Ares Management (ARES) investor relations material

Macro and market outlook

• Middle market corporate portfolios show 9% year-over-year EBITDA growth, with strong credit metrics and low defaults.

• Secular tailwinds include global AI CapEx, strategic autonomy, and energy security investments in regions like the Eurozone and Canada.

• Deal activity is increasing, with robust boardroom sentiment and improved transaction terms.

Direct lending and credit deployment

• Spreads and upfront fees are higher than a year ago, with improved leverage and deal structures favoring lenders.

• Better relative value and less competition are seen at the upper end of the market due to capital dynamics.

• Deployment is driven by portfolio diversification and internal growth, not just new transactions; pipelines are at record levels, up 20% from the prior quarter.

• Asset-based finance, European direct lending, and infrastructure debt are particularly active.

Private credit and investor demand

• Institutional demand for private credit is at record highs, with allocations at 4% versus 10%-15% for private equity and real estate.

• Private credit offers consistent performance, floating rates, and excess returns of 150-300 basis points over liquid markets.

• Current market excess spread is about 235 basis points, driving strong allocations from sophisticated institutions.

• Private credit is expected to continue growing at 10%-15% annually, outpacing loan and bond markets.