Ares Management Reports Record Quarterly Fundraising Amid Market Volatility

What's Happening

Ares Management Corporation posted second-quarter results that demonstrated resilience amid market disruption, delivering record quarterly fundraising of $26.2 billion and assets under management growth to $572 billion. The alternative investment manager navigated tariff-related volatility that temporarily slowed transaction activity in April and May while successfully integrating its GCP International acquisition, which contributed $103 million in revenues during its first full quarter under Ares ownership.

Why It Matters

• Market consolidation opportunity: With institutional private credit fundraising declining sequentially over three years, Ares is positioned to gain market share as competitors reduce fees to attract capital

• Wealth channel democratization: The firm's $7 billion first-half wealth fundraising represents 54% year-over-year growth, reinforcing its top-five market position as alternatives penetrate retail investor portfolios

• Infrastructure timing: The GCP acquisition provides immediate scale in data center development as hyperscaler demand accelerates globally

• Revenue stability enhancement: Perpetual capital now represents $167 billion, or nearly half of fee-paying AUM, reducing dependence on volatile fundraising cycles

The Key Moves

• GCP integration ahead of schedule: First full quarter delivered $103 million in revenues with 33% margins, with management identifying cost synergies exceeding original expectations

• Global expansion acceleration: Established partnerships with leading Japanese banks while recording $1.4 billion in July wealth channel fundraising with August projected near $2 billion

• Secondaries platform expansion: Launched new GP-led transaction fund with $800 million raised and expanded credit secondaries strategy to $3.5 billion in total commitments

• Data center pipeline development: Completed $2.4 billion Japan data center fund raise with entitled projects across London, Tokyo, and Osaka markets

By The Numbers

• Growth metrics: AUM increased 28% year-over-year to $572 billion; fee-paying AUM rose 27% to $350 billion; management fees advanced 24% to $900 million

• Fundraising performance: Second-highest quarterly total of $26.2 billion; year-to-date gross commitments of $46 billion position firm to meet or exceed 2024 record of $92.7 billion

• Financial results: Fee-related earnings increased 26% to $409 million with 41.2% margins; net accrued performance income grew 8.5% to $1.1 billion

• Operational strength: Deployed $26.9 billion in capital compared to $26.4 billion in prior year; maintains $151 billion in available capital including $105 billion not yet paying fees

• Credit quality: U.S. direct lending portfolio maintains 43% loan-to-value ratio with 13% EBITDA growth and nonaccrual rates below historical averages

Key Players

• Michael Arougheti, CEO: Emphasized disciplined approach to fee preservation while highlighting successful GCP integration and private credit market positioning

• Jarrod Phillips, CFO: Detailed GCP synergy realization exceeding expectations and confirmed trajectory toward $200 million fee-related earnings target

• Greg Mason, Managing Director of Investor Relations: Announced 20% dividend increase to $1.12 per share reflecting confidence in earnings sustainability

Analyst Sentiment

• Positive: Record fundraising momentum despite market volatility; successful GCP integration; wealth channel acceleration; fee discipline maintenance

• Cautious: Private credit spread compression impact; potential broadly syndicated loan refinancing headwinds; near-term GCP margin dilution effects

• Optimistic: Data center development pipeline scale; secondaries market opportunity expansion; Japanese market penetration potential

• Mixed: European versus U.S. market dynamics; performance income realization timing; competitive fee pressure sustainability

• Supportive: Perpetual capital strategy providing revenue stability; geographic diversification reducing U.S. market dependence

• Watching: Wealth channel redemption patterns; deployment pipeline sustainability; 401(k) market regulatory development timeline

• Constructive: Insurance platform growth trajectory; data center AI infrastructure opportunity alignment

Key Questions

• Private credit sustainability: How will spread compression and refinancing activity affect institutional demand and fee rates in core direct lending strategies?

• Regulatory market access: What specific developments are required to unlock 401(k) market opportunity, and can Ares maintain pricing discipline amid potential competition?

• Integration execution: Can management deliver promised GCP synergies while scaling global data center development amid inflationary construction pressures?

• Channel durability: Will wealth management momentum sustain through extended market volatility periods?

• Geographic risk management: How effectively can improving European investment activity offset potential U.S. policy-related headwinds?

Key Quotes

• "We're not getting focused on AUM growth, we're getting focused on FRE growth and profitability" - Arougheti on strategic discipline amid competitive pressures

• "Private credit fundraising institutionally is actually down sequentially for the last 3 years" - Arougheti challenging market narratives about sector growth

• "July was a record month for us. We took in about $1.4 billion in equity in July, and August will be significantly in excess of that as well" - Arougheti on wealth channel momentum

• "We're identifying more cost saves than we originally expected" - Phillips on GCP integration benefits

The Wrap

Ares demonstrated operational resilience and strategic execution during a quarter marked by market volatility, successfully integrating its largest acquisition while maintaining strong fundraising momentum across multiple channels. The firm's emphasis on perpetual capital formation, geographic diversification, and disciplined fee management positions it favorably for sustained growth, though questions persist regarding private credit market evolution and emerging opportunity timing. With substantial dry powder and improving deployment conditions, Ares appears well-positioned to capitalize on market recovery while preserving its methodical approach to profitability expansion.