Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Ares Management Corp (NYSE:ARES) declared a 20% increase in quarterly dividends, reflecting strong financial performance.
• The company achieved record levels of fundraising and deployment, with assets under management (AUM) growing by 16% year over year to over $484 billion.
• Ares Management Corp (NYSE:ARES) expanded its executive management team, appointing Kipp De Vere and Blair Jacobson as co-presidents to drive strategic initiatives.
• The firm reported strong growth in fee-related earnings (FRE) and management fees, with a 17% increase in FRE for the full year.
• Ares Management Corp (NYSE:ARES) is well-positioned for future growth with a record $133 billion of dry powder and a robust pipeline of investment strategies.

Negative Points

• General and administrative (G&A) expenses rose by more than 20% in 2024, driven by supplemental distribution fees and new office leases.
• The transaction environment in 2024 was subdued, impacting deployment activities despite a strong finish in Q4.
• The company faces challenges in maintaining growth momentum without its two largest campaign funds in the market for 2025.
• Ares Management Corp (NYSE:ARES) anticipates a modest decline in fundraising for 2025 compared to the record levels achieved in 2024.
• The competitive landscape in the private credit market is intensifying, with banks becoming more active, potentially impacting spreads and deal structures.

Q & A Highlights

• Warning! GuruFocus has detected 11 Warning Signs with ARES.

Q: Can you provide insights into the expected growth rate of G&A expenses and the impact of supplemental distribution fees in the wealth channel? A: Jared Phillips, CFO, explained that supplemental distribution fees were a major driver of G&A expenses, increasing to about $50 million for the full year. While these expenses are expected to grow with fundraising, the reliance on channels charging these fees is decreasing. Occupancy expenses, due to new office spaces, are also a factor. The GCP acquisition will add some G&A expenses, but their margins are similar to Ares' current real estate business, excluding data centers, which currently have a $20 million FRE drag.

Q: With the elevation of Kip and Blair, what strategic initiatives will you focus on now? A: Michael Riti, CEO, emphasized that his responsibilities are not changing but expanding with Kip and Blair's help. They will focus on integrating GCP, expanding in digital infrastructure and real estate, and leveraging Ares' credit capabilities alongside Aspida. Developing the next generation of leaders is also a priority.

Q: What is your current M&A appetite following the GCP deal, and are there any gaps in your product offering or geographical presence? A: Michael Riti stated that the bar for acquisitions is higher due to Ares' broad capabilities. The strategic objective is to have full capital structure capabilities across corporate, real estate, and infrastructure in the US, Europe, and Asia. While M&A has driven growth, the focus is on exploiting organic growth opportunities.

Q: Can you elaborate on the expected growth in credit fee-paying AUM and the deployment environment for 2025? A: Michael Riti noted that while Q4 saw strong deployment, January is typically slow. However, private credit portfolios are increasing in activity, driven by market stability and pent-up demand. Ares is well-positioned to maintain deployment levels even if M&A activity remains subdued.

Q: How do you view the partnership with T. Rowe Price and its potential impact on the 401(k) space? A: Michael Riti expressed excitement about the partnership, highlighting the potential to leverage T. Rowe's fixed income capabilities for Aspida and explore product development for retirement solutions. It's early days, but the partnership could eventually lead to alternative investments in the 401(k) market.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.