Ares CEO: Private Markets Thrive Despite Subdued M&A Volumes

In Brief:

Despite materially lower leveraged buyout volumes and market uncertainty, private markets are demonstrating remarkable resilience through innovative liquidity solutions and refinancing opportunities, with $3 trillion in private equity investments awaiting distribution and another trillion in fresh capital ready for deployment. Michael Arougheti, CEO of Ares Management, which oversees $570 billion in assets, appeared on Bloomberg Surveillance following the firm's Q2 2025 earnings call to discuss how alternative asset managers are navigating this environment. His firm deployed $27 billion in the quarter despite subdued deal activity, highlighting how the industry has evolved beyond traditional M&A dependency to encompass digital infrastructure, real estate, private credit, and asset-based finance across global markets.

Big Picture Drivers:

• Capital Imbalance: $3.2 trillion in private equity investments need to be returned to investors, with half being over 5 years old, creating urgent liquidity needs

• Market Diversification: Alternative asset management now extends far beyond M&A into infrastructure, real estate, and private credit solutions

• Regulatory Momentum: Pro-business administration driving deregulation and potential 401(k) access to private markets

• Economic Resilience: Portfolio companies showing 13% year-over-year EBITDA growth despite higher interest rates

Key Topics Covered:

• Q2 Performance: Ares deployed $27 billion and raised $26 billion despite subdued M&A environment

• Market Outlook: Pent-up demand for transactions expected to drive robust Q3 and Q4 activity

• 401(k) Access: Cautious optimism about opening retirement accounts to alternative investments

• Interest Rates: Economy functioning well at current levels, suggesting no need for Fed accommodation

Key Insights:

• Alternative asset managers are not dependent on M&A volumes: The industry has evolved to provide solutions through market cycles via geographic diversification, capital structure flexibility, and innovative liquidity solutions that work regardless of traditional deal flow.

• The weight of money will force transaction activity: With $3.2 trillion in private equity investments needing distribution and half being over 5 years old, structural time constraints will push companies into markets even without traditional M&A catalysts.

• 401(k) access faces significant hurdles despite enthusiasm: Implementation requires executive orders, rulemaking, navigation of expected class action lawsuits, plan sponsor comfort, and proof of excess returns net of fees before meaningful adoption can occur.

• Current market conditions don't warrant Fed accommodation: With portfolio companies showing double-digit EBITDA growth, liquid markets near all-time tight spreads, and the economy on stable footing, there's no indication that lower rates are necessary.

• Wealth channel momentum is already strong without 401(k)s: Ares raised $6.3 billion in wealth products this quarter alone, with nearly half of AUM in permanent capital vehicles, suggesting robust demand exists without regulatory changes.

• June activity signals potential market acceleration: Following tax bill completion and tariff clarity, June's pickup in activity could indicate robust third and fourth quarters if stability continues.

Memorable Quotes:

• "There's a misconception that alternative asset management is just driven solely by M&A and private equity volumes" - Michael Arougheti, explaining the industry's evolution beyond traditional deal dependency

• "We put $27 billion to work this quarter in a very subdued deal environment" - Michael Arougheti, demonstrating execution capability despite market headwinds

• "Half of it is over 5 years old, and there's a desire to get that money back to investors" - Michael Arougheti, on the $3.2 trillion in private equity awaiting distribution

• "The plumbing is working. Nothing's broken" - Michael Arougheti, assessing the economy's ability to handle current interest rates

• "There's no reason that an individual shouldn't have the same access to alternative assets that institutional investors do" - Michael Arougheti, advocating for democratization of private markets

The Wrap:

Arougheti's perspective reveals a private markets ecosystem that has matured beyond its traditional reliance on M&A activity, now serving as a critical liquidity provider across multiple asset classes while managing through market cycles. The combination of structural forces—including the massive backlog of private equity investments awaiting exit, continued strong fundraising capabilities, and portfolio company resilience—suggests the alternative asset management industry is positioned for growth regardless of traditional market catalysts. While regulatory changes like 401(k) access could expand the investor base, the industry's current momentum and diversification indicate it doesn't need such changes to thrive, though democratizing access remains a long-term priority.