Ares Management (ARES) 2 Aug 242024 Q2 Earnings call transcript

Good morning, everyone, and welcome to the Ares Management Corporation's Second Quarter Earnings Conference Call. [Operator Instructions] Also today's call is being recorded.

And now at this time, I would like to turn things over to Mr. Greg Mason, Co-Head of Public Markets, Investor Relations for Ares Management. Please go ahead, sir.

you call. us thank second for and conference quarter morning, for today joining our Good

the today Chief on Officer; Speaking call and Chief Arougheti, Jarrod Executive our Phillips, our Financial will Officer. be Michael

during several executives today be We also the with session. have Q&A who us will available

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

materially, differ any could results we undertake update actual Our to obligation and such no statements. forward-looking

fund. past also note call is Please sell an in of guarantee future offer Ares purchase an and that or this performance on to not solicitation of interest offer a nothing a to results an constitutes any

second reconciliations Resources quarter comparable Note earnings presentation will certain to our that measures for principles. accepted which call, most XX-Q this in we Please the to file GAAP our month. considered be refer to of website directly this generally financial not in measures. later from non-GAAP plan or a Investor the During isolation of to accounting section Form measures accordance with our should we as available on measures, the prepared substitute refer for

XX% holders The our year XX, September of our This Class a share of be dividend on representing dividend to morning, A stock, quarter third the for will September same ago. and we we over record announced XX. of paid that increase XXXX, declared an company's common the quarter $X.XX per dividend nonvoting on on common

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

picture in and and with is economic soft a labor landing. better for a outlook second rates, Improving everyone. macroeconomic combination morning, well. The business for stronger market. interest trends the strength and increased environment, both by good is and confidence solid inflation quarter transaction driven of estate improved and backdrop continued real credit recovering doing stable in market Greg, hope our I everybody the a Thanks,

active across more Given the constructive strategies. investment our transaction of many were more we environment,

$XX highest In quarter higher second our invested ago. than on fact, and we than billion record QX, XX% the same a more in year quarter

to and estate, in demand As we May, and globally affiliated broad continuing infrastructure, for at retail Investor significant investment of products, within institutional our our Day insurance, we're and credit opportunistic also secondary strategies. but see real value-add alternative highlighted a host particularly in strategies,

fundraising to capital the in was in QX with gross bringing our $XX quarter $XX raised, billion. our raised funds year-to-date best billion single history total

our billion, to under quarter, the a record grew second management a versus $XXX year assets For up ago. XX%

earnings and Our XX% the year-over-year supported in fee-related strong deployment a fundraising for growth activities quarter.

highlight also will strong fund quarter of We another later. performance, had Jarrod as

Overall, business. for firm's the we're momentum, promising outlook positioning, pleased our with and our the

rate cuts, transaction time, we footing. nearly for in the LPs improvement expected in As improving rate seeing prospects and for some this we've a trillion powder $X and a stable dry on year variety aging, of economy from backdrop are significant remains volume for that's a interest capital, demand the solid return a for equity that gradual reasons: an of private

$X.X over strategies of For groups billion. billion deployment with was $XX totaling in with activity approximately Ares, private we credit looking across strategies deployed strong in private credit QX the double more net deployment in billion, second our and real net very gross our than X deployment up our $X.X QX, asset credit year-over-year. quarter In XX%

the every solid deployment of indication year forward, our will environment. and to second that activity, investment have pipeline Looking continue we active suggests be half the continued an

recent indicate assets stability. very remains and trends credit quality The credit across our corporate strong,

which year. remains second are the lower companies is in portfolio meaningfully portfolio's prior growth, EBITDA reaching XX% historical organic The turn lending direct straight U.S. our quarter ratio XX% market multiples range, than leverage levels, year-over-year. improving and company example, portfolio an below experienced loan-to-value X.X As their the average of low

call, For U.S. that in seeing negotiating and, earnings credit incumbency these on markets markets is our reported more staying executing decline loans. economic instance, and and advantages, nonaccrual the to on and underperforming our structures X.X% highly we're for rigorous its solid out-originating a Based playbook That European by intensely selective. tight using across performing performance. our our growth on continued said, in ARCC fundamentals we're in due and deep in favorable competition, credit focused fundamental on corporate continued active book, a competitive outlook decline our diligence, documentation therefore, loans

we're real of such estate areas industrial our as represented rates which asset transaction rents remain multifamily, value. of occupancy and fundamentals valuations activity for and market core X/X focus and seeing strategies, our In nearly stabilize. our Operating positive

Within we growth continue from the these positive benefit longer-term e-commerce, onshoring segments, and to supply-demand dynamics. in

extending peak levels duration of the to strategy of our is as market near-term the digested. are supply deliberate of terms Our being effectively navigate enabling industrial lease us

positive housing, adjacent seeing such new as doubling single-family in We're continues in team the ago pipeline year significantly deployment our market rental also and was active the more second than transactions real more the our student upon period, Based self-storage. to build. with estate trends for and trends, areas improving quarter,

infrastructure $X across real opportunities digital fiber and within installations the infrastructure, broadband nearly particularly various investment We're digital-related growth. including infrastructure centers support committed data past credit demands data Collectively, We our billion also estate. towers and X AI but in centers, to businesses, enormous the new digital infrastructure, we've see needed over significant of alternative in investing in the years. and

clean and actively natural wind investing opportunities solar, gas. infrastructure renewable focused energy also We're climate in new are on including projects, and

in approximately debt across to needs billion past these sectors growing the the $X.X energy in committed meet and we've U.S. years, equity the X Over investments

transitioning to new liquidity solutions, funds, Within our providing both portfolios, see and and for in investors structured GPs with we try alike valuation IPO market. including across and manage and on working as secondaries continue the liquidity environment businesses, M&A demands robust a range slower our of a purchasing managers investments for LPs. has Overall, GPs solutions secondary remains and LP been market opportunities continuation to opportunity what

on and our compared some continue our more client fundraising of insurance, highly and productive, scale. fundraising investor wealth record institutional, to channels: our management channels, broad year. our color provide this far a let Now year from tripled to base, All to fundraising primary benefit expanding our X wealth are increased and Across and across has quarter. so in we're loyal acceleration channel, allocations seeing distribution growing we a alternatives, which last meaningful than me

QX, $XX managed billion differentiating as lead group. broad CLOs accounts Our within strategies in raised way the our our track factors. scale of we and of nearly funds, In offering to and continues benefits record credit credit are

our market earlier may seen the largest institutional that roughly billion U.S.-focused the in the private you the As II. in from investment or $XX.X Senior have double raised week, Direct SDL III III, final Fund Lending fund billion of This with closing we credit we for and SDL $XX.X capital announced investment is this total capacity. is of

July next QX raised could SDL fund. billion leverage in $X.X this equity over capacity commitments capital billion III's included in months. and that of We anticipated closed $X investment along fund billion $XX.X in vehicles, for to XX raised with leverage up $X.X the be billion of another related and

than well to to III, $X XXX underway date. companies investing SDL also having committed already billion We're more of capital

billion institutional we XX VI Direct billion other in With anticipated fund equity This the or market, Fund, over of of Lending our brings investment capacity another million the EUR today large credit Ares' European EUR commitments to respect second private total XX.X equity raised in including commitments quarter. to XXX EUR leverage. total

billion X equity to close in raise QX. commitments quarter, We commitments with EUR in EUR the expect final additional X.X the to third in another billion in expected

life and credit example continued within is our strategies across our for also We're which various is we new this sciences focuses currently launch Specialty initial liquid on closings great totaling we Healthcare quarter, approximately for the illiquid One the a start fund, in holding and our that coming raise companies. believe We the loans receive commitments this product. inaugural During direct Fund, $XXX to weeks. of million funds a to platform. expect our to

we've $X.X XXXX. X record CLOs priced we've the CLOs, quarter. billion, in raising priced $X.X in addition, for In of Year-to-date, exceeding X year full X CLOs billion new already our

raised APAC billion credit, credit, with across our across the direct in combined debt fundraising $XX in billion estate XX months in strategies the lending our strategies. over months. infrastructure When AUM alternative past approximately credit real credit Overall debt, $XX XX our raised we've over and past other private we've private

in aiming Fund, this investor meaningful Based we're hold to to investment predecessor close final this and support exceed close fourth and anticipated the final will our strategy third total a we Real believe the In fund Estate U.S. quarter commitments size, its on opportunity. Assets billion. $X.X Opportunistic commitments we for the our bringing XX%, Group, that demonstrates the expect of for by the fund Real

great with second close first the including to start our in off European for quarter. EUR the launched in related We're additional expected the also recently raising Value-Add Fund million vehicles, Real Estate quarter, with XXX capital approximately a fourth third

sector. our billion less market in also attractive dynamics values compelling we We Strategy in U.S. with and Real this raised $X.X Debt as continue competition another see Estate to

addition significant the demand across meaningful our seeing to managed we're also In for in fundraising accounts funds, platform. commingled

commitments the raised and in accounts. over managed $XX and $X.X in billion, we billion second new quarter year-to-date periods, respectively, For these

we wealth very early and to penetrate continues set. market history, believe boomers to that distribution, in a seeing our As I wealth management generational how of geographies divergent as the existing earlier, younger We're we generations expand we importantly, into largest are with invest. broaden stated new channels, trend momentum the have and baby phases the and in significant our product new business transfer

to wealth growing out with toolkit investors positive bonds, believe implications allocations, investing in could expand assets. we allocations see play their to but portfolios our that Baby to have we're increased private in results. are seeking boomers significant these for and their manage market investment younger their beginning stocks This current trends by optimizing and trend wealth primarily

new raised X across nontraded $X.X inclusive During the quarter, equity our $X.X we billion. second of in products, and more raised commitments than we billion leverage,

equity the the $X.X raised capital over in a ago. For year-to-date X.Xx totaled year over commitments billion, is the which period new same period,

to half last earnings flows expect call, on our expanded our second solutions focused continue of momentum Since partners. nontraded to products through global year. Based certain the we distribution with these partnerships, X into the we've wealth gain launched additional

affiliate Aspida, is insurance our a strong growth on minority-owned trajectory.

secured in equity expected equity QX, poised in for With quarter, from nearly third-party million capitalized and well is capital raised $XXX Aspida be additional institutional expansion. more investors. it to This continued

annuity exceeding an billion is annualized the half thriving, run on market of a XXXX. $XXX rate first record in with The sales

industry opportunities. from reinsurance and flow flows Aspida from experiencing tailwinds, new robust is increased these benefiting sales, annuity retail

we and believe $XX where with we're or better we first overall, match raised to the in the in in that billion a So that of to exceed in raised ahead potentially we're $XX.X expected XXXX. midyear, position billion months, we be X

of position Our half in an deploy. amounts strong first excellent with puts to capital available us record

next X and Looking ahead contributions months, our to more funds. likely fundraising broader the of diverse set a to is from see

market expect the advantage in to allocations. the For in have the asset across funds year, XX alternative to strategies growth we XX expected take of

And detail. Jarrod? discuss I will turn over Jarrod results now our to to more call financial the in

good everyone. and Mike, you, Thank morning,

paying As more AUM, growing record yet state second to paying AUM offer Mike realized European fees in helped growth deployment raised future increase sectors. us future on to many management high XX% strong second income. The to stockholders. and ideally and this you in as of we in with yet waterfall deliver mix we quarter, combine a we realization drive our our believe along the quarter normalized capitalize year-over-year visibility in a in our for with results billion levels FRE AUM markets and return not potential, XX% the mid- situating realizations in continued the we to growth of activity earnings fees fees, earnings $XX to said, not strong FRE-rich When teens

quarter's earnings, look Taking revenues. with a starting at this

credit not yet compared second of Our performance primarily last management equity the same fees the totaled XX% our year, of positive quarter. quarter, period non-traded paying along APMF, net in private primarily select increase million by fees. deployment an driven Fee-related our in to totaled product, [indiscernible]. $XX.X secondaries AUM revenues over with products the from $XXX million

assets generation FRPR $X.X $XX.X from and, portfolio We growth, would FRPR in growth episodic of in purchased AUM quarter. was APMF [indiscernible]. for from accordingly, approximately will be from long-term provide one difficult APMF to APMF additional FRPR the tailwinds However, sizable and in like project which reached to The the more spikes by more FRPR million aided total in benefited expect a recently billion AUM

of more or XX% realizing credit quarter. anticipate we our fourth FRPR reminder, a As in the

point second quarter. through I G&A do X the running in out want to expenses our

AGM we multiple a impacted being in investor instead G&A First, year first in by events Typically, incurred throughout our cost expenses of May. quarter. were held the resulting our ever spread QX firm-wide in single hold

As year will annual meeting a result expenses. quarterly spike expect benefit the fewer half this G&A costs, of event in the of expenses in we second from

Second, as to increase $XX.X to distribution million we quarter, incur we of our management $X.X QX. fees wealth supplemental million second fees. totaled These an continue scale distribution, compared in the greater

these Importantly, reducing respect partially employee offset majority fees for be over or expenses time of the fees to funds. X we recoup Part the as by with FRPR compensation associated will paid these

XX.X%. million, management a FRE XX% by fees approximately improvement XXX and points totaled of to In the higher quarter, $XXX margin the driven from year, previous basis

performance than funds, was $XXX the increase Class year. mainly after-tax common was over of we the the million, second XX% realized previous $X.XX, generated the Realized income, realized a style income In quarter quarter, European of driven income waterfalls. net quarter up from $XX in million A credit of share XX% by per XXXX. second second And more stock

ago stood our the AUM $XXX up from year of billion, at period. June As XX, XX%

year. the Our at from XX% of reached previous quarter, up AUM million end the $XXX the fee-paying

representing Following sustained annual available fundraising to at increased approximately paying billion momentum, for our $XXX deployment management AUM quarter-end, yet not $XX fees. potential in million fees future

the stock $XX rates to of by our income strategies ]. income by our credit increased million, uninvested, second interest slightly primarily in opportunistic XX% performance Our driven in accrued XXXX, is performance, billion. interest In due equity net the by income exceeded our incentive $XXX as change significant the Savers amount, this Of quarter, second our reversal eligible quarter certain accrued meaningfully declined performance in corporate $XXX position of private offset of in reaching AUM to potential. representing growth performance and a partially due compared credit the hurdle funds Village. the This price Value to to over billion income, and net the was [ carried

out million Of nearly that just the waterfall European at was million of style funds in million, are $XXX of funds, from $XXX quarter-end, net XX%, performance their accrued periods. income $XXX with over reinvestment

nearly recognized XXXX, of quarter. million million of all income half funds the an that estimating fourth $XX second additional the For we're from performance net of amount $XX realized to in European style with

million anticipate income to style XXXX XXXX fund will For slight the a range we XXXX. European $XXX decrease XXXX, in realization we from estimate our to net be The million. X estimate in realized to of $XXX of could timing currently XXXX performance our shift our is related end primarily where

is total over X realized performance the largely this However, unchanged. life expected the net income fund of

quarters spread in in XX% For quarter first annual will our XXXX, it's and XX% performance about [indiscernible]. best of European to realized be that style income the quarter, the assume second the XX% third and across

net full of regularly performance fund the end of income realizing toward end persist lives, eligible performance tax style credit distributions, older which to beginning current our our the larger realize early The life. net will XXXX. the of as their due near income, that our European The European smaller in funds the European realizing compared start payable as of funds are to seasonality we waterfall seasonality funds potentially which of fund their several primarily larger realizations stage style income make performance

outperformance XX like double-digit within I'd group, returns which composites Across fund Finally, past by to our credit months. generated recent strategies. all our discuss over gross our is performance, highlighted our credit the strategy broad private

credit characteristics. are as economic variety of fundamental well positive particularly scenarios, believe see very approximately to of we in XX% outstanding continue portfolios for [indiscernible]. our default positioned And growth credit corporate a we're Our

and XX returns we debt Real infrastructure Across for the the of generated X.X% in quarter for Assets, X.X% gross last months.

relative As Day, highlighted real strategies returns we to our in are equity equivalents. comparable our estate Investor delivering market strong

stable overall market discussed, to real recovery, Mike see a portfolios, we As fundamentals signs values. including to continue positive improving beginning our of in see we're slightly to estate and

equity large X.X% our Savers quarter by on LTM return gross quarter in ACOF of private a in second basis. impacted position X.X% the had corporate Village in in The Our Value the and V. were composite returns an

fund, respectively, gross return X.X% rate and recent internal private ACOF most generated XX.X%. inception of of and equity and our gross However, XX-month quarterly XX.X%, a has VI, of corporate since returns

year-over-year private portfolios showing strong corporate with growth into Our demonstrate equity fundamentals mid-teens. the EBITDA continue to acceleration

I'll Now turn comments. closing Mike it for back to

generating our Thanks, Jarrod. and May, sheet the light depth and breadth model. At of on our of our management Investor growth focus we Day our in with platform, highlighted our high-quality the consistent team, balance

drivers for our banking of the highlighted credit, influencing the relationships need the positive investors, system moving also private investment, GP of We to including out business, consolidation institutional assets for secular significant infrastructure wealth believe our platform the allocations, trends. and and secondaries in and that power we're benefiting We this of management how growing compelling from the insurance. demonstrate opportunities many results of quarter's compelling these significant

future about We the optimistic remain outlook.

We available environment. an have and to see for investor we one remained largest industry the investment demand will performance of capacity key believe in the transaction our investment what investment continue Investment in across strong improving products. significant of our we be strategies, alternative pools

As also I'm of their and deeply our always, dedication. I'm the collaborating current grateful And drives our future our appreciative ongoing of our support talented hard the team work business, globe for for investors' and and deeply across company. success

the up And operator, for we can questions. line now open

[Operator Instructions] We'll Bank first of America. Craig this at morning to go Siegenthaler

update were wealth We flows on the channel for with net an private looking year-over-year. tripling

Day, to the laid X more Investor plans out you X products launch at shortly. So to your

maybe secondaries vehicles retail that Pathfinder type you gaps? biggest is going? how So the ABF It infra like should a give looks and

second the a wire join know I ASIF. will a in capacity with pretty then you're U.S.? or managing ASIF When And tightly third

if them, know. let if miss and of of I'll all see us lot to I a we questions. one, It's just get

billion new we $X.X we platform. raised we're and In So in capital QX, of the like articulated. We're ASIF. the -- with as products PMF, momentum that ASIF scaling across pleased had the seeing continues,

continues flows, some net see flows in and our as inflows we the into positive X I REITs, seeing we've are peer products, Our fund to X positive while of unlike interval think slowing net seen products well. still those

in be of in our parts expect enjoying put pointed We out, well. the would you new as And our platform and the around product products business. Craig, that dedicated we that as that I next introducing given that channel. in franchise be of access infrastructure we're success certain are and the would into process provide may the to of credit breadth opportunities private there to there, the some would

continues ASIF to its broaden distribution.

actually approved on there. another have We platform distribution been

And not so continues did our that spot U.S. outside distribution the is international remarks, mentioning, XX% and forward to worth to coming to the moving highlight plan. prepared of XX% now are flows also of according bright in our the accelerate, we that wealth A market. of is expansion from

there making And broaden the bearing that early we're so to the build-out. the in out are investments food distribution pretty

that I think it. I Did was miss anything?

follow-up? you and -- covered No, X it's guys. if question get it. And do forget or I follow-up, you a a X Mike, just I

ahead. Go Yes.

Okay.

follow-up on quality. credit So is my

see And a the inflection to always industry. for outperformed so positive have you it's That's Ares, nice nonaccruals guys but at ARCC. good

defaults So my book industry-related. though your the getting do continue better? is industry the little direct private deterioration is even past the in you question corporate industry to expect to nonaccrual more Is lending, is a write-downs? see some Or and peak

rates into go that alarming in GFC. the or should both the And think what approaching going up Look, our pretty but at longer like a clear or cycle, see as up. calls classify we we them a I we've been seen we're and COVID not level ARCC, we've on in, go that to would Yes. that you in do here default one

maybe happen I beginning moves and are highlight, see things good But up other basis, the called given We space an continue relative market cycles and outperform credit underperformance types of the performance, index remind portfolios. in in to who the to there that large expectations. are Yes, similar outperforming in old-fashioned are on. and people competitors putting some prominence will our our people's to the private market think credit we are but defaults you certain would the market I and of performance on credit

of the we've remind this about and talked in I'd erosion coming of and through lot a cycle driven we've not necessarily the before, stresses folks, this due a earnings. result as has rates, the run-up liquidity in been seen in that to that

back expect the to front And we're so in even as cut earnings the will recede, release end going cycle, so that rates, temper if cutting we the you're now, defaults. from future all we of that in see get some

at a And to seen where credit the story in capital side relative standpoint, deterioration this important that the probably when point that most amount the haven't comparable, low just And the the this, believe subordination past future important these would I from our risk of not part think that cycles. I market mitigate story. in is undervalue big equity in of a is cycle how that is range. a be I from on basis we And different. other this the gets equity structures mitigation risk. of just in level will and prior sit in I to the written a It's cycle, of credit highlighted portfolio setup is private structure credit significantly the and the XX% loan-to-value credit

I broad-based right underperformance outperforming, read we're yes, but So there's don't now. through a that

Steven Wolfe We go next at now Chubak to Research.

speculation start off to strategic strategy. more wanted on It with issuance certainly equity I M&A. quarter. saw We on a your has M&A prompted question the So the just during

infra, to look where back a estate, global Day, infra XX inorganically. to the areas main number you were thinking Just grow Asia might digital Investor Insurance, at of Slide listed X. you real

macro how indicators cuts, any in priority? with some expectations for valuations potential is Just rank targets? you softening, in improvement M&A the there areas would rate terms for of And those of

Sure.

after That has look where markets and view not see, to changed. on have So in up set, Investor our to inorganically that if look, scale gaps product large addressable Day not our we growth. highlighted we scale And may go capability where we matters.

business a into We walked want also drive to similar on talked high, cultural strategic be what Investor to through continues of bar strong we've and want and accretion. Landmark to financial to others acquired have And as a Black able value to real we We The acquisition strong see be want to fit. we road with see demonstrated Day. the any Creek we've about. map good that the to very

I do maybe that think that obviously pressure seeing the for can't private we markets in and cuts I some sure. for prospect rate will release the business deal generally. flow, catalyze some But are say

I the So would imagine asset space. that that could management into flow through

the But bilateral, you Investor been you deals, be at at to end to of as day, at look been we've on we able Day, do at better And look the they they've think these where to businesses when stick to the tend high-quality when trading highlighted we're noncompetitive. levels, at discounts to multiple. attractive in acquisition discipline and our we that buying that going of type make I can multiples, pretty the

much wouldn't equity I the that. into of too read terms raise, In

of and growth Day about continue wealth talked sciences set. Investor that one We're on businesses, We're is launching organic to the up Life lot product investing in we down also our initiatives. We invest a example. new

the So the in company, to market bit little just ourselves that invest when a cap was to to delever continue that really raise to you at growth. and position of of the relative look size

gross the for follow-up, versus dynamic. origination just on net my And

but clearly gross still levels indicating see that continued some of strong encouraging origination improvement to quarter, ratio, gross refi in also activity. net So elevated deployment the to in

wanted get remain likely that the in a sense Do just And as you half? further will expect back deployment to to will back in half. ratio the strong improvement noted likely traject. expect how you You

think ARCC call, talked then have pipelines. And the was I the our towards backlog to is it just deal the flow. we we incumbent on [ forward a refi transaction billion. X-month Court alone on activity the ] as We're pipeline, composition and view do. at there from And obviously definitely $X when pipeline and X- pure look of about kind skewing we the away new in -- of

to platform of Real parts after slow We're increasing thaw. beginning beginning to the signs is see estate months. a XX of show other pretty to activity XX

expect that hold, would the then improve. gross we'll net and see I to So will deployment

kind point, if a at to as to look XXXX average gross historical Just about that's and down XX%. was dramatically. data back of come you levels, net go our And were

I place think and the it's think trend is so And I going that continue. line in to

next now to of Sachs. We Goldman Alex Blostein go

kind bit are I how of and distribution a fees dynamics with wealth on wanted of those a discussion to evolving. start

obviously, seeing, gross really and how for other platforms are a kind the come. momentum, any, distributors nice you on you So charge sales that? products have changes couple What from on if of and of

of a big, We've maybe this placement little on hearing structure. been kind more harmonization fee

$XX how So a Jarrod, does of bit as out? that play I on million. fee that, of higher little call a well highlighted the know there's you that

from distribution? kind that run higher rate funds? expense was some placement onetime So of a from fee of expect a just G&A the closed-end Or we generally should

you second, yes? handle the Can

Yes.

great. Sounds

kind based quarter. management what we wealth on is Alex, the that a channel actually rate did the of on So run for

is headwind. on expenses product, as my first Part [indiscernible] had employee that more terms amounts It fundraise depending there. as expect expense to we do a event. see the would X expense I'll about see we margin that overall we more out that G&A in that FRPR, that remarks, those the which calculate of also prepared we the a was remind you, really or in thing I or cost So in recoup of channel, of XX% is one impact The

of. build an as view continuing is those continuing off means as we're positive And that the I very a of in a products can that that, you to to But base scale expense a I which generally in positive, early these view we're as we're can as it view it much because we the products. expense still fact innings fundraise and

to build relation scale. as be So scale smaller numbers these in there, we and that will smaller more

the I And harmonization, all more There's terms yes, I simple fair think directionally, answer, of there think in product that in and the to going is, different channels just should that in more share expect I more and and is But think without think there's nuance different the classes. a and of -- answer harmonization. structures. amount matures the the market your question there's -- you I investor to the nuances products normalization of proliferation, terms of as geographies see

maybe That it remarks, you makes paraphrasing your Mike, you said a And more bit earlier prepared deployment to one little of being in the comes a when highlighted I then, bit. selective, think too, sense. things I'm

are capital competitive right where either syndicated the direct returns markets buckets given you still But enough generating it's yourself major you the dynamics, from now guess, approaching sort more size of you're gotten of lending players, has about excess direct as companies or I think competitive? where compelling whether or how the space by from and to other find guys deploying sponsor-based you of sort

we And a folks reminding on probably and the thought here. did kind talking competitive the but Chip ARCC worth do. of job Court nice I about Yes, that positioning call, it's

We people longer is origination that the have sponsored at to difficult geographically. nonsponsored. do it broad-based is than It A, is very scale strategy. market. anybody rival. It's a for a It unique doing think is I it we've broad-based been advantage. by in We and

to developed that company. highly We have industry direct originating X are verticals

our end focused competing ability differentiated think end think then we whereas market, market. and company the peers spectrum I of the would lower most the to probably folks the of the people what in is the middle of up down core some market, and larger are the upper And market, and on certain call market middle size importantly of day, have the I that day to most invest with and more in

high-yield of us. So when that's this and the for reopening having conversation about loan okay we're market, the syndicated

a months we've record year. If already X level CLO franchise example, as performance our you achieved in CLO of of in first the this look our one fundraising at

of of kind that that on advantage we're business. of So take And capture we And capital the meaningful up, of open when upper at both growth liquid and close, sides they in our the to opportunity. share markets market. try liquid see end our when we in velocity we

deploy is there capture down and unique. up But the showing pipeline environment. the driver deployment any really our ARCC ability and I return think big in market really, what think from the of to it's ability to you as a saw in in pivot market that's And well, I excess

then of that to XX% When and you that portfolios globe, look the into around relationships. we out this we're talk And lot, a we incumbency. are putting of the size the at about incumbent just dollars the lastly, XX% is manage

through of so deploying at slow still because was you a the XXXX, saw value healthy And that and that very incumbency. of market, new rates in were issue what we M&A

the answer, a probably deployment to broad-based. but So think continues be long-winded I

down to liquid illiquid, a nonsponsored, sponsored we'll We that. to do lot balance move of and the have flexibility market and sheet, around continue and up to

Hawken We'll go next Brennan with UBS. now to

increasingly We XX that know more to but long least they're than cuts. at we but they're least odds what upon rate markets this a basis which just overreact, at see can at telling us are initially, sometimes morning, seems might see likely we meeting, us telling based actually like points And whatever.

would FRPR on drop to offsets and short-term that could you in the the to impact? what about basis be So point remind rates us XX a sensitivity likely

Sure.

Let's rolls just go structure importance is valuation P&L because of volatility to different the from through it's deeper FRPR bit differentiate. sharp lot see in this, out where of for you going components. versus how understand structure balance heavy I a our and it think, changes sheet, little and the to sheet people our I But the balance than again, And a the moves. the of that about talk balance sheet rate important we smooth light to is think

But million rates the to people at the of the and there's compensation you'll is foremost, on that that the is. what the composition walk So XX-Q beneficiary sensitivity part if you high the XXX roughly of a obviously is what X of on have ARCC are P&L, FRE. there in P&L. There of decline first structure point we've were That public see rates news good impact a would just the there. based Part on disclosures a the through basis in look $X staying been the

So for is by X your that question, basis cut point sub-X%. XX which

pick But volumes typically up. fees. typically offset decline X transaction down, Part see importantly, when rates And come increased in that by volumes and we is transaction increased

beneficiaries. that P&L, experience we've our that net has been of in been, part the So

to to a important When FRPR, to that lag there's understand it also question. it's your comes specific effect

to if basis based XXXX, investments, XXXX you decline on were that our just XX our a $X.X So rate a in effect. have typically, see lag the FRPR. rate But of cut we at X-month if we when look positioning, structure a usually saw there's point would probably impact million on

whatever you want. you again, So by that number multiply could

for a to And cetera. de earnings impact minimis. XXXX valuations, again, does it et performance, going But is mean be then of function future impact the what the is

curve that on regard already we're With when forward that guidance guidance. think and using waterfall, you people important the giving European understand giving, yield disclosures calculations I the to those in that that making it's our we're we're

expect terms no we already that surprises portfolios, the is roll of in. how the for through cuts to expectation So But in baked there.

standpoint, we expect that sheet sizable balance we obviously, And under a pretty any fact, should obviously, net rate see a in light, From borrow interest lower balance a material given from we revolver, impact. don't sheet benefit expense. floating

that just spur of a maybe think a and activity together, future like markets we the which said, add. rates then to wrap decline and I is will capital capital, that net we in increased -- velocity net of all And transaction expect

positioning, the rate the really about feel then based good originally that than I and So start underwritten cuts jobs to extent today's market rate it. be the had report, on so sooner

you in estate, that? bit remarks, right. of hear. In little recovery helpful, to are prepared maybe parts indicated you down encouraging beginning you to Michael. That real market signs into drill very is the a All Could was which certainly What of relief is which some a might that signs the been side, that rate business? a headwind on to could broad-based idea of has do how see the signs, have encouraging much be it? how And for of bit getting with interest we those your

Yes.

I think landscape. of of rate-sensitive estate that's is the one alternative Obviously, the a of more big it. business parts the part real

to does not rate And rate reduction, if markets. flow-through that transaction so getting impact have a stability,

you're falling of ahead to of even reductions. think I so beginning is some that anticipation see the rate And of cuts the rate

the our order, The industrial, we've focus just multis that X% book. about demand all in intact. quite fundamentals drivers about we this those And are at multifamily, through be to strong of and of as property talking people, level to cycle, on, markets market and segments are have the secular X/X hiking been industrial remind continued logistics the for XX% the in rate still

And so there volume transaction of that once it start is see down, through as to and some you strength that's part come the pushes rates well. to fundamental

as attractive in debt spot bright us. business, a seen private are other been The also parts have banks able the say, private derisking Obviously, for has estate markets, as of I'd been we've provider come landscape, real as capital credit some the to the where in reliable European we and rates. some at seeing we're business deployment. opportunity our be in debt pretty have seen developing pretty pretty and a U.S. meaningful healthy a well And

Bill next go to now at We'll TD Katz Cowen.

fund XXX(k), you that's to So building sort Michael, shifting talked gatekeepers, opening alternatives? receptivity in the younger interested retirement area? of target are the in in the demographics up with date of of the investing the about there remarks, to How some going sleeve conversations the so more with folks any the alts. opening your Is particularly

that point, your logical think and make privates dedicated our are here it alternatives. So ready I channel open To that of open when product the to partners underway to efforts the and we to teams hoping sure and opens. market market see those for is have answer some is D.C.

but think call to that to all they do would that find in cautiously opening There will is optimistic as in. due like will those be ready, their guess maybe the are markets up legal to target be quickly time. mentioned that be them But do, one best some, as see. headwinds I we'll I we're going You when say. and is it path, going regulatory to up it, one that way we But I they open can date a way slow funds. obviously be

back, Okay. you the belabor year 'XX? the then update just And flight just the sequential rise to I sort for distribution? the give an go us back XX% and to path on we Jarrod, following just related the hate on this that stepping margin to as out for the particularly to wasn't then side? one maybe comp look And it. Can to of offset

of first think there. part or is Part Sure. these those. we that comp pay on sure we you out And about pay, we question the FRPR before what make X don't our fees the distribution recapture that when we

so seen you've X a in So XX-XX typically, Part FRPR and what is split, margin there. XX%

result those that's for us we're to a repaid having that and sure employee paying distribution prior actually were costs margin, ratios better those that expenses. see You'll a any of making

kind is pool. house sharing the XX-XX the expense compensation the that means that So with of

and walk you total the it -- take just essentially through where but would there, the works, amount So that's you mechanics reduce more happy we I'm to from if expenses. earn otherwise on that and the

our of in growth. about focus terms talked and high-quality in we In margin, Day, is, this Investor foremost, first

based sometimes costs the And we built, because see with doing margin on In for it. expand though, way know prior -- we so, that you'll high revenues quality the seeing see generally, growth to of our comes we're deployment.

in So where we'd basis XXX now, you in we're I basis look given XXX think And we we're the if that up points I year. is be walked through at last to somewhere Day over through points X any Investor and at walked year. about at

deployment, is. that see what to we'll deployment to it's to but continue kind at of margin, see be we of the of as So expansion going continue speed

so so don't in the are you'll distribution these bit we to some going a in that a management I annually, we them, into smaller those are So periods. earlier it recur a of products percentage it future it. headwind a these where more fees in onetime that mentioned be spike will times is you overall and where have as -- Certainly, will you scale somewhat response, be build earning as fees as there or they will products, my from these have coming fees sometimes flat. And will of raise of little tailwind

margin another that's expand way moving will that forward. So

Ben We'll go at Budish to now Barclays. next

about Maybe on credit. advantages. Mike, in you're the into your talked state of which the first of some leaning competition of areas some you in

could if you're loan in doing? I that talk increase are looser you're that. degree Some of wondering optionality, seeing becoming To would increasing more flexible response to like you you to of things to the was of degree competition. the media headlines sort documentations the seeing PIK what that like what inclusion deals or either that things in indicate

to some my to back market. goes -- to question give of because comments the about a I'll simple just structure the a try answer earlier a actually of not it it's simple

So into have that say in you my oversimplified structural generally I find market, the markets. traditional middle market, traditional safe upper deterioration view middle market any, in and seen the large way if market market its of those middle lower of it's your to lower think in middle market little, middle very

the into credit some to in which sometimes structure, type markets, of the cases could in start some higher be the appropriate as I argue middle with providers, both extent and larger same nearly to many because that they're upper the quality, said that traded be the command but get would end market structure. of deterioration you the liquid you markets competition, see When will not larger to in can borrowers

not people present be tends middle on, management are those in focus things media market. the should of that to loopholes the of most about the concerned But that terms liability the things and in really

been there's think despite perception documents. of amount extraordinary of increased competition the on an discipline I

we it's Chip and some the way transaction we exercise or to, feel be at again down, largely over and we this documents, if to well have the saying in we to turning as the seemingly don't will it simple simple when on fairly be addressed to. that, when we where call that pass ARCC Court could things our that going look ability need you rights on that creditor need we're

really is broad do end the market, that the the media upper not market. to relative it I in it's to So even pervasive. And liquid think relation at overblowing probably the middle

structural would private encourage and of people rates question, a when excess hole, a to different time necessarily PIK base rabbit I I is for think way market high. is it a again, today's managers return go an not about in indicator deterioration. to down at credit a PIK capture think as are PIK to not

plan, constraining PIK sustainable that to the if the borrowers. constraining prudently ratio and flow your and to excess leverage and are to then return not their of a you structuring and cash your and ability And their execute managing so capture interest support is way about company thinking you're business coverage going growth a

at the to maybe So that et to But that's that the PIK you cetera, cetera. intentional PIK versus outset not used reduce have the really is differentiate is again, some between same default, et like as former to book, other look that think corporate when than in you about. approach more it's And of people of credit deteriorations the our again, structural the to pick the at latter.

Very it. just And helpful. follow-up. a Got then quick maybe

Does Fund, -- from or maybe an drawdown strategies size funds? perpetual you future more scale potentially from to scalable? of degree there? how the do that SDL continue to latest the be Or you could of continue think it the raise structure fund sort sense given outsized Just make about more of to up to degree these to the what will

Yes.

brought think a we said I places this growth it of in growth were up quite kind Craig as high been that tempering like is vocal. earlier, despite the we've we that place ASIF.

now ARCC, raising seen scaling you're in seeing and equity You've SDL us and III.

that critically important diversified sources. you have is your that we've in doing over been distribution XX funding We this the learned that it and are years

a we that capacity. going years we deployment as pretty into We or have deployment and meet good to capacity structure what handle our is, think any our year capital to

billion raised. we've as fund. So SDL has $X that the already investing ground on in been We're about

expected open it fund never pace. or X or to channel be we close. different in at to those in X beholden deploying the the parts will want cycle, because, So is But

see that slowdown sees commingled, deployment or get demand. us accounts that have capital to you of So life can forms market non-traded sure public managed on in Similarly, closer as end we want the if some of appetite, on meet other a the we our the we to fund entities. of make may actually turn

continue understand people that how and it. a big funding driver actually diversity is here, important of critically it's we'll of we do -- value just create that to It's

that up open-ended, give how of It's complement non-traded. ever we'll campaign, offer, this business. traded, we part think on have, the closed-ended, don't I perpetual So of we funds run a big

JPMorgan. go Worthington We'll now at to next Ken

months XX crisis. beyond bank almost We're the regional

in And Ares over going going Ares do opportunity come benign as environment you phase a of consider us the various in alter And opportunity rate more kind what considered phases different opportunity What be Ares I set think the interest to does to the for that forward? now? see forward? for see would time. you you

I alters mean. say set. the I that Yes. wouldn't it opportunity

or transfer was talked early phases. One distressed I that asset to, reiterate, we've resolution sales certain to that an referring through different just about distressed balance certain think where what there or that needed phase portfolios sheets Just transactions. is were either obviously were risk you're the

a going rates, there's may some reasons. the sitting to that. that But continued or the assets you resolved need still in amount regulatory the that reasons is economy prospect get significant bank now, sheets of for pretty of There less of And balance on. either for still on strength given capital see will credit

so And same at just are I the that the velocity. deals to They don't we seeing are of think happen. that going not happening means may types not that be

is for are few. credit you transitioning a I about, alternative wake finding the think, to wake lending places our opportunity assets a of in will name these much their a that business way pressure, private is the capital more we've of more of actually and the to sustained next see and into consistent opportunity, estate which We to that's set increased talked like markets. regulatory that now, crisis the begin business, real And more our phase, which

that of some pipelines. sheets, So as rates well. I wouldn't bank just continue a of transition portfolio balance see seeing continued it certain We're and down, is trades amount underway. on of that deals the decent given even the transfer you'll in acute coming our with out But risk I composition think rule stresses to

Patrick Davitt we'll now Autonomous at next go And Research. to

have dramatic happening the maybe is contrast but been asked, what a strikes one. broader today pretty of a macro everything market saying with It today. that you're Most mine is me thinks

Or can I think there's to this a companies, report what from et see you just you as an jobs your and talking see cetera, growth overreaction? the So across than of do you have competitors borrowers, economic PE thus do guess slower been a and path seeing evolution today, your about potential towards maybe more you a months real cuts ago? couple maybe

have Yes. but this I so we've our that. we data don't -- the consistent something can we market have crystal is lot. portfolios in that And We've we best that about a been talked we telling us mean different. on ball, see private do

So calling weren't. when ago, markets X were the a years recession, we for

and terms magnitude, positioned very to in for as we what think try well up long-term pulled private get the seeing business are worked get investors timing transition. rate in But that obviously anything one already not singular seeing of for so both would not we're argue our I And forward, that market we the portfolios about We in in is today. any talked that cuts headline. if

good in that data the at that you of sure bad It's is runs comes to interesting and news, is news. as public because facts We guess, schizophrenia that news make try look and see often in as interpretation bad well today, news out public private And we the news. I okay practitioner we're markets. is bad them and a market that the news, a company, I'm struck just And positioned. good at the see volatility can just month-to-month,

accordingly. personally I like feel overreaction, react I but and an data -- feel keep But collecting it's we'll

go now Stanley. Cyprys Morgan at Michael to next We'll

size non-sponsored the expect broadening on just have with XX months the capital-efficient ask pace wanted evolve looking non-sponsored as nonsponsor have, banks direct and compared that sponsor terms then the if to Just to to us an sheets. And your out, of update that how run in initiatives just business platform next you guys lending, to just business. share are particularly that at of of that on of lending activity that you you'd there as curious more remind balance larger of the could some for the over direct

Sure.

they when deploy the deal originators are As we supporting and in I industry. X right private in said, company sponsor-led direct and originating have business. a actually our about is industry investing They sponsor that corporate credit that a now are we across teams to teams

actually these So increase benefit origination, of a that of markets. our of do to better kind also, a I underwriting able job we're it's in but some nonsponsored double think,

the look at place dollar of to sponsor, business, to The order non-sponsored and an it we'll of just somewhere the to I'm a on you not sense, and nonsponsored meaningful a X% of our where business, just lending aggregate opportunity. But will business, just the to the given of sure continue the but markets were parts size to the magnitude, between going get if you But it's basis. it's a pull-through overwhelm to importance give and it's it's needle XX%, kind grow aggregate given in to our sponsor-backed in there's that going not any effect probably move so other dollars, origination period. direct of

of some both been we've media It's early highly adding or sciences differentiated, and core verticals and like particularly life people in entertainment sports in capital. where these

So we'll keep those investments. making

Bedell to Brian go now next we'll And Deutsche Bank. at

impact guess, move XXXX, deployment come of of a last to in is here, the where very we deployment couple plans on only actually Would per pull for shifting how the volatility obviously, it questions that temporary up follow potentially? extent in a negative. of environment, back -- and recent least of temporarily this I help would couple second days year system, maybe just more half on on Or bank sentiment financial half? just would sort Mike, this and into stress we into Great. have as the but that you potentially freeze the could in your back? that sponsors To because deployment at the market

Yes.

transaction that the more et up lending market. Then to side healthy need ramp think where the be was you'll alternative activity increased you secondaries, the geography seen if because we the a business transition and pull back I at you increasing issue and cetera, to would volumes market in way is liquidity dislocated see constrained, and deal will and again. into in it volatile deployment market and the So volume places and direct go provider within then in opportunistic credit understand to new you new volumes liquid you they're going into So the you'll to right? shift a back, the credit, market. portfolios change, incumbent people like go begin XXXX, if have banks And look deployment of the

reducing deployment time. diversity volatility manage diversity over them because of So we geographies and of the we of in, the strategies that manage is that the of

capital, that of I to we're aging the still of cost weight continue the yes, having going believe on on a think cuts just healthy equity, base I so pretty the deployment and And that private based the see rate installed to corollary capital, of valuations of to market for we're the well. parts of got into going impact find back be more our But half today's capital whatever nervous, to if the we'd then where notwithstanding. relevant other kind be deploying and reason, has too there is move of market the going as year,

we're in really good think a So spot. I

in deal hybrid doing to interest obviously now? structure terms is a strategy a a retail And was saw retail. [indiscernible] one as wider Or just your of like what on it like Any we helpful. That's products maybe you Capital in distribution? much with

just headline. looks as deal like. actually that I now, Well, anybody that's if really don't knows know of what a

opine So I or not as that to can't whether do not. or would we like something

been the historically. partnered of a with over and through into have bring private platforms sub-advisory part asset portfolios, distribution and our of of diversification We to that's various years more agreements markets some those traditional management partnerships

would thing I would expect that type of continue. So

be it. would We open to

end the binding for retail, the of day, ability to another anybody unique business high in growth value Day, fee is to that I and the at maximizing Because at are we our are And I high-quality growth the what on mean is those assets. some would side is is that just we constraint our I call whether growth. would how clients, high our assets deliver the Investor go around or our origination. institutional equation. profitability our what our very sustainable source of where focused think by to be to And then we going margin, of they're I to of rate, back comments

our the of perspective, that origination. profitability goal shareholder maximize from Management is to the sure But Ares make we that

type fee originate And require our which very is and average portfolio-manage so to look of it partnerships the those They X.X%. is don't not again, why -- high rate, do assets is expensive a like, I knowing do. what fee rate that we

have difficult-to-access when markets rates. to we they down private so that traditional go that market at we access the And thinking be can non-correlated very within rabbit careful hole portfolios, public unique start don't outcomes of talking about private people

So we lot it. think about a

or distribution managers is to not with what the there to deep earlier, enter very channel like going as of deploy, the have But against whether We traditional any into what's relationships a the the calculus of diversifying that benefit many said that the is highest partnership our at capacity to to levels deployment. and really back I that to is go into in firms.

I so that's think And TBD. a

I'll gentlemen, you, sir, And back questions it comments. further Arougheti, for appears to we things today. closing turn any Mr. have no

it. and next of the to today. And Enjoy look forward questions great for the rest appreciate time summer. again you the to Thank We we quarter. the you speaking Great.

Mr. you, Ladies this Goodbye. Instructions] our for Thank [Operator conference concludes call . Arougheti. gentlemen, and today.