Ares Management’s SWOT analysis: stock outlook amid fundraising strength, EPS challenges

Ares Management Corporation (NYSE:ARES), a leading global alternative investment manager with a market capitalization of $62.4 billion, has been navigating a complex financial landscape characterized by robust fundraising activities and strategic acquisitions, balanced against earnings per share (EPS) challenges and market uncertainties. According to InvestingPro analysis, ARES is currently trading above its Fair Value, suggesting careful consideration for new positions. This comprehensive analysis delves into the company’s recent performance, strategic initiatives, and future prospects, providing investors with a detailed overview of Ares’ position in the alternative asset management sector.

Introduction and Overview

Ares Management has maintained its position as a significant player in the alternative investment space, with its stock performance and analyst ratings reflecting a mix of optimism and caution. The company’s market capitalization stood at approximately $59.71 billion as of August 1, 2025, underscoring its substantial presence in the financial services industry.

Recent analyst ratings have been predominantly positive, with firms such as Barclays and JMP Securities maintaining "Overweight" and "Market Outperform" ratings, respectively. These ratings are supported by Ares’ impressive revenue growth of 49.87% over the last twelve months and strong fundraising capabilities. The company maintains a "GOOD" Financial Health Score of 2.94 according to InvestingPro metrics, though recent earnings reports have presented a more nuanced picture, with EPS figures falling short of expectations in some quarters.

Financial Performance

Ares Management’s financial performance in recent quarters has been a mixed bag. In the second quarter of 2025, the company reported an EPS of $1.03, slightly missing the expected $1.10. This shortfall was primarily attributed to higher corporate-level operating expenses. Similarly, in the fourth quarter of 2024, Ares reported an EPS of $1.225, below the estimated $1.30, due to reduced management fees and Fee Related Performance Revenues (FRPR).

Despite these EPS challenges, Ares has demonstrated strength in other financial metrics. The company’s Fee Related Earnings (FRE) margin has exceeded projections, benefiting from better-than-expected compensation ratios and general and administrative expenses. Assets Under Management (AUM) have shown consistent growth, reaching $484 billion by the end of 2024, representing a 4.5% increase.

Analysts have adjusted their EPS estimates for the coming years in light of recent performance. For fiscal year 2025, estimates range from $5.03 to $5.15, while 2026 projections vary between $6.10 and $6.53. These figures reflect both the company’s growth potential and the ongoing challenges in the market environment.

Business Segments and Strategy

Ares Management operates across several key business segments, including Credit, Real Assets, Private Equity, and Secondaries. The company’s diversified portfolio has shown varying performance across these segments. Credit and Real Assets have demonstrated strong investment performance, while Private Equity and Secondaries have remained relatively flat in recent periods.

The company’s strategy focuses on leveraging its strong fundraising capabilities to fuel growth across its business lines. Ares has consistently emphasized its ability to attract capital, with recent quarters showcasing record-breaking fundraising activities. This approach has allowed the company to maintain a substantial dry powder of $151 billion as of the second quarter of 2025, positioning it well for future investment opportunities.

Fundraising and Capital Deployment

Ares Management’s fundraising prowess has been a cornerstone of its recent success. In the fourth quarter of 2024 alone, the company raised $28 billion, contributing to a full-year total of $93 billion. This exceptional fundraising performance has bolstered the company’s AUM and provided a strong foundation for future growth.

Capital deployment has also been robust, with Ares deploying $32 billion in the fourth quarter of 2024. The company’s available capital stood at $133 billion, with $81 billion expected to start earning fees upon deployment. This significant pool of available capital underscores Ares’ potential for future revenue generation and growth.

Analysts have noted that Ares’ gross-to-net deployment ratio is expected to continue improving, reflecting enhanced operational efficiency and the company’s ability to effectively put capital to work.

Management Changes and Acquisitions

Ares Management has undergone significant management changes and pursued strategic acquisitions to strengthen its market position. The company announced the appointment of Kipp deVeer and Blair Jacobson as Co-Presidents, a move seen as a natural evolution given the firm’s growth trajectory.

A key strategic initiative has been the acquisition of Global Collective Partners (GCP), expected to close in the first quarter of 2025. This acquisition will add approximately $44 billion to Ares’ AUM and is projected to contribute significantly to Fee Related Earnings. Analysts view this move as immediately accretive to earnings and a strong driver of future growth.

Market Outlook and Future Prospects

Looking ahead, Ares Management’s outlook appears cautiously optimistic. With analysts forecasting EPS of $5.38 for FY2025 and the company maintaining a healthy dividend yield of 2.35%, investors have multiple potential catalysts to monitor. The company anticipates an increase in transaction activity for 2025, which could drive growth across its business segments. Management has reiterated expectations for net realized performance income related to European Style Waterfalls to be between $225-$275 million in 2025, with considerable growth anticipated in 2026. For deeper insights into ARES’s growth potential and comprehensive valuation analysis, consider exploring the detailed Pro Research Report available on InvestingPro.

However, analysts note that there is limited potential for realized performance revenues from American-style funds in the near term. This, coupled with ongoing market uncertainties and the potential for economic headwinds, presents a complex landscape for Ares to navigate.

Bear Case

Could continued EPS misses erode investor confidence in Ares Management?

Ares Management has reported EPS figures below expectations in recent quarters, which could become a concern for investors if this trend continues. The misses have been attributed to various factors, including higher operating expenses and reduced management fees. If Ares fails to align its expenses with revenue growth or struggles to maintain its fee structure in a competitive market, it could lead to further earnings disappointments. This pattern might erode investor confidence over time, potentially impacting the stock’s valuation and the company’s ability to attract capital. Moreover, in a market environment where earnings predictability is highly valued, consistent misses could lead to increased scrutiny from analysts and investors, potentially affecting Ares’ market position in the alternative asset management sector.

How might a potential recession impact Ares Management’s performance?

In the event of a recession, Ares Management could face significant challenges across its business segments. Economic downturns typically lead to reduced transaction activity, which could hamper Ares’ ability to deploy capital effectively and generate performance fees. Additionally, a recession might impact the performance of Ares’ portfolio companies, potentially leading to lower valuations and reduced returns on investments. This could, in turn, affect the company’s ability to raise new funds and maintain its current level of assets under management. Furthermore, during economic contractions, investors often become more risk-averse, which could lead to outflows from alternative investment strategies, putting pressure on Ares’ fee-generating AUM and overall revenue. The company’s credit investments might also face increased default risks in a recessionary environment, potentially impacting returns and investor confidence.

Bull Case

How will the GCP acquisition strengthen Ares Management’s market position?

The acquisition of Global Collective Partners (GCP) represents a significant opportunity for Ares Management to enhance its market position and drive future growth. With GCP expected to add $44 billion in AUM, this acquisition will immediately boost Ares’ scale and diversify its product offerings. The integration of GCP’s expertise and client base could open up new markets and investment strategies for Ares, potentially leading to increased fundraising capabilities and a broader investor base. Furthermore, the acquisition is projected to be immediately accretive to earnings, which could positively impact Ares’ financial performance in the short to medium term. By leveraging GCP’s complementary strengths, Ares may be able to enhance its competitive advantage in the alternative asset management space, potentially leading to increased market share and improved long-term growth prospects.

Can Ares Management maintain its strong fundraising momentum in the face of market uncertainties?

Ares Management has demonstrated exceptional fundraising capabilities, with record-breaking inflows in recent periods. The company’s ability to continue this momentum could be a key driver of future success. Ares’ strong track record in fundraising suggests a high level of investor confidence in its investment strategies and management team. If the company can maintain this momentum, it could lead to sustained AUM growth, increased fee-generating assets, and a robust pipeline of investment opportunities. Moreover, strong fundraising in uncertain market conditions could indicate Ares’ resilience and ability to attract capital even in challenging environments. This could position the company favorably compared to peers, potentially leading to market share gains and enhanced reputation in the alternative asset management industry. Continued fundraising success could also provide Ares with the dry powder necessary to capitalize on investment opportunities that may arise from market dislocations, further strengthening its competitive position.

SWOT Analysis

Strengths:

• Exceptional fundraising capabilities
• Robust AUM growth
• Strong investment performance in Credit and Real Assets
• Strategic acquisition of GCP
• Substantial dry powder for future investments

Weaknesses:

• Recent EPS misses
• Higher than expected operating expenses
• Flat performance in Private Equity and Secondaries segments

Opportunities:

• Expansion into new markets through GCP acquisition
• Anticipated increase in transaction activity
• Potential for improved gross-to-net deployment ratio
• Growth in European Style Waterfall performance income

Threats:

• Market volatility and economic uncertainties
• Potential recession impact on investment performance
• Competitive pressures in the alternative asset management sector
• Regulatory changes affecting the financial services industry

Analysts Targets

• JMP Securities (August 6th, 2025): $205
• Barclays (August 4th, 2025): $200
• JMP Securities (May 8th, 2025): $185
• JMP Securities (April 8th, 2025): $165
• Barclays (February 6th, 2025): $217

This analysis is based on information available up to August 14, 2025, and reflects the most recent data and analyst projections for Ares Management Corporation.

InvestingPro: Smarter Decisions, Better Returns

Gain an edge in your investment decisions with InvestingPro’s in-depth analysis and exclusive insights on ARES. Our Pro platform offers fair value estimates, performance predictions, and risk assessments, along with additional tips and expert analysis. Explore ARES’s full potential at InvestingPro.

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