Ares Management delivered a record-breaking year in 2025, with Assets Under Management (AUM) growing 29% year-over-year to surpass $622 billion, crossing the $600 billion milestone. The firm reported record fundraising of $113 billion for the full year, including a record $36 billion in the fourth quarter, alongside record deployment of $146 billion (up 37% YoY). Financial results showed robust growth, with Fee-Related Earnings (FRE) increasing 30% for the year and 33% in Q4 to a record $528 million, while FRE margins expanded to 41.7%. Management declared a 20% increase in the Q1 2026 dividend to $1.35 per share, signaling confidence in achieving 20%+ realized income growth for 2026. Strategic diversification across credit, real estate, secondaries, and wealth channels (up 69% YoY to $66 billion AUM) drove performance, offsetting concerns about private credit cyclicality.
| Metric | Value | Change |
|---|---|---|
| Total Assets Under Management (AUM) | $622 billion | +29% year-over-year |
| Total Fundraising (FY 2025) | $113 billion | Record high |
| Total Deployment (FY 2025) | $146 billion | +37% year-over-year |
| Fee-Related Earnings (FRE) | $528 million (Q4) | +33% year-over-year (Q4) |
| FRE Margin (FY 2025) | 41.7% | +20 basis points vs 2024 |
| Wealth Management AUM | $66 billion | +69% year-over-year |
| Dry Powder | $156 billion | Record level |
| Dividend (Q1 2026) | $1.35 per share | +20% year-over-year |
Diversification Beyond Private Credit: Ares is successfully leveraging its multi-asset platform to drive growth, mitigating reliance on any single strategy. While credit remains core, Real Assets deployment more than doubled to over $23 billion, and the Secondaries group raised $12.9 billion (up 45% AUM growth). The GCP acquisition has vaulted the Real Estate business into a top 3 global position. This strategic breadth allows Ares to capture 'a broad slice of GDP,' shifting capital from software to infrastructure as economic cycles change.
Digital Infrastructure as a Growth Engine: Management highlighted digital infrastructure as a key future contributor. Following a $2.4 billion data center fundraise in 2025, Ares expects to raise significant additional capital in 2026. With a vertically integrated model and a global pipeline of seed assets (including AI-related projects), this segment is shifting from a negative FRE contributor to a positive one, enhancing margins and capitalizing on the AI build-out.
Wealth and Insurance Channel Expansion: The firm is making deep inroads into retail and insurance channels. Wealth Management AUM grew 69% YoY to $66 billion, driven by strong flows across 8 semi-liquid products. Insurance AUM reached $86 billion, fueled by Aspida's 39% sales growth. Management notes that individual investor allocations to private markets remain low (3-4%) compared to institutions, presenting a massive 'opportunity for private market allocations in the wealth channel to move towards the much higher allocations.'
Robust Capital Recycling and Fundraising: Ares possesses significant momentum heading into 2026 with $156 billion in dry powder and a record investment pipeline. Management guided for 2026 fundraising to meet or exceed 2025's record levels, supported by the launch of major funds like the fourth U.S. senior direct lending fund and the seventh European direct lending fund. This capital availability ensures continued fee-related earnings growth even in volatile markets.
Operational Efficiency and Margin Expansion: Despite the GCP acquisition creating headwinds, Ares expanded FRE margins to 41.7% in 2025. Management credits 'back-office efficiencies,' AI integration (over 25 projects), and the scaling of the data center business for this improvement. They guided for 2026 FRE margins to be at the high end of their target range (0-150 bps improvement), indicating operating leverage is compounding.
Software Exposure and AI Disruption: While management spent significant time downplaying risks, the firm holds ~6% of total AUM in software (9% of private credit). Although they are senior secured lenders with low LTVs (high 30s), the rapid disruption of AI in the software sector remains a valid credit concern. Management's need to extensively defend this portfolio suggests investor anxiety is high, and while they cite strong EBITDA growth, a tech downturn could still impact valuations.
Real Estate Market Sensitivity: A significant portion of the guidance for Fee-Related Performance Revenue (FRPR) growth relies on the continued recovery of the real estate market. Management noted that non-traded REITs are just hitting high watermarks. If the real estate recovery stalls—given the 'brief market pause' mentioned earlier in the year—the anticipated $79 million in gross FRP and the broader margin expansion could be at risk.
Wealth Channel Volatility: Although Wealth AUM is growing fast, management acknowledged the channel is 'procyclical' and harder to manage flows against deployment. They noted 'some outflows' and 'noise around private credit' impacting the space. If market volatility increases, the 'retail' portion of AUM could see faster redemptions than the sticky institutional capital, potentially pressuring liquidity management.
Private Equity Growth Lag: While other segments are booming, the Private Equity business is not 'keeping up the growth pace.' Management openly discussed the need to potentially acquire scale in PE to better serve client demand. This implies organic growth engines in PE are currently insufficient relative to the firm's other high-flying divisions, potentially limiting diversification benefits if PE remains a smaller component of the pie.
Overall: Management exhibited a highly confident and assured demeanor throughout the call, frequently using superlatives like 'record,' 'strong,' and 'optimistic' to describe performance and the outlook. They were direct and detailed in addressing concerns regarding software exposure and AI disruption, using specific data points to de-risk the narrative. The tone shifted from celebratory regarding past records to pragmatic and reassuring when discussing future growth drivers and market volatility.
Confidence: HIGH - Management consistently backed their optimism with specific metrics (e.g., $156B dry powder, record pipelines, 90% institutional investor retention intent). Their detailed defense of credit quality and specific guidance on 2026 margins and income growth indicates high visibility and control over their business model.
Management expects total fundraising for 2026 to be 'as good or better than our record year in 2025.' This is supported by a strong pipeline of institutional funds and continued momentum in wealth and insurance channels.
The company expects the 2026 FRE margin to be at the 'high end of our annual target range of 0 to 150 basis points' of improvement. Drivers include back-office efficiencies, GCP integration synergies, and the data center business turning profitable.
European style net realized performance income is expected to total approximately $350 million in 2026, which would 'more than double 2025 levels.' There is also potential for realizing American style carry in the second half of the year.
Anticipated to be in the range of 11% to 15% on realized income, driven by a higher mix of performance income which typically has fewer deductions.
Hedging & Uncertainty: Management generally used assertive language ('We expect,' 'We are confident') but employed hedging when discussing external factors outside their control, such as macroeconomic shocks or specific market dislocations. For example, they used qualifiers like 'barring any unforeseen global market disruptions' when discussing deployment growth and 'if the real estate market recovery continues' regarding performance fees. When addressing the sensitive topic of software/AI risk, they used precise, defensive hedging: 'not all software exposure is the same' and 'we deem to have high risk,' attempting to categorize risk rather than eliminate it from the narrative entirely.
Our strong fourth quarter cemented another record year for Ares. - Michael Arougheti, CEO
We expect our total fundraising for 2026 to be as good or better than our record year in 2025. - Michael Arougheti, CEO
We have negligible look-through exposure to soft grow in our balance sheet... any potential credit losses would also have a limit impact on management fees and earnings. - Michael Arougheti, CEO
Visibility into our future growth is high as we've already raised $100 billion of AUM that will earn fees once it's invested. - Michael Arougheti, CEO
We entered 2026 with a high level of optimism about the continued success and growth of our business. - Jarrod Phillips, CFO
Our software portfolio is highly diversified across many subsectors with a very small percentage of the portfolio that we deem to have high risk of AI disruption. - Michael Arougheti, CEO
We're seeing improved conditions for future deployment across a broader range of investment strategies than we have in several years. - Jarrod Phillips, CFO
Analyst Sentiment: Analysts were inquisitive and focused heavily on risk management, specifically regarding the firm's exposure to the software sector amidst AI disruption and the cyclicality of wealth channel flows. Questions from firms like Bank of America, Goldman Sachs, and Barclays were probing but respectful. There was clear interest in how Ares is pivoting from software lending to infrastructure/data centers.
Management Responses: Management responses were exceptionally detailed and data-driven, particularly from CEO Michael Arougheti. When pressed on software risks, Arougheti provided granular statistics on LTVs, EBITDA margins, and sub-sector exposure to reassure investors. They effectively turned questions about 'slowing' private credit into opportunities to discuss diversification into real assets and secondaries. They were transparent about the 'procyclical' nature of wealth flows but confident in their institutional base as a stabilizer.
Software Exposure and AI Risk: Analysts sought to quantify the impact of AI disruption on Ares' credit portfolio. Management clarified that software exposure is ~6% of total AUM, secured, and high-quality, arguing that AI risks are overblown for senior lenders compared to equity holders.
Wealth Channel Flows: Analysts asked about the 'real-time' sentiment in wealth channels given recent volatility. Management acknowledged some cyclicality but noted January flows were strong ($1.2B) and that 95% of investors are not seeking liquidity, suggesting redemption queues are inflated by a small number of anxious investors.
Real Assets and Secondaries Growth: Analysts inquired about the shift from private credit to real assets. Management highlighted that Real Assets and Secondaries are 'breakout growth' areas, with deployment in real assets doubling and secondaries AUM growing 45%.
Private Equity Strategy: Questions arose regarding an interview about potential M&A to scale the Private Equity business. Management confirmed they are open to acquisitions to better serve client demand and support the wealth channel, but emphasized strict financial accretion requirements.
Ares Management has established itself as a dominant, diversified force in alternative asset management, successfully navigating market volatility to deliver record results in 2025. The investment thesis rests on three pillars: (1) **Diversified Scale**: With $622B in AUM spanning credit, real estate, secondaries, and wealth, Ares captures opportunities across the capital structure and economic cycle, reducing reliance on any single asset class. (2) **Fee Momentum**: The firm has $100B in raised but uninvested capital and $156B in dry powder, ensuring robust management fee growth regardless of immediate market conditions. The 20% dividend hike signals strong confidence in cash flow generation. (3) **Structural Growth Channels**: Expansion into Wealth (retail) and Insurance, combined with the new Digital Infrastructure vertical, provides long-term growth drivers as institutional allocations mature. Key risks include a potential deterioration in private credit quality—though current metrics show nonaccruals at historic lows—and the cyclical nature of retail flows. However, management's disciplined underwriting (evidenced by their detailed defense of the software portfolio) and balance sheet-light model mitigate downside risks. With FRE margins expanding and a clear path to doubling performance income in 2026, Ares offers a compelling risk-reward profile for exposure to the private markets secular shift.
There is a persistent and structural shift occurring where institutional investors are maintaining or increasing private market allocations despite public market volatility. Ares cited a survey indicating 'approximately 90% of institutional investors plan to add or maintain private credit allocations over the longer term.' This suggests that the 'denial-of-liquidity' trade is durable and that private markets are becoming a permanent fixture in standard asset allocation, supporting long-term fee growth for major managers.
Capital allocation is shifting rapidly from software application layers to 'picks and shovels' infrastructure like data centers and power. Ares noted a transition where software was a major origination source, but now 'data centers and power' are fueling growth. This indicates a broader macro trend where the AI investment cycle is driving massive demand for physical infrastructure assets, benefiting alternative asset managers with real estate and infrastructure capabilities.
Individual investors remain significantly under-allocated to private markets compared to institutions. While retail flows can be 'procyclical' and sensitive to headlines (evidenced by redemption queues in semi-liquid products), the average allocation for individuals remains only 3-4%. This implies a massive, untapped reservoir of capital that could flow into private markets as education improves and products like 401(k) alts become more standard, representing a long-term growth opportunity for the wealth management channel.