Ares Management (ARES) investor relations material

Industry evolution and business models

• Alternative asset management has evolved from direct lending to diversified strategies including asset-based lending, digital infrastructure, and GP stakes, with a focus on capital solutions and downside protection.

• Growth has been primarily organic, with acquisitions serving as complements to core businesses and enabling scale.

• Both firms emphasize a capital-light, fee-driven model, prioritizing high margins, cash flow, and dividends over balance sheet-intensive strategies.

• Scale is seen as a key competitive advantage, enabling access to larger deals, better origination, and more robust underwriting.

• Diversification and disciplined credit standards are central to portfolio construction, with hundreds of positions and significant equity cushions.

Market dynamics and performance through volatility

• Volatility is viewed as an opportunity, allowing deployment into higher quality assets at better spreads and reinforcing the private credit model.

• Despite market fears, portfolios have shown resilience, with low default rates and strong recoveries, especially in direct lending and software lending.

• The industry benefits from permanent capital and is not forced to sell during downturns, supporting long-term outperformance.

• Public sentiment often lags actual performance, with negative narratives recurring during periods of volatility.

• Education and consistent performance are seen as the best ways to counteract misinformation and skepticism about private credit.

Growth areas and future outlook

• Asset-based lending and digital infrastructure are identified as major growth areas, with addressable markets potentially larger than direct corporate credit.

• Barriers to entry in asset-based lending are high due to data intensity and the need for sophisticated origination and risk management.

• The wealth channel is still evolving, with leadership and product quality driving fund flows.

• Macro outlook is positive, with underlying portfolio companies growing faster than GDP and a favorable environment for credit.

• Industry leadership is expected to remain stable, with current top firms likely to retain their positions over the next five to ten years.