Ares Management at Morgan Stanley Conference: Strategic Growth Insights

On Tuesday, 10 June 2025, Ares Management (NYSE:ARES) presented a robust strategic overview at the Morgan Stanley US Financials, Payments & CRE Conference 2025. The company showcased its strong performance and future growth ambitions, while acknowledging challenges in the competitive landscape and potential interest rate changes. CFO Jared Phillips emphasized resilience and strategic positioning, with a focus on expanding direct lending and asset-backed finance.

Key Takeaways

• Ares Management aims to grow fee-related earnings by 16% to 20% over the next five years.
• The company anticipates reaching $100 billion in assets under management (AUM) in private wealth by 2028.
• Ares has over $140 billion in dry powder, supporting future growth in direct lending and asset-backed finance.
• AI is being integrated into operations to enhance decision-making and profitability.

Financial Results

• Assets Under Management (AUM): Nearly $550 billion in AUM.
• Gross to Net Deployment Ratio: Improved to 49% in Q1, with expectations to stabilize at 50%.
• Secondaries Deployment: Increased by 160% year-over-year.
• Retail Inflows: $3.2 billion in Q1, with similar expectations for Q2.
• Fee Related Earnings Growth Target: Aiming for 16% to 20% growth over the next five years.
• Data Centers: Expected to shift from a $20 million loss to a positive contributor to FRE growth.

Operational Updates

• Portfolio Performance: EBITDA growth of 11% in Q1, with no major red flags.
• Dry Powder: Over $140 billion available for future investments.
• Team Size: More than 140 people globally in 10 offices dedicated to raising capital.
• Product Offerings: Seven retail products each exceeding $1 billion.
• AI Integration: Over 100 potential AI use cases identified, with 15 actively in use.

Future Outlook

• Direct Lending Growth: Expected to grow by 15% to 20%.
• Asset-Backed Finance (ABF) Growth: Significant growth anticipated in both liquid rated and illiquid non-rated ABF.
• Real Estate Debt Opportunities: $1.2 trillion of debt maturing off bank balance sheets over the next two years presents opportunities.
• Private Wealth AUM Target: On track to reach $100 billion by 2028.

Q&A Highlights

• Macroeconomic Impact: Portfolio resilience through economic cycles, with optimism for increased transaction activity.
• Competitive Landscape: Ares maintains a competitive edge through team size and deployment strategies.
• AI Opportunities: AI is enhancing efficiency and decision-making, acting as a "junior analyst."

For a deeper dive into Ares Management’s strategic insights and future plans, refer to the full transcript below.

Full transcript - Morgan Stanley US Financials, Payments & CRE Conference 2025:

Mike Cyprys, Equity Analyst, Morgan Stanley: For important disclosures, please see the Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosures. Note the taking of photographs and use of recording devices is also not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. All right. Good afternoon.

With that out of the way, thanks for staying with us here on day one of the Morgan Stanley Financials Conference. I’m Mike Cyprys, equity analyst covering brokers, asset managers and exchanges for more insight on their research. And we are excited to have with us here Jared Phillips, the Chief Financial Officer of Ares Management. With nearly $550,000,000,000 of assets under management, Ares is one of the world’s largest alternative asset managers. Jared, thank you for joining us and making the trip out here to New York.

Jared Phillips, Chief Financial Officer, Ares Management: Absolutely. Thank you for having me. It’s great to be here.

Mike Cyprys, Equity Analyst, Morgan Stanley: Great. Well, why don’t we start off with your thoughts on the macro? has been a bit volatile, but it’s kindly. A lot of uncertainty. Some of this has normalized a bit here, since some of the peak volatility that we have seen, in April.

So I guess through the lens of your portfolio companies at Ares, how are you seeing the state of the global economy, inflation and how’s the portfolio holding up?

Jared Phillips, Chief Financial Officer, Ares Management: Sure. Look, will just start and say we’ve been really pleased with how the portfolio has held up then. I think it’s important for people to understand that in a given year in U. S. Direct lending alone, we’ll look at over 2,200 different unique companies.

We then have five fifty portfolio companies give or take in ARCC alone. So we see a lot of different companies and we get to see how they’re performing through a lot of these different cycles. What we saw in this cycle was no red flags. We’ve seen before in prior potential cycles a drawing of all available liquidity or a prep that there could be issues with inbounds from the borrowers. In this, we saw people more just being cautious and waiting.

We didn’t see that big draw happen on any of the revolvers. We entered into it with a lot of strength and I believe that helped. We’re LTVs in our portfolio in the low 40s across the board and what that means is sponsors have a pretty big equity check that sits in front of you. We have interest coverage at two times and so having that interest rate shock over the last couple years, you saw that go to about 1.6 times and then what you’ve seen in this current interest rate environment where it’s been more flat with an anticipation of down in the future, that’s enabled that coverage to creep back up because importantly, probably most importantly in terms of your question is, we’ve continued to see EBITDA growth. And that EBITDA growth has been in the low double digits.

We are at 11% in the portfolio in the first quarter and we’ve seen that continue to move forward. Now the sectors that we primarily invest in the service side of things, the software business, they’re less impacted by tariffs. So there wasn’t any immediate flow through that we saw from the tariffs. We did a big analysis across the whole portfolio, saw that it was a single digit percentage number that had level impacts of the tariffs. Certainly everything could have had a larger impact if there was a macro dislocation.

But in terms of the overall portfolio performance, it stayed strong and the credit characteristics, they proved well and we didn’t see any of unnatural again or red flag behavior. So we were really happy with how the portfolio has performed through that. And then that’s got us to where we’re at now, which is I think that some of that optimism is returning that it is a great time or will be a great time and a necessary time to transact. So you’ll see a lot of the private equity firms thinking about some of their aged vintages and their aged assets that they need to move on from and that it’s now time to monetize. You’ll see that there’s a lot of dry powder that’s expiring and this will be a time where that will need to be deployed.

Some of that optimism that we entered the year with that then was tamped down as the rumor of tariffs came about towards the February with more caution in March and then obviously the very April having the actual tariffs come to light, that created that pause. But when it’s just a pause and there wasn’t anything that happened in addition to that, assuming that we don’t have more negative news around the tariff front or we don’t have more negative economic news, I know on Friday we had the jobs report and that was a little bit more positive than people were anticipating. So I think with more data like that, you’ll see that maybe excitement to transact come back a little bit and that pause won’t be enough to really throw 2025 off. You might have a little bit of slower second quarter from folks, but that could really leak into making the third quarter better than it seasonally is and then certainly sets you up well for a strong fourth quarter, which going into this year, we all anticipated the back half of the year would be pretty strong. And now I think there’s optimism that the pause wasn’t necessarily long enough to prevent that from occurring.

Mike Cyprys, Equity Analyst, Morgan Stanley: Do you think maybe activity that otherwise would have taken place in 2Q kind of gets pushed out 3Q, 4Q?

Jared Phillips, Chief Financial Officer, Ares Management: I think that’s because nothing dropped out of the pipeline, but things people put pencils down and said, well, I don’t want to be the one that transacts if the market’s about to explode. I don’t want to be the one that transacts into a bottom. And so essentially, you have maybe it’s a month or two pause that then restarts and instead of it taking you three to six months to settle, maybe it’s a little bit faster through the process. So that could just shift some of that timing for what we would have hoped would have been a pretty active second quarter. Maybe that makes for a more active third quarter and certainly still bodes pretty well for the fourth quarter.

Mike Cyprys, Equity Analyst, Morgan Stanley: And just given that backdrop, you guys have over $140,000,000,000 of dry powder on the platform today. Where are you seeing some of the most interesting areas to put capital to work? Any particular areas that you’re avoiding? And could ultimately 2025 here be a better year than last year from a deployment standpoint? Sure.

Jared Phillips, Chief Financial Officer, Ares Management: I’d say when you think about that from a direct lending standpoint, there’s not areas that we don’t periodically avoid. There’s areas that we always avoid and we don’t come in and out of them and those are more cyclical. Like the areas that I talked about earlier, that’s where we’re always focused. In terms of our overall deployment, we talked about it a little bit on our earnings call in May that the pipeline looked fairly similar despite the dislocations that we saw in April, but the geography of that pipeline was a little bit different to your question. Secondaries has been an area where there’s been a tremendous amount of deployment.

Year over year, we had 160% increase in our secondaries deployment. So you can see that that’s been a popular area and I think especially with that pause that I just talked about and then LPs and others feeling more like maybe I’m not as close to monetization as I thought. The secondaries environment becomes a much more attractive place to deploy whether it’s GP led or LP led. Asset backed financing, I know it’s been a hot topic at this conference and I’m sure many of you have heard about it. That’s continued its strength in terms of deployment, really showing that it is not as correlated to the overall C and I lending market to singular companies as a whole.

That’s shown that it’s continued to have a lot of different deployment opportunities and certainly what we do out of our alternative credit business or our ABF business on the illiquid side, one of their main hypotheses is that they want to be as flexible as possible and go in and out of different industries at different times. So that means they can always be active and things like SRT’s and fund finance have been very popular places of deployment for our Alt Credit business. Real estate and real estate debt are starting to tick back up and be more active. We have a pretty large real estate business, it’s even larger now with the GCP acquisition, really built for a macro environment that is a lot busier. I think in the face of potential interest rates being lower or more normalized, that’s enabled people to come back to more transaction activity there.

And with a headwind to the banks in terms of they have $1,200,000,000,000 each of the next couple of years on the debt side maturing, that is going to provide some real estate debt opportunities as well over the next couple of years.

Mike Cyprys, Equity Analyst, Morgan Stanley: The past couple of quarters you talked about gross to net deployment ratio improving, suggesting deployment was less skewed toward refis and therefore supporting fee paying AUM growth. So how is that evolving here in the second quarter and what’s your expectation as you look out over the next twelve months? Sure.

Jared Phillips, Chief Financial Officer, Ares Management: And I’d say, it’s important last year was I would categorize it as maybe historically low of a ratio of gross to net. We were around 37% for the year. In the first quarter, we were actually at 22%. That’s in the prior year. This year we were at 49% in the first quarter.

So you’re already seeing about normalized percentage there and that’s my expectation is in a normal year you’re going to be around 50% on gross to net. Now there’s a couple different factors at play. Last year the main factor was you had spreads at very very tight levels and then you had a forward look of interest rates that at the time people were anticipating would move down. Normally when interest rates move down, you see spreads expand a little bit. So people looked at that as this is the time that I can refi and lock in because these are floating rate loans a better spread.

It also coincided with the BSL market really turning back on so there was more optionality for borrowers at that time. So you had a bit of a rush to market and a rush to refi. It wasn’t driven by M and A activity so you had one of the two factors you need to see more. Now M and A activity, what that does is it drives both your gross and your net. So you will see more velocity within your portfolio.

We did not have a tremendous amount of M and A activity in the first quarter just on a macro level And so far in the second quarter, there hasn’t been macro, a lot of M and A, although it seems like there’s more deals coming and it seems like there’s been more publicity around deals over the last couple of weeks. What you’ll see there is you’ll see more gross but that will mean your net isn’t as strong. Ironically, your net number is probably strongest in an environment where there’s not that much refi obviously but also not that much M and A because then your portfolio is not turning over as much. So I would expect that as you see, if you see a little bit lower M and A count, you’ll see a stronger gross to net ratio. But all in all for the year, I do expect M and A to bounce back if everything maintain where it’s at currently.

So I would expect that we’d be in that fifty-fifty range.

Mike Cyprys, Equity Analyst, Morgan Stanley: Great. Private credit has seen significant growth across the industry. It’s now attracting some newer entrants. We see existing players doubling down on private credit opportunity. We’ve seen acquisitions across the space as firms want to lean in.

What sort of impact are you seeing on the industry, whether it’s spreads, terms, overall behavior among participants and maybe talk about your moat around your credit business and how you sustain that as more firms are entering.

Jared Phillips, Chief Financial Officer, Ares Management: Yeah, and there’s a lot of different pieces there. It gets a lot more publicity now than it did and I think some of those transactions that you’ve talked about certainly drive that. But many times when there’s a transaction, it’s not creating a new player. It’s maybe being additive or it’s just adding to an overall portfolio of a manager to make them more diverse, but it’s not creating someone that we’re actively competing with that’s any different. In fact, think if you were to talk to any of our portfolio managers, they’d say that they’re really competing against the same five parties that they’ve been competing against for the last ten or more years, really with only one or two really being new entrants in that ten year timeframe.

The biggest change has been the retail dollars that have flown in. So you’ve seen a lot of retail product be launched. We have Asif obviously as our non traded product and you’ve seen a lot of those larger scale players launch those retail products. As that channel has opened up more and more and you see the wirehouses, the RIAs, the IBDs and wealth managers being much more amenable to that product and building out their portfolios to include it, you’ve seen those dollars come in. And what those dollars do is they do have to come in with some discipline.

So those BDCs, they have to meet their dividend, otherwise they’re going to need support from their manager and the managers don’t want to support those dividends. They also have to meet a certain level of return, otherwise people are going to allocate away from them. So they are disciplined in terms of the behavior. It does have some impact in that when you bring a lot of dollars in quickly, you need to deploy those dollars quickly. When you need to deploy those dollars quickly and if you don’t have a large team, you need to deploy them in the upper

So meaning you’re competing a little bit more against the BSL market. That also means that you’re looking to do those larger check sizes. So that’s where we’ve seen over the last two years that spread is compressed on those larger check sizes on those upper middle market deals. It’s still you’re still getting about 150 basis points, maybe a little more to the liquid markets, but it also informs us to why last year around this time you saw us make a pretty meaningful pivot into the core and lower middle markets in terms of our median deal size actually decreased at that period because we saw that as an area of less competition and more opportunity. You then counterpoint to in April when the BSL market temporarily shut off, we jumped in and we led the $5,000,000,000 Dun and Bradstreet deal.

So that ability to go from those large upper middle market deals to the lower middle market deals and the core in between, that really creates a competitive advantage, but it’s also expensive. So if you’re just bringing in those dollars on the retail side now and you haven’t had that chance to invest in the team and we have one of the largest underwriting teams, we have one of the largest asset management teams that can deal with the assets after they’re on the books and then potentially if you have issues within your portfolio. Having that enables us to play across a wide variety of loan sizes and constantly be deploying where we can generate the best return. So ultimately that creates a moat, but it also will create return dispersion over the long term. The last several years have been very beneficial to private credit with high base rates and so it’s been easy to show a low double digit yield to your investors.

Interest rates come down, as portfolios may have episodic or idiosyncratic issues, you will begin to see those managers have return dispersion and having more talent available to look after your portfolio, to deploy your portfolio, that creates a pretty large competitive advantage and what it also does is create incumbency. And incumbency, if you note the last two years, we’ve set deployment high watermarks and that’s been because of incumbency. These were macro years in terms of the M and A environment that were more depressed if you look over the last twenty five years and we were still able to set deployment high watermarks. And that’s largely because of the size of our team and the ability to participate in all types of middle market. So that’s something that we look at as those new dollars have come in, they’ve really been it’s been more on that fundraising side and how do you deploy and how do you best deploy and that’s how those dollars are changing things is making sure people are focused on that.

Mike Cyprys, Equity Analyst, Morgan Stanley: And the other question that comes up as we think about sort of the competitive backdrop is around the bank side of the equation And expectation is capital rules could be lightened up for the banks here. How do you think about the impact that could have on the overall marketplace, the magnitude of lending moving out of the banking system, which was a big sort of view in recent years and had been playing out. What areas do you think the banks might have more appetite?

Jared Phillips, Chief Financial Officer, Ares Management: Yeah. Look, it’s actually over a thirty year trend. It’s a little bit more than thirty years that there’s been a migration from bank to non bank, especially as it relates to sponsor backed transactions. If you look at what they’ve been saying around bank regulations, I believe what the focus is, is allowing banks to do more of what they’re currently doing. How do they hold more treasuries?

How are they able to do more mortgages? Strengthening up the community banks and reducing some of the regulatory cost or burden that they’re seeing. Not really as much a shift away and hey, start doing new products that you weren’t doing before. I think that banks have seen by and large that we are a very good partner to them, that as they lend to us, they are able to still get exposure to that asset type while having less people associated with it. So just like I just articulated in terms of when you’re doing size loans, if they do a billion dollars to us and we do somewhere in the neighborhood of 10 to 20 loans underlying that billion, they get the exposure, but they needed one relationship.

They needed the Aries relationship, not those 10 to 20 that they’d be sourcing, that they’d be paying for that team, then they’d be paying for the workout team that they would need in case something happened to those loans. They actually get a much better ROE by not having all of that expense load and allowing us to hold those loans and then lend to us and provide us that leverage. So ultimately, I believe that it’s a very solid relationship. I’m not sure that any of the regulatory changes will mean that you’ll see banks all of a sudden willing to hire up large teams to go in and begin to make these loans. Maybe on the BSL side on that, it maybe makes them more likely to do something that they might have to hold for a little bit longer as opposed to being able to syndicate right away, but I’m not sure it means that they’re going to be doing more of that lower or core middle market lending.

Mike Cyprys, Equity Analyst, Morgan Stanley: Great. So as you think about the private credit market opportunity, say over the next five years, how do you think about that next chapter in the evolution of private credit, whether it’s asset backed finance, whether it’s on the investment grade side, sub investment grade side, ABF to real estate credit, where are some of the biggest opportunities? Talk about some of the steps you’re taking there.

Jared Phillips, Chief Financial Officer, Ares Management: Absolutely, Ian. I’d be remiss not to just highlight as regular way direct lending. Every time people kind of look away and say, well, what’s next? It still grows at 15 to 20%.

Mike Cyprys, Equity Analyst, Morgan Stanley: Is that sustainable from here in the next five years?

Jared Phillips, Chief Financial Officer, Ares Management: Look, as part of what we mapped out in our Investor Day, we did have a growth rate that was right in line with the rest of the company for U. S. Direct lending and some of that is because we see what their dry powder is waiting to be deployed and then you see things like the dollars that you’re bringing in from retail on that side. But there are a lot of other high growth areas. ABF as you highlighted is among them and it’s really both sides of ABF.

So when we talk about ABF and we call it all credit but I fully recognize that everybody else has been referring to it as ABF so I’ve adopted that as well. We call it either liquid rated or illiquid non rated and those are really the two main buckets. For our business, we have about $40,000,000,000 and slightly more than 50% of that is in that illiquid non rated. And that happens through our commingled products primarily. That’s our Pathfinder series of funds.

So we have a closed end Pathfinder and then we have an open end Pathfinder core that deliver non correlated returns to institutional investors. And then on the liquid rated side, that’s more the domain of SMAs and insurance partnerships. There’s a tremendous amount of growth there because there’s a tremendous desire by insurance companies to generate that IG plus type return. So you have something that’s investment grade rated, but it’s generating somewhere in the neighborhood of 100 to 200 basis points more. That is really, really meaningful to an insurance company and that’s an area where there’s a tremendous amount of growth.

But that is slightly lower fee, not even slightly lower, it is a lower fee than what we generate on the illiquid non rated side. And having the ability to do both means that as banks or other originators come to us, they know that we don’t necessarily have to have something rated or put into a structure. It may fit within Pathfinder or Pathfinder Core. So it really does enable us to see a lot of deals. And at the size we’re currently at on the non rated side, we believe that we are the largest in that space and that we have the ability to do the most creative types of transactions, the largest check sizes within that space as well.

And so that’s provided there a great growth rate over the last couple of years in advance of that 16% to 20% and still has a lot of runway to go. And that’s a dollar that comes in at a sometimes two to three times higher fee rate plus getting an incentive or carried interest along with it. So very valuable growth engine for the firm going forward. And you also highlighted real estate debt. I mentioned it a little bit earlier, I said in the next two years, each year you’ll have about $1,200,000,000,000 of real estate debt maturing off of bank balance sheets.

They’re not going to necessarily want to participate in all of that on their own. They’re going to look to us again as partners where they can start to establish those same relationships where lending to us and then allowing us to create all of those other loans gives them better capital treatment, gives them more staffing efficiencies and gives them overall a better ROE potentially. That’s an area where we see there could be a lot of growth in the near future and the ability to really fund raise and deploy off of that.

Mike Cyprys, Equity Analyst, Morgan Stanley: Great. Why don’t we pivot and talk about private wealth? You alluded to that earlier, very large adjustable market where you and your peers have all been making some headway here with new products and distribution efforts. Just curious what you think will ultimately drive success in the channel and separate the winners from the laggards and talk about some of the steps that you’re taking in the coming years to be on the winning side of that.

Jared Phillips, Chief Financial Officer, Ares Management: Sure. Talent is and foremost product and then your distribution partners and I’ll go into each one of those individually. We have over 140 people now globally and 10 different offices globally that are looking to raise capital. And if you notice, that’s our own build. We still have the distribution fees that we need to pay to the wirehouses.

So having people and having the ability to have capital to put against it, it is expensive to start. So that creates a moat and that’s one of the reasons you see the scaled players really advancing the ball and taking more share in that market is because it’s expensive to start. And you need to be able to go out and not just deal with the wirehouses, but deal with all the RIAs and the IBDs and that means that you have a sales force that is based all throughout The United States, in fact all throughout the globe, that’s able to individually visit these offices, provide training, provide information. We’ve launched a training website that can assist in RIAs, IBD’s and other investors understanding the product. So having the talent and the capital to devote towards the sales and the education of these assets is extremely important.

Having the right product set and as we sit here today, have seven products that are above a billion. We believe that we’re the only provider that currently has that many products above a billion dollars in the retail space and we just launched an that is very, very popular. It’s our sports media entertainment fund. It just went live with retail investors here recently and I believe that that one will scale fairly quickly because of its popularity. That was created based as much on inbound from the distribution partners as anything.

It was them saying, we know that you have this capability. They saw obviously the NFL press release. They said, we’d love to get this in retail investors’ hands. We think that there’s going to be a substantial demand for it. So that’s launched with two of the largest distribution partners right off the bat.

Normally those partners wait until you see show some kind of scale, but that shows you how interested they are in that product. So having that wealth of products that when your sales force is going out and meeting with RIAs and is meeting with IBD, is able to explain to them these are the different ways you might construct a portfolio. These are the different funds that we have and how you can think about them in terms of what you want to provide. And that way they also begin to know the Aries brand name and the Aries name. So that breadth of products matters as well.

And then having the right distribution partners, so it needs to be globally. You need to make sure that you’re not overwhelming your capacity to originate so you have good partners that understand that you’re going to be methodical about onboarding all of your products over time and that you’re going do it at the right time so you’re benefiting their investors. Those are all really important things as you build out that platform. I’m very excited about where we’re at. Mapped out that we’d be at $100,000,000,000 in AUM in 2028.

We’re well on that pace. That’s kind of a run rate pace for what we’ve been doing recently. So it’s something that’s exciting to us. It’s a great new avenue for fundraising and it acts as a great ballast against our institutional business. It’s really important to not just be reliant on one or the other, but have those two that work together and they work a little bit in opposition to do things like protect fees.

Mike Cyprys, Equity Analyst, Morgan Stanley: And how are flows holding up here in April and May, just given all the volatility in the markets?

Jared Phillips, Chief Financial Officer, Ares Management: Absolutely. We’ve been very pleased with how flows have held up. The retail investors have continued to deploy. As importantly, what we didn’t see was a rush of redemptions. That’s something that you’re always looking for.

Certainly, we’ve seen that in recent history with some retail funds is that there’s been overall redemptions. A great point to highlight is that KDEX, our interval fund, that had its redemption date as April 10. So that was right in the middle, if everyone remembers, of the tariff tantrum. And essentially, that had in line redemptions with every other period. And that means that they had that week to be looking at the markets to feel that dislocation and they still did not choose to redeem.

So that was great. And then in terms of fundraising, April numbers were very strong, May numbers were slightly down and the reason that is, just to explain to everybody how the retail dollars work, is going to be a mix of what you raise in March and April That happens on the day. So April flows come in on May 1 along with what you raise for the rest of May. It depends on your distribution partner. So what you saw is that May number coming down, but that was really a reflection of that May 1 date, which reflected your April, which was down slightly.

We’ve seen a return that I would say we had our record retail inflows in Q1 of 3,200,000,000.0 I’d expect that we’d have similar flows here in the second quarter. So with the addition of the Sports Media Entertainment and the strength of what the April flows were against the bounce back in June, that we’d still have a very strong quarter in the half.

Mike Cyprys, Equity Analyst, Morgan Stanley: Sounds quite encouraging. That’s great. Maybe just on fee related earnings. Back at your Investor Day, you put out a target to grow fee related earnings, 16% to 20%, you alluded to that earlier, over the next five years. Maybe just talk about some of the key building blocks you see behind that, maybe the direct lending growing 15% to 20% sort of being part of that.

But just how do you think about that algo there and where might there be some scope for upside?

Jared Phillips, Chief Financial Officer, Ares Management: Sure. One of the things I’m really proud of as a firm and how we model that out is the conviction that we’re able to do that. There’s not many people that are able to give a five year plan and be able to operate within that plan and hit it. A lot of that is the predictability of our model. So when you just look today, if you just said hey, nothing else today except for our AUM, not yet paying fees available for future deployment.

That’s 25% of our current management fee revenue. That’s going to come on largely margin accretive. There’s a slight cost maybe to deploying that, But that number right there tells you that you have that amount of growth baked in if nothing else happens. So that drives a lot of that direct lending growth that is still there in both Europe, U. S.

And Asia. So the strong mature businesses continue to be growing and strong. And then you have our investment in other businesses. I would highlight last year at this time, real estate was probably approaching its trough in terms of valuation. It probably approaching its trough in terms of market activity.

If I had Bill Benjamin or Julie Solomon up here with me, they would have told you that at this time last year they were canceling more investment committees that we were having. A year later, now those investment committees are running longer, so there is more deal activity. That real estate business, even though it’s a mature business, is built for a macro environment that’s much more active than it was. So you’re going to have just that organic growth of something like that. Our ability as a scaled franchise to hold on to talent, to work with that talent through periods where it’s not as active, that enables us to then grow in excess of what we might have otherwise been able to do if we didn’t have that team already in place.

So you’ll have growth that comes from that. Then you’ll have growth in things like retail. So sports media entertainment and launching that retail product, well that wasn’t in that roadmap. So that’s zero to something that’s meaningful and that’s happening with the team. Mark Affalter and his team have been in place.

So it’s happening with a nice amount of margin accretion. And then I know that it wasn’t in the plan last year, but I think data centers is a great example of how we think about growth because there’s other smaller areas throughout the business. It just happens to be one of the larger dollar ones where we walk through that that was operating at a $20,000,000 FRE loss. That business as it comes online is we’re going to have a close of the Japan or final close of the Japan business coming up of that location. We’ll launch at least one other location based fund within the next year here and then we have several more that are waiting that were land bank.

So you’re going go from negative $20,000,000 to a positive number, which is going to have an infinite impact on your FRE growth. So areas like that, real estate debt is another example that we highlighted that in our Investor Day, but we’ve walked through already. The growth in all credit. So we have a number of different areas that we see expansion capabilities. But what we don’t do is we want to give you high conviction that we can meet or exceed those numbers.

So we try to model it out as if it is a kind of muted macro environment. If it is a robust environment, that’s going be little different. If it’s a depressed environment, it will go the opposite way. But we kind of just use a normalized environment over that five year period. Within a five year period, if you have a tremendously active environment, you can meaningfully beat or exceed.

I talk about that with our margins as well. If we have a meaningful deployment environment, those are the type of years when your margin expands greatly and you can really exceed that 16 to 20 within that year, which gives you a nice base of your CAGR over that five year period.

Mike Cyprys, Equity Analyst, Morgan Stanley: Great. And we have just a few minutes left. You mentioned data centers. Maybe we’ll just double click on that as we think about the AI opportunity for Ares. Just taking a step back advances in sort of new technology AI reshaping a number of different sectors.

I was hoping you could talk about how you see AI impacting the asset management industry and in particular the alternative asset management industry. One thing unique for the Alt is that AI cuts across a number of opportunities from AI application at the management company to harnessing AI as a tool for value creation, as well as AI as a deployment theme. So on each of those three threads, I know we just have a few minutes left, maybe just talk about how you’re seeing some of the opportunities around that.

Jared Phillips, Chief Financial Officer, Ares Management: AI is, to me, it’s incredibly exciting. Love to think about what the future capabilities of it are. We bought last year Bootstraps Lab, which is a venture capital firm focused on AI and our hypothesis was multifold, not just twofold, but multifold there. One was we’re very happy with them as investors certainly, but as you know we’re not a venture capital investor. What we wanted is their interaction with our portfolio companies in terms of how they could meaningfully impact our portfolio companies’ EBITDA growth, their overall profit levels and then how they could impact Ares as a manager and what different types of AI that we should be looking at.

And working with those teams, we’ve put over a 100 different use cases up on the whiteboard so far. We have 15 that are in active flight. The easiest way in a short period of time for you to think about it is and where AI is today is think of it like you’re hiring a junior analyst. And that if you’re asking it the right questions and you give it access to the right centralized data, it is able to quickly interrogate that for you, it’s able to help you identify patterns, it’s able to assist with your due diligence of deals, it’s able to put things together in a very summarized manner, that in some cases would take days or even weeks. So it’s taking a lot of that initial lower level work off the table to allow for much faster analysis and faster decision making.

And that’s really in terms of our use case, that’s I think the easiest way for you to think about it. There’s a number of different other channels that will ultimately benefit us there. And even in the last year just the growth and the ability of it to do that has been exponential. So it’s getting better, it’s getting smarter, it’s getting more usable. You still need to be good at asking the questions, but you don’t need to be as good at asking the questions as you were before and you still do need to test the data as it comes out.

Then you have it in terms of how do you work with it in portfolio companies. And in terms of your portfolio companies, if it’s increasing EBITDA, even on lending, that means you’re increasing your interest coverage. That means they have the ability to potentially borrow more and invest more in other areas. So that’s how you can use it to help grow your portfolio and if you use that same basic premise of hey, right now it’s acting like a good junior person in your business and if you’re leveraging it, you’re able to reduce your overall time spent. That’s where you’re going to see most of the impact to value.

And then lastly, in deployment, I know I’m out of time now, but in terms of the data centers, the important things about our data centers is AI is a tailwind. We don’t build to spec, we build to suit. The locations that we have and that we’ve currently land banked, they are urban adjacent, so they’re designed to provide low latency to those environments and be as beneficial to AI as they are to cloud computing, which was the original thesis behind them. So AI just makes them even more desirable, but they still work in an environment where AI is either nonexistent or cheaper.

Mike Cyprys, Equity Analyst, Morgan Stanley: Great. Well, I’ll leave it there. Thank you. Great. Really appreciate

Jared Phillips, Chief Financial Officer, Ares Management: Thank you. Thanks all of you.

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