile comparatively redemption of or market nature top make portfolio patient also addition interest-rate rising experienced our long-dated focus markets. In our of mix generating on us credit are to of both of and utilize These dry to capital to valuation times teams also Approximately than our the volatility. of difficult during benefits more our XX% economic of long-term high to long-dated investments of provides companies from assets protection to values from of our under credit that can credit in spectrum client since portfolio more About positioned environments, during positions insulation half the structures our wide periods. And assets diverse our debt capabilities this less due strong less XX% experienced multiples risk. interest to of returns This and during

would in short-term have ARCC prevailing core the earnings that higher the September at for been an effect third-quarter. example, rates entire at XXth X% reported As its on Tuesday been

ARRC Capital's for earnings fees assets built-in the increase believe rent this mix, in to continue to strong provides growing continue the As Across being to with assets ARCC's we enhance investments well-positioned sectors all part dividend, as year-to-date estate XX% else that equal. that the with the third our in rates evidenced one it AUM environment. real asset and core infrastructure of inflation market and increase, be our an perform will current rest growth in by escalators real quarter have and well, Ares potential as increased should for

less on private assets. capital believe debt across differentiated distressed in growth assets flexible is its of that cyclical, business deploying with also industries along also We our strategy and its opportunistic equity equity other higher with and resilient, focus

is deployment. a current providing and The environment capital to take are us continue to market to and public for providers consistent traditional turning sources So other provider retrenching. be when market-share opportunities

of relative strategy companies dry the powder provide us play capital has enabled private in significant a and to our flexibility as or to to Our variety liquid of markets value shifts. solutions

$XX situations. types businesses larger borrowers segments half European direct with Nearly In spectrum, purchases, tied combined middle portfolios, and billion continues secondary lending and Our credit focus financing our industrial real be we the invested activity was in strategy. our the on deployment multifamily, than strong to market including billion in $XX assets, our real add-on third core $X.X during existing across our We remained strategies selectively our and actively quarter acquisitions, QX. invested at credit companies. in of over estate market asset billion, across and privates, for in take to U.S. of upper we invested $X many of other the primarily incumbent quarter infrastructure billion, and our more

our private We strategies. also equity billion ASOF across ACOF and over deployed both $X in

the very special particularly debt excited in the more yielding investing team Our presented, is opportunities volatile opportunities in being markets. liquid about high

growth. increasing as activity momentum capital as over solutions to they're capital the that over And both and expect million coming liquidity seeing quarters GPs investors private seeking gain allocation seeking opportunities managers LPs secondaries for and facing. for we'd and the Our group transaction for equity $XXX secondary deployed seek balances additional they're

discussion by lot and insurance to also have. of the understand There's experienced our alternatives via end billion in quarter, the effect across have denominator Through allocations degree the others we investors. this affiliated Ares invested been of platforms. in We third $X.X same we a SSG the market about the and not to slowing

our larger fund of II estate of on Our held inaugural XX% its the and for can of end, entertainment fund $XXX billion, its fund. ahead well floating team from the our capital continue XXth also new we strategy advantages $XX.X third-quarter, and held final ago. $X.X three today's are funds our with for adjacent or investors strategies than and billion which the strategies size our at insulated across as One report and is XX% fund. to This U.S. hard commitments direct example than closing different predecessor broad beneficiaries billion, we're debt fifth platform the exciting of of than inaugural $X.X create our is real $X.X our vehicles. for at strategies another fund raised to related with target our from rate existing bringing great $X.X during credit over investors. final leading of private for pleased our market double seen At Overall quarter And more amount and value-add headwinds. well in more fund more derived raised the quarter $X.X XX that resonate we ASOF either and cap a accounts as received to its investor media, the as billion asset they its third equity real at its sports, within of of we closing strategy years AUM our highlight total the quarter billion our final leverage of closed was than billion to the infrastructure from and how just being million, closing base. is some

has as With fund to billion our continue the first U.S. Within anticipate New $X and attracted build estate, closings we capabilities will QX. and in investors closing target, predecessor capital fourth our that fund. out AUM the launched, a the of significant exceed our fund, increased real and to Asia expected or is also which equal recently was early in direct lending Australia investment first the size Zealand Pacific interest region. the We in from opportunistic hold we

capital see perpetual continued strong funds to inflows. Our also

from with third-quarter funds REITs approximately equity equity to and Overall, ago in non-traded million approximately from billion. two period year debt of million $X.X during billion commitments as the XX% $XXX perpetual $XX during the raised QX Our raised totaled perpetual commitments increased redemptions. capital $XXX

with to for year. fourth REIT one at least add wirehouse expected We next during non-traded the expect distribution quarter more

launched insurance to June. across affiliated and company, is billion third platform of quarter momentum end its that Our of platform gain at in the at beginning annuities the $X.X new and new retail reinsurance Aspida,

teams. to expanding is our business. secondaries has On We're investment of in now integration and which the better sub-advised a set now also fully we'll XX% about the business of billion by completing the own our excited be step opportunity for of $X.X and Xth, little referred process November the the Aspida over over strength AUM brand. Landmark to Ares final platform our be to the as Secondaries Ares transitioning leverage

We strategies invest to partnering pickup, plan The Pacific, synergies estate capabilities and new in real retail to We including equity fund next to credit talent, are fund launch Asia senior by we private launch within expected. and revenue is third also to the as expect in playing starting enable out with see technology adding new platforms we're and our secondaries. markets private heavily retail continue Secondaries our we on year. access wirehouse Group secondaries infrastructure platforms inflows to and

Now, let the to me pipeline. turn future

our the our predecessor funds we the cycle stages on launching at fundraising discussed were funds. of for call, a were significant among beginning commingled last where As a largest number earnings of funds

this billion, expect addition activities existing leverage. fund three $XX in launched funds managed the perpetual we've or our recently commingled market inclusive commingled we accounts, next months our to have more launch year, had In that funds, will ongoing and than target of the with in to funds

closed infrastructure U.S. We fund. expect infrastructure our private This along $XX lending including flagship two fund, in our our second first seventh fund, our third of others billion includes of and our continue XXXX. first-half opportunistic the corporate with target real-estate European our our funds these of senior largest and series, fund, fundraising of fund, second credit sixth direct lending to fourth third U.S. end fund, our closings some fund fund, direct alternative equity climate secondaries new

senior generally basis gross our as both generated a strong credit, direct quarter returns were generated and for lending X.X% The of returns our markets along equity equity composite XX.X% and strong the non-traded public direct U.S. past direct leverage, and and NAVs last for from and packages. benefiting XX% to continued and real gross on Real overall months. interest lending and In losses report strong European private direct X.X% well, its our XX across months also quarter results the fund lending XX our XX% gross strong various is with totaling the lending lower and lending, of increased junior As of generally returns European performance portfolio direct the the quarterly strategies. REITs. estate, X.X% held fixed-income, coverage, last respectively. X.X% covenant and for continue for our in across strategies XX up months the over estate equities X.X%

strong multifamily Our the growth, for on and on generally industrial inflation in focus rent tailwinds of continues sectors. excess fundamental in performance to generate these based

X.X% composite Our declined X.X% for XX increased estate growth for European months. quarter, real the the trailing but

Our private overall portfolio in performed third markets. particularly the declines equity quarter, during equity public the despite well the

invested increased over quarter the is composite in the driven revenue the EBITDA attractive XX.X% sectors resilient X.X% growth ACOF months, by with tailwinds. behind portfolio, Our past and XX growth strong up as we've primarily and secular across

X.X%. and not the special business capital quarter environment, Our opportunities deploying QX also returns significant strong of this in only but in generating raising a of thrive amount continues to gross

positive In detail now has on declined X.X% over with quarter secondaries private basis, over currency through basis the returns in related past over months, and largely strong, was But third months, the on XX.X% gross let me to in to a to the ASOF call related lag provide estate secondaries X.X%. Jarrod? a one our Over a the quarter Real an strategies XX a where year. basis, results gross updated to walk generated quarter of strategy still that, and generated past our gross up turn the on reported X.X% outlook. our And financial returns up assets. is XX.X%. the are to European Jarrod equity very past depreciation I XX

for again this us you thank And joining quarter. everyone. Hello Mike. Thanks

Mike mentioned, resilient management we fee-related third business delivered As strong nature our as growth fee-paying and fees, results quarter the emphasized of in our earnings, AUM.

deployment by increased AUM. in our management growth continued Our quarterly fees XX% fee-paying to driven year-over-year million $XXX and

was Our than million million more up $X in quarter, predominantly and capital certain increase other fees direct third of fee the an from ago. typical our the income to development year quarter structuring totaled increase by in over and funds. and a The lending addition second origination $XX million non-traded property-related $XXX fees driven XXXX. In quarter over generated the FRE, we in double third quarterly REITs perpetual of XX% of our quarter, third the our of

quarter non-traded performance gross virtually Ares. Through $XXX fee-related and to no continue FRPR revenues more or had had we occur fourth agreed expected, quarter. As September our third we XXth, the of expect performance annual during the our REITs to for XX% million in participation

As returns. not our remains included growth an third-quarter, performance our driven the realized and annual management XX% income is fund's subject accrued to over fees net pay in as income realized net our value these basis, on the modest funds performance in in this by future a percentage fee-related or performance FRE more steady of it income. revenues since was the

points was the quarter FRE up over of Our up quarter for margin third and slightly third the XXXX. XXX second over basis XX.X%, quarter the versus

income third equity their which fund declared the of XX% has year-over-year. for of quarter, XXXX per up ahead Investor funds, are generated income $X.XX. the Day $X.XX Class $XX million this about XX% and our in-line $X.XX quarter at down realized we targets performance as After-tax A the on life. for out well good year-to-date was real XXXX Realizations realized exits third quarter third slightly million, of to estate the year. roughly feel third income the basis approaching of compared XXXX. $XXX a last net our with were Realized totaled target dividend by and in quarter stock of our well up to of performed continue from driven of common We the other mainly well end laid as in quarter now the and margin We share

we been last beginning European waterfall of our we are Day funds Investor the over many our scaling and year, highlighted at As past meaningfully years to have the five season. funds early

to base larger we expect performance in to ahead total, $XXX ramp-up eligible in European billion thereafter to net accelerated continue realized In waterfall contribution style funds years We as their to funds, begin consistent in income believe growth the with have contribute. reach funds. more billion in for these realized $XX a once we periods in should future years of performance growing the life net or credit of build harvesting which about we credit which funds, income

realized incentive performance few the years, billion AUM, we next European primarily from Looking currently $XX funds income in the over this reinvestment out generating have period. approximately to at over expect we currently potential our are the that waterfall and in million these income, of their and performance vast accumulated funds funds, next have majority $XXX net years. two we In approximately of the accrued amount realize of

roughly then the early our We some related in in realized one-third roughly over expect anticipating the and in are to fee coming with distributions, net In funds realized year. recognition waterfall quarter, ramp-up million in the be income this fourth totaling $XX quarters strong XXXX. current to the income expected performance we of two-thirds this European XXXX to returns

significant have and to being to as American environment value softer eligible the that where are funds these well, style continue due strategies. realizations current We for patient we're equity waterfall in private realization

offsetting private yield our funds. of Our the net rates interest both equity year-to-date This nearly excess up the increase waterfall to the and largely fixed of funds, style rising is further compression to in X.X% in difficult in European the multiple includes portfolio the increased the despite market $XXX due performance was and rates accrued backdrop. credit and in those increases portfolio, which million hurdle XX% EBITDA and of investments income, increasing American quarter

XXXX. over quarter billion, AUM increase up $XXX management third and $XXX billion from XX% of in quarter-over and related under Turning to an quarter, our assets the of totaled metrics, X% our

fundraising strong by the across driven was growth AUM Our platform.

from set our five largest and flagship our funds capability. only to continues $X.X closes these in increase Importantly, expansion as distribution of this we any inflows product our channels the both year billion of generated fundraising with

our strong flagships for pipeline us for forward, XXXX. of is number up The an Going raising as compared is market to expected fundraising will Mike have stated. XXXX as set sizable fund the in in significant increase to

totaled of in up XX% quarter-end, XXXX. the X.X% the Our billion and increase fee-paying an AUM quarter from at quarter second $XXX of third

primarily Our invested significant in credit, growth all strategies, and should estate powder, dry advantageous Having in fee-paying debt, of alternative navigate by future driven we real are paid volatility. special lending, on amount AUM opportunity capital. our as direct which deployment highly be was

billion, available for not $XX $XX our XXth, future with and available paying fees yet billion ended quarter totaled nearly September of over As deployment. capital the AUM we

to we market As a result, remain well positioned current on capitalize dislocations.

deployment, our at of available generally to XX- our XX-month historical pace Looking over we capital have deployed period. an

However, we recognize that our periods pace. can impact deployment extreme of volatility

increased which over to Finally, meaningful billion us. represents for end, of our uninvested value AUM amount creation future XX% this opportunities by incentive at of $XXX potential amount quarter billion, $XX eligible year-over-year was a

rich So over combination in positions our balance of summary, in we business with Mike to believe with now the back turn available this his management asset-light in fee for FRE concluding this uncertain environment. capital I'll and sheet, us well And remarks. call the that,

results our and and of trajectory believe ability to uncertainty. consistent during our I business Jarrod. times of Thanks underscore and competition volatility the durability our take weaker of advantage

credit two constrained. declined the past been severely more and and the liquid than quarters, XX% markets markets the Over banks equity have global

while our platform. to investment most and of continued During operating this performance strong time, growth scale in delivered our AUM, our improved fee-related continuing management even funds, earnings, and fees we've margins across relative

and team While continued I'd us the ability demonstrated successful volatile line has outcomes experienced drive to And of today. stockholders. our your capital dedication for that powder, I'd there And The in up platform, experience, appreciation which that will deeply hard our long-dated around by for we all just turn clients, you work thank to dry need a portfolio the investors that believe also generate the please of combination our to for challenges clearly we tools results Ares' for to our and sizable open are provide our time positioning, employees end globe. all of for an consistently have we with that, investment base, through deep for grow their Company. markets. ahead, expressing of I'm operator, ample successful with my like you could thankful and questions? the support lie

the Our of Bank when Instructions] of first Siegenthaler you're of Craig. line Please Craig question from [Operator ahead go ready, comes America.

you hope are and morning well. the Good Mike, team doing

Craig. Thanks

But looks the going come the commentary to XXXX handful have So and from vintages of in we vintage updated and waterfall the like larger. scaled are appreciate XXXX XXXX drawdown performance subsequent credit. the on fees It European 'XX funds opportunity. a mostly private

So stream continue could like ramp does European vintages, waterfall this be is with American newer exhibit cyclical deceleration more going and will the to funds? or this this beyond mean fee waterfall XXXX some your

for Hi the Craig, it's Thanks question. Jarrod.

will similar I we've it think to the you'd track about think also. management how a talked want - way it is, fees to and about lot it

individual waterfall we deploying, so management As is vintages the the that we we that's and as raised a about case, on at assets this been have more earn funds they're what larger exciting In rate. fees. above think style subsequent hurdle yield European they're deploy, often these the deploying as

building pre-balance time. they're that So over

So expect would actually balance period-over-period, accrued European to much that steady fees continue like it and related style a do. management we these, of and waterfall growing

great. Jarrod, that's

of where of credit of think a you especially front. any the the side Just I XX trajectory the sort as business, follow-up, more to sellers? other you're of some flexible where can need out funds you the on headwinds Credit drove quarter continue? XX strong more the had on are investing willing there this, my versus really investing, And

I continue. think No, deployment can

liquid and beauty prepared platform in the the when geography, pivot we asset into sheet. talked by up get our and markets the the of bulk diversified As backdrop, move a volatile down strategies class and into is; the by it's ability the we have one, of the about to balance remarks, Craig,

primary market in ability we that's deploy up showing the slows, still actively, pretty surprisingly, and So not to have when the numbers. even

Great, thank you guys.

Thanks Craig.

Goldman Sachs. Alex Thank of you. now We have Blostein

may your proceed with You question.

a at AREITs well. off seen in of the some with everybody, question guess, I good and strategy. billion. Hi, peers. for retail two, thanks quarter one from the good wanted around flows about to obviously a pretty larger question seen $X We've I start slowdown as morning the

same-store distribution I the strength partners the how fundraising has continued those in been bit been of dissect a maybe So, think adding help couple quarters? vehicles pretty much for over function generally then, as of for remaining me further retail you've last a a I little to of near-term what guess, sort plans sort sales strong. versus expansion platforms channel? And the follow-up are, that, the the new of in of

thanks, Sure, Alex.

is the quarter was inflows good bad in the saw last last And against two So insignificant which what news, as news that those which non-traded quarter. some REITs well. raised quarter, think $XXX is $XXX importantly, from came we I million also million up outflows, fairly

quarter $XX were I think this redemptions quarterly million. about

And is so news, so of the think peer group if news. doing net. inflow our selling you that it good the outperforming and still the terms that we want to both That's in all with set, of is the call same-store. bad existing we're The are I actually that,

pipeline As to about we one-wire prepared for into we REITs the of the other new year. and talked to expect platform the partners we a the in bring have end add by expect that year, would the of online remarks, non-traded

thanks Great, And then helpful, Mike. my... that's

product about asked just expansion. you Sorry,

we accelerate to credit franchise. I we We're are know, people referenced have think script And hopeful we are in which beginning private our received there. product, as will well be given aware folks are well. which BDC, we our see inflows the with registration, ASIF, our PMF as private in

more include of the strong European question words, for with largely Jarrod fees realized earnings performance from approach thinking think, FRE. follow-up obviously, waterfall. realized that. the around to, travel through FRE, of in just of of growth? other philosophy? visibility was direction But into waterfall My meaningfully inform Awesome, style that higher thinking In I the of will very to Obviously, the follow-up base will sort thanks dividend the dividend does for could lots growth Ares to to management from percentage the recurring that increase bit dividend or is for nature payout, of ultimately How is that we create as a European to income now, in funds, should fee-related and the fees overall in your addition be that? your for earnings here? a direction tied Craig's

continue we'll something to It's certainly. monitor,

as However, you flexibility like markets want be to pride we our earnest, to available to ourselves as and I being that. wouldn't on maintain I'd on opportunities. and might different to sheet of And manager, want guess know, and ability in our regards take flexibility these a come what balance us our in advantage really to

we're was be we'll suited our acquisition or be as want that, growth that So aware But opportunity it's I opportunity opportunity if there certainly investing, organic would that an well away. take cash that to out of wouldn't mapping to will always something what dividend be.

All right, we'll stay tuned. Thank you.

Patrick. of ahead when go Autonomous you Thank now Research. ready are Davitt Patrick have you. Please We

good everyone. morning Hi,

the from They just annuity there insurance You growth writing the June. in launched organic of $X.X billion mentioned platform.

to writing that do run good from So that think is it the you a to baseline rate or from organic continue about ramp growth here? annuity to kind of expect

talked our able being per at close to to year Investor onto a organic. do scale onboarded endeavor to We're to will that My platform, that we was folks, we To Ares is be view as the it that. Day this prior that we than billion that would we there. with better getting expectation engine obviously remind but that $X quickly from originating went ramp level, think into I distribution

those continue are early as very we in of a scale numbers underwriting capital it June, having [maneuvers] be given started we the expectation the end speed how to exciting is baseline So think the of would the that base, but only at I could my grow. and hope

the a in REIT crystallizations of - accrual And follow-up, any $XXX waterfall other non-traded that visibility other helpful. out? the on million. than you chunky Are European quick there pointed have you you Great XQ mentioned

be included the clear, in they're in not REITs Yes, [FRPR], and accrual. to are our

The credit amount funds. perpetual other related is that comes FRPR to the - capital into the

factors have of credit last about take have that a of there, widen as we which and they little bit of you to AUM, well. is, they billion as it, about rates a year, $XX We given had rising interest couple spreads, drag. billion a benefit be a the but can year consideration $XX into within There's

of REIT. we pay XXXX So of I have the and think, or the the that European-style to that the that well rates European larger mentioned slightly interest lot be overall, had, that credit that It's we terms of there's certain what related as of from realization last in in that tax than had quarter will was a assets do of what payments $XX we earnest, that's XXXX which order realization - the our had look funds. those as expect of the waterfall really the we that and the million, of are waterfall in required there make in by to periodically realization to go number not to all from in we are really And it what start that for. REITs the credit what in, into the and it inputs when fourth spreads we terms we'd value consider year. you have that fair side, the But you doing,

you. thank helpful, very it, Got

you, Thank Patrick.

when from question Please next comes Barclays. ahead ready. Your Benjamin from go you Budish are

you much taking thanks cycle. billion for Hi $XX rating flagship the check mentioned wanted I on to question. the just from so guys, fund

is the broader that $XX last expectation just more strategies? think now just like from from expectation you're a of include coming including billion an funds. sort Does talked billion upsized I quarter four or four $XX about you the for

the queue that's that of we've the the to given we up flagships deployment of think actually that we're and earlier one a our investors attractiveness some in our seeing I environment than anticipated. Yes, from originally credit demand the raise core fundraising it fund, had pulled for our reflection of

follow-up kind talk great, between how versus we think of I of kind Just you're exclusivity like of distributed; should how fund maybe then sort continue are very of I'm specifically there? -- kind deciding like is of the like about that? wirehouses how often environment much already where thinking Ares competitor, helpful. Okay, advisors that's sounds competitive side. And, wanted the Can retail What's nicely. flows are to -- kind on really you the it a about

in we Ares consolidating the but in and of my institutional to in that a that and with Yes, deep relationship opinion beginning by news the XXX Management wire a business; long-standing clients. attractive and I three, one, and people already sit and to and funds in set with channel have good broad still that's things commitment manage as in the financial lot plus advisor to in a of going performance Solutions those like consolidate, managers that think street high-net it's and having platforms work our them; education hands the worth four is and couple community; the and around raised strong of have two, the ARCC a things market and is diverse fairly the all is, products distribution fragmented, a who of like Wealth retail products; evidenced ACRE for

we think ticket the the whose you average So the are We're are share, we're tell Ares taking are there can't published they are competitive flows, exactly And choosing in between. products, they seeing put far strengths actually an you into they're of terms are are choosing others tables competitive they broad-based, those at in that number actually the alongside business with to increase. of but whether And or that up at seeing we're lead I deepening. client seeing their another an and these real they're at advisers one. results increasing. doing I But honest flows. product, that to field is look creeping of product adviser you estate top the few how choosing be the have incremental if if look slowly the those

dollar the competitive doing are that we numbers advisers actually more choosing business that, per advisers between a to tell even product, the with if would So larger amount you adviser.

Okay, Thanks much so questions. great. my for taking

Thank you.

have now McKenna JMP We Securities. Brian with

Your line open. is now

Great, thanks.

second is of your closing fund the timely. So very opportunities special

then And for of impressive So are into dry of interesting the --- first powder vintage invest specific of what fund? now $X with to returns IRR. billion net for powder, billion areas XX% dry the the this most market $X quite are right

in returns the expectation the what's second So for fund?

fortunate so product is him with runs who that. I'll that we're Graves Scott answer Brian, Hi that let here us,

second-quarter, and relative discount. income, private which to back solutions between ASOF hybrid the relative quarter That We first into the a coming very saw a securities done markets debt now The it's earnings, in quarter, equity what significant where pivot It's the morning. secondary this is privates, at attractive. accelerated market back the backdrop and we now In to bounces year. saw on we're market a off in value strategy in value. trade-off were market our times a clearly rally focus, that publics. value is multiple will private the pivoting the seeing market the forth, second for against of it strategy secondary around refined obviously obviously basis and fixed back pivoted we're of at Good in

move to tends refer this is it as we diversification. and forth. really for what back ideal vintage But strategy So to

lack market when volume, vintage deployment in into more strategy and diversification. accelerate to a of alternative this asset strategies So you illiquid see traditional other due transaction which that is that decelerate a can create

Great, thank you.

now of We Jefferies. you. Gerald O'Hara Thank have

Your line open. now is

folks. you there perhaps color cycle? one kind of of sort the raised give would going deployed a of that of morning incremental host there. little market. that could bit good of whole should can to incremental and the as and margin pipeline, of function context, Thanks Appreciate helpful. think their Great. those invested? FRE from we us coming funds there go-live investment anything Is be Or increment how on in Is us it multiple step-function some kind and a any funds give possibility to the or on a color be you Perhaps, about of future

like could this large a remind really in the we prepare into pretty and and our fund said, looked I'll that beginning so this was be we year you, was raise year, year, cycle. we'd what at I our technology the knew of making investments people that we Sure, for coming

and be funds the are then that. deploy that, as So take year ultimately a will And of majority that from those deployment. fundraise still range, we'll behind hiring upon we in anywhere cycle that earning fees management

that margins. allow So accelerate our noted, us as will, you've to

you very look accelerant to and reaffirmed funds we the why margin-accretive. as at That's is that; script, plus. if So the XX% be to in that laid out this we've deploy margin there, an these ability target feel comfortable our if what and as we will of certainly

here. Jarrod

which look the which pay we pays on private Just you But in equity bulk pipeline, is to is on seventh committed. that deployment. clarify fund of that, those referenced credit funds at that if were are which not largest corporate our one funds our

you is extent step-function improvement will a in the XXXX that in in that particular see successful to that the margin raising, of So part business.

the kind products versus the opportunities in and clearly, less looking that's follow to kind public Okay, I least your think And are yield, about Thank dominant pension or risk higher headlines out the of as in of market? for fixed perhaps I plan with sort you other opportunities up, see potentially age at this forefront, are private morning, then income kind of dynamics who's you. at at now with shaking or that you helpful. shoes are the just credits credit And perceived credit. and term allocator how the a just competitive as the golden of of all put private reading but myself

to lot Yes, there. there's a unpack

on succinct, to particular I'm to any and down to try So going if standing. drill want you be

and rates up, increasing to dual And fixed obviously, the traditional investor are impact value in you sovereign pressures in income company-level. have of book rate, at you the First, existing and debt, investment debt. fixed declines going of within portfolios form performance differentiate between the when high-yield of the have grade debt,

think income more lot the rate start those decline floating That dealing product that of rise this and values private losses are makes some So that point a, I rate and important rapid fixed to folks in of cycle. recoup the in valuable at in rates. there's with with the rapid actually has come to just the credit other all

first, So I fixed I between and that. balancing make want act. sure just we're credit that to traditional positioning The think, differentiating often income private is

either having rate house I think in they're terms experiences side on right different the two move. totally now of of the

had private Right private provide of liquidity to companies, positioning, don't look competitive the traditional if I and now terms have private this. credit age think of at to you and if on, and know Scott golden Public its In a markets I we ability hinted their markets at in more a going we are credit golden we markets the have that the some we respects markets before. more longer. than age but getting more in ever sense of They're have staying private private concentrated. companies and in private

reevaluating in markets. of people think are value I public the liquidity the

its headline is into capital more referring the those So are didn't way markets that private people maybe, and I there's that to. see what finding

shift purposes is opened of the the and a as is for all now private The in that provider are capital high yield in economy, again, right largely unavailable. loan intents markets structural growing So market markets market companies. The not unavailable. public largely to leveraged the

think type this. market a feel positioning the from position competitive the the of across So in that one, we if I positioning. powder amount competitive We're having in great the active standpoint, platform about be liquidity now only a that not a like of to we dry are have providers

that's color. the for Okay, perfect. Thanks

Finian Wells Securities. have O'Shea now of We Fargo you. Thank

good Hi, afternoon morning. good or

that deployment. eventually understanding seeing will these one on move private And up, this middle-market lending? lever companies back Is favorable We're is more a a from widely that borrow buyouts. something headlines more less another you're of there an seeing in of that all-cash Sorry, equity? toward direct is or or to impact lot

on and Yes, I seeing, would that say if as I don't all-cash we're based that buyouts pipeline. Mitch with here Kipp we're are know the in me and seeing well, what

compressing, against the have lot think pretty standpoint I a discount will going interest if rates. discovery been at from and price I just happening what's think think around the we're to And leverage universe. change about private clear. in are in in attach There's equity rate in on the providers is, the willing of obviously in price where and rise you the what transactions you given referring market, may terms multiples what primary a us where Valuation of in what disciplined terms. and the market to like leverage be

transaction, clear leverage to would bridge I a cash will disconnect So to to the between finance markets private use a think it. equity that like buyer they a the extent and incremental there where is

in move private cash. point, all order we're market, to market today's So like limited, maybe sources vintage of a I few that again seeing going to higher course. the the But but in all-cash think to I think is that is to think but flexibility, pretty not where clear are your a we're good to and for way the liquidity quality don't this about credit, transaction good it's think and in answer contribution one it cash scale a I scarce, be have

Thanks, that's helpful.

Just a small follow.

LIBOR for still base I another the it of improvement extent impact a the approximately fourth-quarter the is rate be think that into X% context the today's next or there in visible of Is curve, the mentioned would performance. for you uptick year?

and so up and rise to we X%. the was Yes, which just in rates, just equal Mitch ARCC being others the about gone Kipp clarify all X% what that, have would talked in-place call, else if on just reciting was have income enjoyed

go that the reason way backward-looking to the have increases to answer absolutely which talked about is rate we is, the X% continued we So there expect. extent is And the that we then more all the our of is a takes full it and get couple months any to the ultimately of into flowed it so portfolios rate the averages, portfolio through these effect that increase. and companies

continue against you'll rate off incentive the And we of if our of credit are mentioned, floating to I we Jarrod that earn increases, rate So maintain think funds hurdles. trajectory fees most fixed current the as that see phenomenon. rate

distributions only the that our meaningful ROE it to higher so in credit not fee-generating our And has opportunity a are book. have portfolio incentive impact on we the in but we delivering level at investors,

you. Thank

Adam now We you. have Thank UBS. with Beatty

Your open. now line is

out. and of the growth comments Aspida. around the that appreciate earlier follow-ups on Thank kind you morning. organic good Couple I sizing of and

and get to balance Thank number a opportunities two, also, perspective from your seeing potential Just inorganic you're thoughts of about marketplace how thinking sheet on what from you're in number-one, you. the wanted capacity? there,

Sure.

which each intentionally Aspida use those that reinsurance trying look next to capital. have the to what as sure organic life that our flow opportunity we all our side-by-side. organic Aspida understand make reinsurance, So business we opportunities annuities our gives And are to inorganic annuities and us can the ROEs set way and business we that up at is in the distribution, of to opportunities was pillars of then generate we we do side-by-side there

we market news good that right the is generating the in, higher given now ROEs. we're are think I

think I just to able generating. that liabilities we're where given against the assets originally we underwrote we're price that

three attractive growing. So the our of significant scaling. are And is we've now all right and and those opportunities view are pretty talked about inorganic

folks their their continue models business companies so Aspida, or inorganic and We as see simplify to for reinsurance business as good of of we've like portions traditional opportunities seen. I sales to insurance the look look either partners to think

In capital. largely terms as a light with platform of that maybe view have balance growing balance third been remind sheet just I would managers you, we capacity, our sheet party asset that

the upfront business, all capabilities third-party that I scaling so get that and investment to formation capital, significant the around moment from and expect would done talent continue. that been largely we with And made a while has to

That's you Mike. great, thank

growth one or Just the you inorganic rate for that regime. expect opportunities that changing on to Do the Thanks. follow-up change the one-way other? around

do. I Yes,

market. changing is regime the them. of I into number catalysts that rate think The one bring of a assets there are will

So I the said. drivers. over would inorganic pickup that one of expect of like the I pipeline will being time, rates largely

today. me all super. from Thank you. Okay, That's

Thank Great. you.

Markets. your Capital May We [Operator from Instructions] line BMO question. on Hone Rufus have the the with next question of proceed

Thanks expect the credit European of morning. if to around the in in credit I geographies Thank recent seen start when some And fundamental lend company's you're direct wondering the generally, was very ARCC and U.S. differentiation metrics Europe? more same different you're business seen between comments from wondering call lending and that I'm you hasn't U.S. wanted performance the I to come through? seeing you whether across And to feel to. months, much deterioration And of the do terms you. credit. Good just the you businesses some change you made about of to the the private Great. seeing come any the back much.

Sure.

portfolio. as we answer weakness is, credit seeing not So credit are in material, the any we our simple sit here of today

nonaccruals ARCC. at at low you call, we of history, was about talked X.X%. value. you the were meaningfully at So fair lower recent that has XX-year Company, if highlighted the most at X.X% look On about portfolio And XX-year it cost, almost that average earnings our

actually you current our terms If how positioned environment. European fundamental coverage, portfolios the interest performance into at metrics on just of were underlying direct in leverage going lending look investments, based some stronger and those

two think performance. that well, times levels in coverage right? XX We're at high-grade nonaccruals the you coverage high-yield coverage we're in coverage low we the market, liquid as So And and at market. high the strong to in excess interest pushing to grade. in again, the five If XX in of times loan very in six market, interest times I look well see markets

some experiencing in the anxious capital be structural how underwriting. is protection But them bulk structure a I half given inflation And any equity level these rate to it uncertain given we So fundamental companies remarks, asked, wish from until we interest we I are had have lot strength trajectory there's do just up distress. about of get subordination these are on providers I the kind When environment perfect crystal at you around be see our while least the there into a going to should ball the assets that think of absolute the change rates, times. the strength forward of top not the with you. in portfolios that the of this the experience of significant will amount public with tell maybe European not economy. a significant, is But prepared these the just that this will point, versus markets different of the they're shown I period just lot through equity of a of economies help a institutional at and a has portfolio of lot for to indicating the as concerned we were in, global of as the controlled structure how the and rate economy, as are. uncertain and are given interest of said I'm

now going the strength, lot expect are we we're challenging of I it's all before become not But between seeing we of appreciative Europe. So that it becomes a that right lot differentiation should and U.S. with less more and in think a to challenging. going

Thank you.

now Stanley. We have you. Morgan Thank Cyprys Michael of

is line now Your open.

for Great, morning, me in. thanks hi good squeezing and

had was Just what real drivers that seen some guys? strong to in took of portfolio estate credit, might quarter, on guys be you markdowns looked marks mix. a markets a on for bit books wanted in the pretty to you and and in some circle on the some hoping where it were that their positive the then down, back you seemed the able a you were I others PE that more we bit take elaborate And in had broadly of period marks

credit role there. of then Some I were negative was the your credit up, when marked but strategies look at AUM for that

credit? negative and markdown in was versus hoping was unpack what I maybe So you was could positive what

I - including energy, we it growth, what in there's that funds, the return the Yes, the businesses. drill invested of we type on reflection think remarks, in, sectors ACOF think is that equity said look invested that's you private prepared are the a higher down don't to our if much on more at capital I that in higher

single-digits, see rigorous rates, industrial and increases pace our focus which those And we see in continue to Same thing valuation lease estate given business, so, high the we multifamily, deterioration outpaced healthy very portfolios, to about, in growth continue on significant talked mid multiple. rates. our occupancy for real of and EBITDA across the the very to was as in rents

value shift fundamental a performance the to that's in rates. caused So outpace being any continues deterioration in by

with again, forget as don't credit portfolio, ARCC. but of as of reflection book environment. current In modestly Are you again, that. this terms on the largely saw rate value, And of down income environment, the rate a through value credit, in are most growing this the of

to in private markets XXX So excess XXX-basis-point increase basis you see point six the return you of where amount the nine if accumulating XXX a about you're to is, to spreads, relative think in were the months rates, a ago. significant of increase way to base credit attractiveness

be to durable. are is even absorbing return why if decline in so a so of X% proving NAV positive, which X%, portfolios I those you and quite to meaningfully the all-in think And attractive to your continues be in it's to is investors

we're on side really seeing not credit So of the the significant underperformance house.

you income? How a over happens lot a flagged those as protecting follow-up. issuer? they just on is themselves? I you just hedged much event with more credit guys that potential help think protect of and are terms How issuers on do in floating side? the And about know that exposure on you think about rate you that for book. those a of How out view what and impact guys you that How off those how that of interest the to any rolling the have Great, the to having time? hedges credit have credit issuers? But negative significant pay

companies. actively One, couple Sure, portfolio these so obviously very comments with engaged we here. of a are

we hedging yes, we're months fair private of One in nine become that a fundamental agent the future will not about effective that rates. Those benefits of portfolio engaged, step we're they amount being investor, performance effective to But a talking my roll maybe off the are and the usually underlying the way rise eventually the take to is attributing from that I there comment, standpoint is risk when of, to impact going rates, of and/or highly level. is muting off we're because of the talking were lead there the six weaker so about default a markets are in at on it really ago. earlier in less credit than and a lead want in portfolios. coming back hedges recession company place just coverage it much to as

all have theoretically a of to the to this bulk And So companies come to would coming now, the well of decline. value waiting in increases would us equity. coverage of now the is of us. as earnings as the the think rate that credit that of has owner, from us earnings whereas if challenging is to past be in coming that harmful decline the is about one degradation as would the But be harmful see everybody way opposite, you is all credit that transfer" to to private "value as cycles,

we and rate declines the resolve with work to So our have partners where of obviously, now earnings the challenged we get gets from go continued to equity that this into below increased accommodations. this to business take take doing the the interest. It could come the in take the equity company. in extent company been for the but somewhat needs could And or could long we've form the time. those increased into cycle of increases liquidity the It us. of That allowing interest, to a form cash flexibility of structural subordinated noncash form combination to the of debt the form portfolios of

pretty been flourished amount said, and rate requirement broad-based private base stack the significant lens that increases still have I the of the that cycles a credit, to company that the portfolios. important market of value of to generally the across of in value think to appreciate, the has yours you're played lot are transitioning. through has the most there there's And rate you I of people use significant, But a before. that from of long in well. equity So But from it's of tools benefit and that. thrived is will Like half the it way the as sheet. is this health a a we're at the se, while credit. good the capital portion a X% And credit company, the that's a out but And past as thing, this from it's credit private balance not top the of sitting for per or how transfer the

So I think as people need to historical perspective have some well.

protected And level? is you the say hedged portion or at what would portfolio company

U.S. I that. the it's think significantly XX%. higher book, the in than And book, European about in it's

thank you. Great,

Sure.

hand comments. Arougheti to the would like for back I you. some to call Michael Thank closing now

in other you today, continued that the quarter you around support we look the thank to wonderful hope and think earnings of have for say that any time and to forward our New don't I year Year. your we your up fourth have event a end and catching

for you does That joining. Thank conclude today's call.

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