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DATE

Friday, May 1, 2026 at 11 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Michael J. Arougheti
  • Chief Financial Officer — Jarrod Morgan Phillips
  • Managing Director, Head of Investor Relations — Greg Michael Mason
  • Unknown Speaker — [Data Center/Infrastructure Response]

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TAKEAWAYS

  • Assets Under Management (AUM) -- $644 billion, up 18% year over year, with fee-paying AUM rising 19% to $400 billion.
  • Quarterly Management Fees -- Exceeded $1 billion for the first time, growing 22% compared to the prior-year period.
  • Fee-Related Earnings (FRE) -- $454 million, an increase of 26% year over year; FRE margin reached 42.4%, up 90 basis points year over year.
  • Realized Income -- $503 million, up 24% year over year; after-tax realized income per share was $1.24, a 14% increase.
  • Dividend -- Declared at $1.35 per share, rising over 20% from the prior-year quarter; payable June 30, 2026.
  • Fundraising -- $30 billion gross capital raised, a 46% increase, marking the highest first quarter; institutional pipeline remains robust.
  • Available Capital (Dry Powder) -- Over $158 billion available for deployment, including more than $100 billion in credit strategies.
  • Deployment -- Exceeded $32 billion, outpacing last year's first quarter; strong activity across real estate, alternative credit, European direct lending, and private equity.
  • New Products & Strategies -- Fourteen new investment products/strategies launched over two years, totaling $68 billion in AUM.
  • Software Portfolio Exposure -- Represents 6% of overall AUM (less than 8% of private credit AUM); third-party analysis found 86% low, 13% medium, and 1% high AI-risk exposure.
  • Segment Fundraising -- Over $20 billion raised within the Credit Group; ASOF III closed with more than $8.3 billion equity, nearly $10 billion with related vehicles.
  • Product Demand Shifts -- U.S. direct lending equity flows into non-traded BDC moderated, but core infrastructure fund raised $1 billion, and European direct lending wealth products attracted nearly $1.2 billion.
  • Non-Traded BDC Repurchase Activity -- Over 95% of investors did not request redemptions; majority of recent redemption requests came from family offices and smaller institutions.
  • FRE Margin Outlook -- Confidence expressed for full-year expansion toward the high end of the targeted 0 to 150 basis points range.
  • 12-Month Investment Performance -- Time-weighted returns: 12%-15% for U.S. direct lending, 15% for Alternative Credit, 12% for Opportunistic Credit, 9% for European direct lending, over 20% for APAC credit.
  • X-energy IPO -- Completed at over $1 billion, 20% above proposed range high; Ares' current fair value in X-energy is close to $700 million against a cost basis a little over $100 million.
  • 2026 Financial Targets -- On track for 16%-20% compound annual FRE growth, 20%-25% realized income growth, and 20% dividend growth.
  • Secondary Market Activity -- APMF (secondaries vehicle) generated a since-inception net return above 14%; market now sees annual deployment roughly equal to industry dry powder, supporting excess returns.
  • Credit Fundamentals -- Near 10% EBITDA growth across portfolios, mid-40% loan-to-value ratios, interest coverage ratios at 2.2x, and non-accrual ratios well below historical norms.

SUMMARY

Ares Management Corporation (ARES +1.92%) achieved record-high gross capital raising and fee-related profitability, supported by robust institutional activity and expanding investor diversification. Management described elevated deployment pipelines in credit and infrastructure, with several large strategies oversubscribed or at hard caps. The firm's recent independent review of software credit risk concluded minimal exposure to high-risk AI disruption, aligning with internal underwriting. X-energy's IPO outcome materially increased balance-sheet investment value and exemplified the firm's approach to complex private transactions. Management expects further fee margin expansion and reiterated multi-year growth targets in light of strong AUM not yet paying fees and continued deployment strength.

  • Direct lending in Europe outperformed initial expectations, highlighting geographic diversification as a driver of deployment resilience.
  • Data center fundraising and digital infrastructure expansion leverage a supply-demand imbalance in third-party capital addressing a market sized at approximately $900 billion.
  • Non-traded U.S. private credit vehicle redemptions affected a limited investor subset without systemic impact on overall AUM or profitability.
  • Current transactional market volatility, including the aftermath of geopolitical events, is viewed as creating wider spreads and improved deal terms for investors.
  • Firm's diversified origination and product suite facilitate capital allocation flexibility across strategies, asset classes, and market cycles.

INDUSTRY GLOSSARY

  • FRE (Fee-Related Earnings): A profitability measure reflecting revenues from management fees and related earnings, excluding performance-based income, used to assess operating performance for asset managers like Ares Management Corporation.
  • FPAUM (Fee-Paying Assets Under Management): Portion of total AUM on which management fees are billed; critical for recurring revenue and profitability calculations in asset management.
  • Dry Powder: Uncommitted, immediately investable capital reserves, enabling rapid deployment into new investment opportunities.
  • BDC (Business Development Company): U.S. investment structure primarily investing in private company debt and equity, often with specific restrictions around leverage and liquidity.
  • Non-traded REIT: Real Estate Investment Trust not listed on public exchanges, typically offering access to institutional-caliber real estate investments with periodic redemption features.
  • APMF: Ares Private Markets Fund, referenced as a perpetual vehicle generating fee-related performance revenues in the transcript.
  • SDL (Senior Direct Lending): Ares' flagship institutional direct lending product series, providing senior debt to middle-market businesses.
  • ASOF: Ares Special Opportunities Fund; the firm's opportunistic credit vehicle, investing across public and private asset classes for higher risk-adjusted return opportunities.
  • Hard Cap: Maximum dollar amount a fund is permitted to raise from investors, beyond which no further subscriptions are accepted.
  • LP-led / GP-led Secondaries: In private markets, LP-led secondary transactions involve limited partners selling fund interests to other investors; GP-led deals are initiated by general partners, often to restructure funds or provide liquidity on existing portfolios.

Full Conference Call Transcript

Greg Michael Mason: Good morning, and thank you for joining us today for our first quarter 2026 conference call. I am joined today by Michael J. Arougheti, our Chief Executive Officer, and Jarrod Morgan Phillips, our Chief Financial Officer. We also have a number of executives with us today who will be available during Q&A. Before we begin, I want to remind you that comments made during this call contain forward-looking statements and are subject to risks and uncertainties, including those identified in our risk factors in our SEC filings. Our actual results could differ materially, and we undertake no obligation to update any such forward-looking statements.

Please also note that past performance is not a guarantee of future results, and nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in Ares Management Corporation or any Ares Management Corporation fund. During this call, we will refer to certain non-GAAP financial measures which should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles. Please refer to our first quarter earnings presentation available on the Investor Resources section of our website for reconciliations of these non-GAAP measures to the most directly comparable GAAP measure. Note that we plan to file our Form 10-Q later this month.

This morning, we announced that we declared a quarterly dividend of $1.35 per share on the company’s Class A and non-voting common stock, representing an increase of over 20% over our dividend the same quarter a year ago. The dividend will be paid on June 30, 2026, to holders of record on June 16, 2026. I will now turn the call over to Michael J. Arougheti, who will start with some comments on the current market environment and our first quarter financial results.

Michael J. Arougheti: Thank you, Greg, and good morning. We hope everybody is doing well. In the first quarter, we continued to generate strong financial results and significant growth across our key financial metrics, and we are excited and confident about the opportunities ahead for our business. Our AUM increased 18% year-over-year to $644 billion and our fee-paying AUM increased 19% to $400 billion. This is translating into strong top line growth and profitability, as management fees increased 22% year-over-year, FRE grew 26% and realized income increased 24%. We also continued to generate strong fund performance for our investors across an expanding array of investment strategies, which is helping to drive increased and more diversified investor demand across our firm.

In fact, we are on track for another record year of fundraising as we raised $30 billion of gross capital in Q1, which is our highest ever first quarter and is up 46% compared to last year’s record first quarter. Our pipeline of new institutional funds remains robust for this year and next year, with three of our largest institutional private credit funds in the market over the next twelve months, two of which have already launched with significant momentum. Our institutional franchise remains strong. Three quarters of our $644 billion of AUM is comprised of institutional capital, with 14% from publicly traded closed-end funds and other sources and just over 10% from evergreen wealth products.

With nearly 1,700 investment professionals across more than 55 global offices, we operate one of the largest and most diversified origination platforms in the private markets. This platform enables us to source differentiated investments throughout market cycles and to capture market share during periods of volatility. Even with the typical seasonal slowdown in the first quarter, which was further amplified by heightened geopolitical issues, our deployment was still over $32 billion across the firm, which was higher than the first quarter of last year.

As sponsors and business owners gain increasing comfort with the market backdrop, we are seeing our forward investment pipeline increase to a new record level with notable strength across European and U.S. direct lending, alternative credit and infrastructure. The expansion of our platform is also driving new investment opportunities. For example, over the past two years, we have added 14 new investment products and strategies, which now total $68 billion in AUM. These new additions to the platform enable us to continue to expand our global origination capabilities and help us to find supply-demand imbalances. Our available capital continues to expand on the back of our strong fundraising, and it now stands at over $158 billion.

As one of the largest institutionally backed private credit providers globally, we believe that we have the most credit dry powder of any public player in the market, totaling more than $100 billion. This sets us up well for continued growth in FPAUM as we invest in today’s increasingly attractive market. Now let me dive into a few key drivers of our business, starting with fundraising. In short, we continue to see strong demand from institutional investors as many are seeking to take advantage of improving market conditions across private credit, real assets and secondaries.

Institutional demand is broad based; we continue to see investors consolidating relationships with scaled platforms like Ares Management Corporation that can generate consistent performance across cycles. Within our Credit Group, we raised over $20 billion in Q1, driven by strong demand across both drawdown funds and perpetual capital vehicles. In the first quarter, we held the final close for ASOF III, our latest opportunistic credit fund, raising over $8.3 billion of equity commitments and nearly $10 billion including related transaction vehicles. ASOF III significantly exceeded its target and the size of the prior vintage. We believe that the timing of this raise is particularly compelling as the team is seeing a large pipeline of investment opportunities.

In January, we launched the third vintage of our alternative credit fund with a target of $6.5 billion. Our alternative credit strategy is where we invest across the multi-trillion-dollar addressable market in global asset-backed finance. Our prior alternative credit fund totaled $6.6 billion in capital, and the current fund is experiencing strong demand from existing and new institutional investors, well in excess of the target. We expect to complete the fundraise in the second quarter at its hard cap as the fund is already meaningfully oversubscribed.

In U.S. direct lending, we are accelerating the launch of our fourth senior direct lending fund due to improving market conditions, which are offering enhanced economics, lower leverage and improved deal terms in U.S. direct lending investments. We anticipate a first close in late third quarter or early fourth quarter of this year. We also have some exciting structural enhancements to our main fund series, which we believe will benefit investors and enhance our fundraising capabilities in the strategy. In our third U.S. senior direct lending fund, SDL 3, we raised approximately $15.3 billion in equity commitments across both levered and unlevered sleeves in the fund against a $10 billion cover.

The fourth vintage in the series will be a fully levered fund and we plan to launch a new unlevered evergreen U.S. senior direct lending core product. The two products will continue to invest together just like previous vintages but will now provide investors with both a commingled and an evergreen opportunity. Like our third fund, we would expect this fourth fund series to also exceed its $10 billion cover.

In Digital Infrastructure, we are raising a global data center equity fund to take advantage of the multi-decade supply-demand imbalance as the hyperscalers drive demand for trillions of dollars of cloud and AI computing over the next five years, a significant portion of which will need to be solved by private equity and private credit. Our digital infrastructure group, which includes our own vertically integrated operating platform, Ada Infrastructure, has a differentiated position in the market characterized by long-standing hyperscaler relationships, significant investment and development expertise, and multiple seed projects in the pipeline in top-tier markets. We expect to hold a significant first close in our global data center fund this summer.

As many of you know, we operate one of the largest real estate platforms globally, and our scale continues to drive accelerating demand across our real estate funds. In the first quarter, our eleventh U.S. value-add fund closed at its increased hard cap of $3.1 billion in fund commitments and approximately $3 billion of total capital. Similarly, our fifth Japan Logistics Development Fund is seeing very strong demand following the excellent performance of prior vintages. We expect to hold a first close this spring and ultimately reach the hard cap later this year.

And in secondaries, we are back in the market with our third real estate secondary fund and expect a first close in the back half of the year. Within our Wealth business, we had another strong quarter driven by accelerating demand in our suite of products outside of U.S. private credit. In fact, we raised the same amount of gross and net equity capital of $4 billion and $3 billion, respectively, in the first quarter as we did in the fourth quarter of last year. On a year-over-year basis, our Wealth AUM increased 54% to $68 billion.

We believe that our diversified product offering is enabling us to gain market share as advisors broaden their focus away from U.S. private credit toward other alternative products like infrastructure, real estate and private equity. For example, during the first quarter, our core infrastructure fund raised $1 billion in equity subscriptions and now has over $3 billion of AUM, and the fund just launched on its first major platform with its first capital raise on that platform closing today. We are also seeing improving flows across our two non-traded REITs, with more than $640 million of inflows in the quarter, and our European direct lending wealth products had equity flows of nearly $1.2 billion.

Within U.S. direct lending, equity flows into our non-traded BDC have moderated relative to prior periods, while fund performance and underlying credit fundamentals remain strong. Since inception, the non-traded BDC has generated an annualized return of over 10% for Class I shares. Notably, the majority of repurchase requests during the most recent quarter came from a limited number of family offices and smaller institutions in select regions, and over 95% of our investors did not request redemptions. It is important to remember that these vehicles are specifically designed to align liquidity with the underlying assets. For example, the non-traded BDC’s 5% quarterly repurchase framework approximates the natural repayments of a typical U.S. direct lending portfolio.

This repurchase framework is intended to provide access to attractively yielding illiquid assets while also mitigating against the risk of forced asset sales during heightened redemption requests. Finally, we believe that we are well positioned to continue to drive strong growth regardless of redemption activity in our U.S. private credit vehicles. These two private credit wealth products account for approximately 4.5% of our overall fee-paying AUM. While we believe it is a very unlikely scenario, if these two funds were to experience 5% quarterly redemptions for a full year, with no gross inflows, we estimate that, based on existing fund structures and redemption mechanics, it could impact our FPAUM by approximately 1% annually.

Considering that our FPAUM increased by over 19% in the past twelve months, and our current AUM not yet paying fees and available for deployment represents another 19% of future growth in FPAUM, we would expect the impact of any redemption activity to be minimal. In reality, any deployment that would have gone to these non-traded vehicles will likely be taken up by other traded and institutional funds and SMAs with limited to no impact to our current year profitability. On the investing side, overall deployment activity increased modestly compared to 2025, driven by real estate, alternative credit, European direct lending and private equity.

The transaction market environment for U.S. direct lending was slower in the first quarter as industry-wide deal count and middle market M&A declined by 41% in Q1 2026 versus Q1 2025 due to impacts from the Iran war, and changing inflation and rate expectations. During slower periods, we often gain considerable market share due to our certainty of capital and broad sourcing capabilities, and the first quarter was no exception. Over the past several weeks, we are beginning to see a pickup in new U.S. direct lending transaction activity as market participants adjust to changing market conditions. As Jarrod will discuss later in the call, our investment portfolios are performing well and credit fundamentals remain positive.

Of course, the broader market will see defaults which will inevitably garner attention, but we are not seeing signs of an impending default cycle and we believe that private credit players are getting well compensated for the risks with enhanced economics. We have operated our U.S. direct lending strategy for over 20 years, and looking at Ares Capital Corporation, we have deployed and exited more than $70 billion in capital with an asset-level realized gross IRR of 13% on all exited investments.

In our view, the growth of the private credit asset class is part of a multi-decade structural evolution supported first by continued expansion of the private markets relative to the public markets; secondly, by bank consolidation and the need for tight bank regulation given the dependence on federally insured deposits and the inherent asset-liability mismatch and leverage in the banking system; and lastly, by the fact that the syndicated bank loan and high yield markets have been focused on larger companies for decades, which has left a growing void for middle market companies, which comprise about one third of our economy.

The U.S. private credit market, which is funded 75% or more by institutional investors, serves as a stabilizing force in the economy when bank lending contracts or when the capital markets become constrained. For example, if you look over the last 25 years, U.S. private credit has contracted once, which was over ten years ago, versus the banking sector, which has contracted eight times over the same period. Today, Ares Management Corporation has over $100 billion in available capital to invest in credit, and we estimate that the industry has over $500 billion of available capital, which is larger than the size of the entire non-traded BDC industry.

While private credit has expanded at low double-digit rates over the past decade, this growth tracks in line with the growth of the $5 trillion private equity sector and other private market asset classes. Also, the percentage of our economy’s GDP funded by corporate credit—including private credit, bank C&I loans, syndicated bank loans and high yield bonds—has not changed over the past decade. This indicates that the growth of private credit is not increasing the amount of leveraged credit in the economy, and is providing more consistent funding throughout business cycles. Every loan funded by private credit with comparatively less fund or balance sheet leverage should reduce risk of volatility.

Software is a topic that is rightfully drawing a lot of attention, but there seems to be confusion on how to distinguish between software exposures and different software companies. Senior debt is much more protected from downside risks than equity in the capital structure, and individual software companies have varying degrees of potential AI disruption risks and opportunities. In the traded loan markets, we are seeing a bifurcation in the prices of software loans between the potentially less and more impacted companies.

For example, we have tracked a basket of companies focused on core operational software, systems of record and highly regulated markets, where their loans have traded down 2% on average year-to-date to $98–$99, versus another basket of software companies primarily focused on content generation, data analysis or productivity tools, where their loans have declined 24% on average year-to-date and now trade below $65. As we have discussed in the past, Ares Management Corporation’s software exposure, which is 6% of overall AUM and less than 8% of our AUM in private credit, is focused on senior lending, primarily to software companies in the former basket—serving the core operations of complex businesses in regulated industries with proprietary data.

As you may have heard from the Ares Capital Corporation call earlier this week, we engaged one of the top three global management consulting firms to supplement our own internal analysis of our software-oriented portfolio. They conducted a nine-week independent and detailed review of the potential forward-looking AI risk in our software-oriented portfolio companies. The study also included our relatively lower software exposure in our European direct lending portfolio. The study graded each company on a spectrum of risk characteristics and concluded that our software-oriented portfolio is very well positioned, with 86% of the portfolio with low risk of potential AI disruption.

Approximately 13% of the portfolio was classified as medium risk—these companies are performing well today but have a greater need and an opportunity to adapt to AI risks to their business—and only 1% of the portfolio was categorized as having high risk of AI disruption. If the consultant’s framework, which aligns with our own rigorous underwriting views, proves directionally correct, the portion of our software exposure that is medium to high risk represents less than 2% of our U.S. and European direct lending AUM and well under 1% of our total firm-wide AUM. Lastly, before turning the call over to Jarrod, I wanted to highlight the successful IPO last week of X-energy, which is a small modular nuclear reactor company.

In 2022, we identified X-energy as a revolutionary company through our first SPAC, Ares Acquisition Corp. I. As we approached the de-SPAC process in 2023, high inflation and rapidly rising interest rates impacted market conditions for the transaction. We chose to support X-energy in a private transaction and the company continued to execute its strategy, including receiving support from strategic investors like Amazon. Last week, X-energy completed its IPO that was meaningfully oversubscribed, raising over $1 billion at a 20% premium to the high end of the proposed range, and representing the largest equity offering ever for a nuclear company.

The cost basis of our balance sheet investment is a little over $100 million, and based on the recent trading price of the stock, our current fair value, net of employee compensation, is close to $700 million. We are excited to celebrate this significant milestone with our partners at X-energy. With that, I will turn the call over to Jarrod to provide additional details on our financial results. Jarrod?

Jarrod Morgan Phillips: Thanks, Mike. Our financial results in the first quarter demonstrate the strength, durability and diversification of our platform, with continued strong growth across our key financial metrics. Importantly, these results reinforce what we believe is one of the defining characteristics of our business model, which is our ability to continue growing, often faster, through periods of market dislocation given our FRE-rich earnings profile, balance sheet-light strategy, diversity of our AUM and investment strategies, and the scale of our global platform. As we look ahead, we remain confident that we are on track to meet our financial objectives for the year.

We continue to benefit from a large base of AUM that is not yet paying fees, strong fundraising momentum—especially in the institutional channel—and improving conditions for our deployment across a broader set of strategies. We believe the combination of long-duration capital, flexible investment mandates, significant dry powder, an asset-light balance sheet and a management fee-centric model positions us well to navigate through a range of market environments while continuing to drive growth in earnings over time. Turning to our results. Quarterly management fees exceeded $1 billion for the first time in our firm’s history and increased 22% compared to the prior-year period.

This growth continues to be driven by expansion in FPAUM, which increased 19% year-over-year due to strong underlying fundraising and deployment activity across the platform. Fee-related performance revenues totaled $20 million in the quarter, which were driven by APMF. As a reminder, the timing of FRPR varies by fund and investment strategy. Within Credit, we typically recognize FRPR from our Alternative Credit strategy in the third quarter with most of the remaining credit strategies recognized in the fourth quarter. In Real Estate, FRPR is concentrated in the fourth quarter, while APMF and certain other perpetual vehicles generate FRPR on a more recurring quarterly basis. Fee-related earnings were $454 million in the quarter, increasing 26% year-over-year.

Our FRE margin expanded 90 basis points year-over-year to 42.4%. We continue to have good visibility into margin expansion for the full year towards the high end of our targeted range, driven by a number of factors, including continued efficiencies from the GCP integration, the data center business flipping from a negative to a positive FRE contributor with the new global digital infrastructure fund paying on committed capital, and our expectations for continued strong growth in AUM and FPAUM from deployment. Turning to performance income. We generated $75 million in realized net performance income, an 84% increase over the year-ago period. Interest expense increased to $51 million due to normal increased Q1 seasonality.

Additionally, interest income should remain around the Q1 level going forward. Realized income for the quarter was $503 million, representing growth of 24% year-over-year, and after-tax realized income per share was $1.24, up 14% compared to the prior-year period. Our tax rate in the quarter totaled 13.5%, just above the midpoint of our 11% to 15% expected range for the year, in line with where we would expect the rate to be for the remainder of the year. As Mike stated, our fund performance remains strong across the platform.

Over the last twelve months, we generated time-weighted returns of approximately 12% to 15% in our U.S. direct lending strategies, 15% in Alternative Credit, 12% in Opportunistic Credit, 9% in European direct lending and over 20% in APAC credit. We continue to see strong fundamental performance in our funds, and when we look across private and public credit markets, nothing we are observing suggests we are at or near a turn in the credit cycle. Across our direct lending portfolios, we are seeing continued near 10% EBITDA growth, loan-to-value ratios in the mid-40% range, private equity funds continue to fund new transactions with a majority in equity, and improving interest coverage ratios of 2.2x.

Non-accrual ratios are well below historical norms, and we are generally financing much larger, more resilient businesses today versus past vintages. The relatively small number of credit issues we see are company-specific rather than indicative of broader trends. We are not seeing any credit deterioration broadly within software, as we have only one software company on non-accrual. Within Real Assets, our diversified non-traded REIT has generated a total return of approximately 12% over the last twelve months. Our infrastructure debt strategy produced gross returns of approximately 9% over the last twelve months.

In secondaries, APMF has generated a since-inception net return of over 14%, while our primary private equity strategies continue to deliver strong performance with net returns of approximately 15% in ACOF VI. Overall, these results reflect the breadth and consistency of our investment performance across strategies and continue to be a key differentiator for Ares Management Corporation as we look to drive long-term growth in AUM and earnings. In conclusion, for 2026, we are on track with our longer-term goals of generating compound annual growth of 16% to 20% in FRE, 20% to 25% in realized income and 20% in dividends.

We anticipate continued FRE margin expansion, and we expect to be within the upper end of our 0 to 150 basis points annual target this year. We are on track for another record year of fundraising, and our expansive origination platform, record levels of dry powder and flexible capital position us for strong deployment even in uncertain markets. I will now turn the call back over to Mike for his concluding remarks.

Michael J. Arougheti: Thanks, Jarrod. As we step back and reflect on the events of the first quarter, we believe one of the most important takeaways is the continued strength and resilience of our institutional fundraising franchise. Last week, we held our global annual meeting for our institutional investors. We welcomed over 1,100 attendees from across the world to both highlight the breadth and depth of Ares Management Corporation’s investment platform and to expand and deepen relationships with our largest investors. We continue to see enthusiastic engagement from large, sophisticated investors who are allocating capital with a long-term perspective and are increasingly consolidating relationships with scale managers that can deliver across strategies and cycles.

That demand has remained consistent despite the recent market noise, and in many cases, we are seeing investors lean in given the improving opportunity set. I think it is noteworthy that we continue to exceed our fundraising targets in most of our flagship fundraisers, and in many cases, we are getting to the hard cap in a shorter amount of time than in prior vintages. We also believe that the current environment is setting up very well for enhanced deployment. Periods of uncertainty tend to create more attractive investment terms and risk-adjusted returns, and we are already seeing a broader set of opportunities across credit, real assets and secondaries.

Given the ongoing impacts from geopolitical issues and certain redemptions in retail-focused funds, the current environment is offering wider spreads, higher fees and better terms. With over $150 billion of available capital and a highly diversified platform, we are well positioned to take advantage of these conditions and deploy capital at more attractive risk-adjusted returns. Importantly, our business model continues to provide us with a degree of diversification, stability and flexibility. We operate leading businesses across an array of global credit, real estate, infrastructure, secondaries and PE strategies. Our earnings are driven by management fees, supported by long-duration capital and complemented by performance income that we believe will continue to grow over time.

This combination enables us to remain patient and opportunistic while continuing to generate durable growth in earnings. We are excited about the many levers that we have for profitable growth and our ability to continue driving long-term shareholder value. I would remind everyone that Ares Management Corporation experienced its two fastest periods of growth during the GFC and COVID, as we were able to leverage our competitive advantages to consolidate share and as our institutional investors increased their allocations to us to take advantage of improving returns in choppy markets.

As always, I want to thank our employees around the world for their continued hard work and dedication, and I want to thank our investors for their ongoing support and confidence in our platform. We will now open the call for questions.

Operator: We will go first today to Craig Siegenthaler with Bank of America.

Craig Siegenthaler: Good morning, Mike and team. Hope everyone is doing well. You had a strong fundraising quarter in the credit platform, and that is despite a deceleration in two of your newer retail funds that, as you said, only represent about 5% of your AUM. Can you provide some perspective on the evolving demand dynamics between the institutional channel, the insurance channel, and also the retail channel within private credit?

Michael J. Arougheti: Thanks for the question, Craig. I will step back and contextualize the answer. When you think about how the private credit market has been evolving and how Ares Management Corporation has chosen to participate in it, we actually started in private credit with Ares Capital Corporation, a traded BDC, which has a substantial public track record through cycles. If you look at the 21-year-plus track record there, the return coming out of ARCC has beaten the S&P 500, the syndicated bank loan market, the high yield bond market and most anything else that people have invested in. It is a wonderful company and a wonderful structure.

But what we learned was that because of the ebbs and flows, particularly within the retail market, it was challenging to take full advantage of cycles when they developed only in that traded BDC fund structure. So we launched in earnest our institutional fund platform with the SDL and ACE series, which have scaled with similarly strong performance. Watching those two work together, you learn that diversification of funding is critically important to navigate cycles and drive outperformance, and the ability to have those funds working hand in hand is performance enhancing for both funds given our ability to continue to invest into the franchise, drive new originations and have the dry powder to support our best-performing companies.

You kind of need both. Then the wealth channel developed. We were last in our space to come into the market in earnest given some of the learnings we had about the procyclicality of flows within that channel, both good and bad. We have been very measured as we built the fund complex to capture the full complement of opportunities across the cycle within traded, non-traded and institutional. But the assets are the same. If we originate a senior secured loan and we have availability of capital in each of those three pools, each of those three pools will get to participate.

So if you are beginning to see slowing inflows or increased redemptions in the non-traded part of our business, that does not detract from our global deployment opportunity. Those assets will find their ways into other funds and therefore will not have an impact on our profitability. Insurance is something slightly different. Ninety percent plus of insurance companies’ balance sheets are investment-grade and high-grade. The growth of the private high-grade market is exciting, but it is a different asset class from the traditional private credit and sub-investment-grade credit market. So when you think about demand, you have to consider not just the channels, Craig, but also high grade versus sub-investment grade.

If you look at our $20 billion of capital raised in our credit strategies in the quarter, $5 billion was in Wealth. Of that $5 billion, about $3 billion was in our two U.S. direct lending funds, and about $2 billion was in our European direct lending fund and our Sports, Media & Entertainment fund, which we characterize as a quasi private credit product. Those two—Europe and SME—are enjoying very strong gross and net inflows despite the noise in U.S. private credit. As referenced, we are seeing our third vintage of Opportunistic Credit (ASOF) hit its hard cap, and our third vintage of ABF hit its hard cap and be meaningfully oversubscribed.

We also talked about the early momentum we see in the next senior direct lending fund. Everything we are seeing is that institutional investors are not anxious; they are not allocating away from private credit. In fact, they see a huge opportunity to take advantage of a dislocation and bring liquidity into the market to capture excess return.

Operator: We will go next to Alexander Blostein with Goldman Sachs.

Alexander Blostein: Hey, Mike. Good morning, everybody. You mentioned deployment pipelines are at a record in the credit business. Which parts of credit are seeing the biggest incremental pickup in opportunities, how has the market evolved in the last several months, and how might slower flows in non-traded BDCs and evergreen vehicles change market structure and current spreads in the U.S.?

Michael J. Arougheti: I do not think non-traded BDCs were the incremental buyer. If you look at market structure, non-traded BDCs in aggregate are somewhere between 15%–20% of the overall private credit market by AUM, and because they do not operate with significant dry powder, when you compare net flows there to aggregate dry powder in the institutional market, I do not think they were the incremental buyer. That supports our point about the deployment opportunity. In terms of pipelines, the diversification of our platform really shines through. We saw strong deployment in our infrastructure and real estate businesses, our European direct lending business, secondaries and structured solutions, and ABF.

We did see a slowdown in U.S. direct lending, which reflects slower middle market M&A as private equity digested the war in Iran and implications for inflation and rates. Over the last several weeks, pencils are back up and the pipeline has reengaged. As we saw last year, we could see deployment pick up aggressively in the back half. If there is one accelerating theme, it is liquidity-generated opportunity—companies in public and private markets, because of rates or flows, will need creative liquidity via opportunistic credit, secondaries and even direct lending recap solutions. That should drive meaningful deployment.

Operator: We will go next to Steven Chubak with Wolfe Research.

Steven Chubak: Thanks for taking the question. While non-traded BDC flows have come under pressure, flows in other products such as infrastructure and secondaries have been more resilient and are beginning to accelerate. What are you hearing from advisers and gatekeepers on retail appetite outside of credit, and do you still see a credible path to hitting the 2028 fundraising target of $125 billion?

Michael J. Arougheti: The wealth channel’s development is about investor access—bringing differentiated solutions to a part of the market that historically did not have the opportunity to invest in them. Large platforms would tell you their clients are underinvested in alternatives providing differentiated equity, yield and tax-advantaged real assets. That secular trend should overwhelm periodic noise—whether it was real estate a couple of years ago or U.S. direct lending today. We have eight products in the channel, plus two 1031 exchange vehicles, and while U.S. private credit funds are seeing slowing demand, we are seeing increasing demand elsewhere because of that secular momentum. On redemptions, our non-traded BDC is generating top-market performance.

Redemptions were concentrated among smaller family offices and smaller institutions in certain non-U.S. regions, not the well-advised high net worth investor. Ninety-five percent of our investor base did not redeem, in addition to meaningful inflows. So it is not a broad-based repudiation of alts in Wealth. On the $125 billion 2028 fundraising target—yes, we have not changed our guidance.

Operator: We will go next to Michael Patrick Davitt with Autonomous Research.

Michael Patrick Davitt: Good morning. You struck a constructive tone on the direct lending pipeline, but we cannot yet see that in the reported numbers. Can you compare the shadow pipeline you are referencing to historical periods, and when might it begin converting into real announcements?

Michael J. Arougheti: There is a natural lag. Deals closing now have been in process for months. We have a top-down view of transaction flow, and the aggregate pipeline across the firm is at a record level, with direct lending’s pipeline increasing in momentum. We would hope that pulls through. After shocks like the Iran conflict, there is usually a pause as everyone evaluates, then activity resumes once the backdrop is understood. Longer-term catalysts are intact: aging private equity ownership needing resolution via sales or refinancings, a pro-business regulatory backdrop that is constructive for M&A, and a stabilizing rate environment even if not declining as previously expected.

A similar pattern played out last year—pipeline built early, a pause, then reacceleration into a record deployment back half. While we cannot guarantee the exact cadence, the catalysts and weight of capital needing resolution should drive people to the deal table.

Operator: We will go next to William Raymond Katz with TD Cowen.

William Raymond Katz: Thanks for taking the questions. For Jarrod: realizations in Q1 were lighter than expected, though there seems to be strong momentum for the industry. How are you thinking about the realization cadence for the year? And second, given the momentum on FRE margins this year, how should we think about 2027 given the scaling across the platform?

Jarrod Morgan Phillips: Thanks, Bill. Realizations generally follow the transactional backdrop—more activity pulls realizations forward; less activity can extend durations. Our European waterfalls are predominantly from our credit funds, so if duration extends, we continue to earn interest, which increases the accrued balance to be recaptured later in the waterfall. We recently filed an 8-K reiterating our full-year guidance, and there is no change to what we have discussed for next year. Quarter-to-quarter timing can be lumpy because we do not control when a deal is refinanced or a transaction closes, but the nature of our assets means we are not dependent on public market pricing to realize value. On margins, our 0 to 150 basis points annual expansion guidance is purposeful.

As we deploy, we create natural scale. We also want flexibility to invest in opportunities like the data center business, which may be FRE-negative until we launch the fund, then become highly accretive overall and margin accretive. We expect to be well within that 0 to 150 basis points range while staying flexible to pursue attractive investments.

Operator: We will go next to Analyst with RBC Capital Markets.

Analyst: Thanks and good morning. On the secondaries market, it sounds like we are seeing an acceleration this year. You have secondaries across four asset classes and seem well built out. Can you update us on what you are seeing on the ground regarding the acceleration?

Michael J. Arougheti: We entered secondaries at scale through the Landmark acquisition nearly six years ago with three theses. First, a shift from LP-led to GP-led solutions—GPs increasingly use the secondary market for creative liquidity, from NAV loans to GP prefs to minority stake sales. Second, the installed base in real estate, infrastructure and credit had grown to levels requiring more robust secondary solutions. Third, we saw growing wealth demand for diversified private equity exposure beyond what our core buyout business alone would deliver. Post-acquisition, we launched into the wealth channel, scaled products to address the GP-led market, and pioneered credit secondaries, which has become a meaningful growth engine.

Today, the primary markets have grown, LPs and GPs alike seek creative liquidity, and GP-led now represents half or more of current deployment opportunity. Most interesting, annual secondary deployment versus industry dry powder is roughly one to one, making it arguably the least well-capitalized segment in alternatives. We like that supply-demand imbalance because it supports excess returns. Market opportunity is growing and fundraising has not kept pace, which is why we are scaling nicely.

Operator: We will go next to Kenneth Brooks Worthington with J.P. Morgan.

Kenneth Brooks Worthington: Good morning. Can you talk about the deployment opportunity for direct lending in Europe? M&A there is a bit different than in the U.S., but you have a record-size fund. What are you seeing?

Michael J. Arougheti: Europe shares many of the same dynamics as the U.S. We have fully developed businesses across opportunistic credit, direct lending, real estate and infrastructure. Deployment has been robust. I was pleasantly surprised with Q1 deployment in Europe; some expected slower transaction activity, but geopolitical reorganization appears to be drawing more attention to investing in the Eurozone. The opportunity is probably better than we would have expected. If Q1 is indicative, European direct lending is in a good spot. The benefit of diversification is evident—last year, Europe was slower while the U.S. accelerated in the back half; this quarter, U.S. direct lending is slower and Europe surprised to the upside.

Pipelines in Europe are as healthy as they are in the U.S.

Operator: We will go next to Michael Brown with UBS.

Michael Brown: Good morning. On software, you emphasized low LTVs and near-zero non-accruals, but much of that feels backward-looking. Can you speak to the forward look and stress testing that gives you confidence these companies will continue to operate successfully? Are you leaning in or out of software within direct lending, and are there opportunities emerging in credit opportunities or even secondaries?

Michael J. Arougheti: Our software portfolio is well diversified by issuer count, sponsor-backed, and sits at roughly 40% loan-to-value. As a proxy, you saw ARCC mark down equity values within its software portfolio in line with public markets, which mechanically nudged LTV up slightly. When you are senior in the capital structure at 40% LTV with 60% equity beneath you, there is substantial protection before credit losses. The weighted average remaining maturity is about three years, so over the next couple of years, owners and lenders will evaluate each company’s positioning and potential disruption, and resolve via transfer of ownership, debt paydown or repricing.

Importantly, contractual revenues are growing and we are seeing ~10% EBITDA growth—new customer adds with contract tenors often extending beyond loan maturities. Financial pictures need not erode even if models must adapt. We are confident in the quality of the book and believe we are well paid for the risk. New software deals are getting done where competitive moats are evident, and spreads reflect market anxiety. We are also using this market to exit select names where conviction is lower, which contributed to the gross-to-net outcome this quarter. More broadly, think about core systems—finance, cybersecurity, order management—firms are not ripping them out; they are layering AI to enhance them, and vendors are doing the same.

We are focused on those core systems with durable moats.

Operator: We will go next to Benjamin Elliot Budish with Barclays.

Benjamin Elliot Budish: Good afternoon, and thanks for taking the question. Jarrod, you typically give a few more guidance tidbits. Anything you can share on expectations for European-style realization revenues for the year, G&A growth, and FRPR cadence?

Jarrod Morgan Phillips: Thanks, Ben. Most of the main points align with what we shared at Investor Day. On G&A, it is encompassed within the margin guidance. We held an AGM with over 1,100 attendees; typically we host AGMs throughout the year, so you will probably see a bit more G&A in the next quarter, and then less of that travel/AGM expense in Q3 and Q4—similar to 2024. Expect a high-single-digit to low-double-digit type increase in G&A tied to travel and related expenses. Otherwise, everything is in line with prior guidance. As Mike and I noted, we feel well positioned with breadth across strategies that are extremely active and will help drive us toward our goals.

On FRPR cadence, Alternative Credit typically in Q3, most of the remainder of Credit and Real Estate in Q4, and APMF and certain perpetuals recurring quarterly.

Operator: We will go next to Brennan Hawken with BMO Capital Markets.

Brennan Hawken: Thanks for taking the question. You mentioned credit selection impacting recent gross-to-net trends. Looking ahead, where do you see those trends shifting and what factors will drive that?

Michael J. Arougheti: We are not changing the playbook. Our model has been the same for decades: originate a broad funnel and apply rigorous diligence and portfolio management to drive returns. Two underappreciated hallmarks: first, selectivity—we typically have a yes rate of about 5% across private credit. Second, incumbency—roughly half of direct lending deployment comes from incumbent portfolio relationships, which makes for easier, higher-conviction underwriting. Those two together have supported our loss rates, which across private credit have been trending close to zero. Today we may be slightly more selective given market anxieties and mindful to keep liquidity a bit drier as we head into what we believe is a spread-widening environment—getting better economics next month than this month.

But our core underwriting tenets and approach to outperformance are unchanged.

Operator: We will go next to Brian J. Mckenna with Citizens.

Brian J. Mckenna: In the past you have talked about benefits of managing flexible pools of capital across public and private markets. Given Q1 volatility, did you take advantage of dislocation across your funds, and why is this AUM base so important for delivering outperformance through cycles?

Michael J. Arougheti: Flexibility is a hallmark of our strategy. Within individual strategies we have flexible mandates. Our Opportunistic Credit business—where we just raised nearly $10 billion—can invest public and private. That is valuable as dislocations form in both markets; we can direct capital to the best risk-adjusted return. It is not just public versus private—it is senior versus junior, or debt versus equity, across geographies. If you are constrained to a single point in the capital structure, you are more likely to misprice risk at certain points in the cycle. We have built an investment culture focused on relative value and risk-adjusted returns.

To your specific question—yes, in parts of the public and traded credit markets we are beginning to pivot into emerging dislocations, and I would not be surprised to see that pick up in the coming months.

Operator: We will go next to Analyst with Raymond James.

Analyst: Good afternoon. Could you go into more detail on your data center business? Do you have data center AUM outside the digital infrastructure business, and what do you think the total market size could be for data centers in the intermediate term?

Unknown Speaker: To give a bit of background, we have been investing in digital broadly for 10 to 15 years—towers, networks and data centers—across several areas of the firm, including Real Estate, Infrastructure, asset-backed/Alternative Credit, Direct Lending and Secondaries. We have invested over $10 billion historically in the space. With the GCP acquisition last year, we added the Ada Infrastructure digital development capability, which came with a very attractive seed portfolio for which we raised about $2.5 billion last summer for initial assets in Japan, and we are currently fundraising more broadly to address both the seed assets and the significant pipeline behind them. So yes, we have data center exposure elsewhere, and adding this development capability is powerful.

In terms of market size, it is massive—a multi-trillion-dollar opportunity. Some will be pursued directly by hyperscalers, but we size the third-party market at around $900 billion, and there is a meaningful supply-demand imbalance in capital being raised to address it. We are really excited about the opportunity and have seen strong interest in the market.

Michael J. Arougheti: One overlay—when discussing data centers, it is not just data halls; it is GPUs and power. We are also a leader in renewable energy and the energy transition, as evidenced by what we did with the X-energy IPO. The digital infrastructure opportunity pulls together multiple teams at scale to address demand, and we have a large infrastructure debt business that is a major lender to platforms and portfolios across the institutional market.

Operator: We will go next to Analyst with Jefferies.

Analyst: Thanks. A follow-up on the strength in institutional demand—are you seeing any differentiation within that subset, for example Middle East or sovereign wealth funds, or is it truly broad based?

Michael J. Arougheti: It is pretty broad based. We are not seeing major shifts by geography or channel. A key theme is consolidation—larger institutions are doing more with fewer GP partners, and larger platforms are the net beneficiaries. You should expect a disproportionate share of gross dollars to flow to larger incumbents across many asset classes we participate in. It is also important to have businesses across regions—Europe, U.S., Middle East, Asia—because investors at times want to increase allocations in their home regions. Being able to meet them there, not just on fundraising but also with local investment capabilities, is increasingly important.

Operator: Ladies and gentlemen, that is all the time we have for questions today. If you missed any part of today’s call, an archived replay of the conference will be available through June 1, 2026, to domestic callers by dialing 302-393 and to international callers by dialing +1 (402) 220-7206. An archived replay will also be available on the webcast link located on the homepage of the Investor Resources section of our website. Again, thanks so much for joining us and we wish you all a great day. Goodbye.

Michael J. Arougheti: Goodbye.