Ares Accelerates Fundraising and Investments Despite Lackluster Market
The firm’s investment pipeline is growing as sponsor activity picks up
- Ares Management reported record quarterly fundraising inflows of over $36 billion and deployed $35.9 billion of capital in the second quarter.
- Ares Chief Executive Michael Arougheti said the firm’s investment pipeline is accelerating, with signed nondisclosure agreements up around 35%.
- Ares Management’s total assets under management reached over $671 billion as of June 30, a 17% increase from a year earlier.
Ares Management joins a small but growing number of large private-markets firms defying a market slowdown with quarterly growth both in its fundraising and capital deployment.
The firm reported a record fundraising quarter with inflows of more than $36 billion for the three months ended June 30, with net inflows of capital of at least $34.4 billion. It also deployed $35.9 billion of capital in the second quarter, up from $27 billion during the same period a year ago.
“When we look at the pipeline, we are seeing an acceleration quarter over quarter,” Michael Arougheti, Ares’s chief executive and co-founder, said during an earnings call Friday. He added that the number of nondisclosure agreements his firm has signed for prospective deals is up around 35% from the previous quarter.
Both private-equity fundraising and investing have suffered in recent years from a persistent gap between buyer and seller expectations on valuations that has slowed exit activity. Recent tariffs and supply-chain uncertainty stemming from the war with Iran have created additional headwinds.
But Arougheti said he sees strong institutional demand for the firm’s funds, including its credit funds. Institutional investors accounted for some 80% of equity inflows over the past 12 months. Within credit, the firm raised $9.1 billion in the second quarter for its alternative credit strategy, a significant rise from the $1.4 billion that it raised in the first quarter and $300 million from the year-ago period.
Ares’s alternative credit strategy focuses on asset-based finance, a fast-growing area of private credit that has attracted sizable capital allocations from investors. Much of that growth was driven by the firm’s Pathfinder III fund, which raised $8.5 billion in investor commitments and surpassed its $6.5 billion target.
Arougheti said he expects to see continued fundraising momentum, given that institutions remain underallocated to private credit.
Although overall fundraising remained strong in the quarter, Ares’s business-development companies focused on U.S. direct lending experienced a 20% decline in fundraising to $4.7 billion in the quarter from $5.9 billion in the first quarter.
Newsletter Sign-up
Private Equity
Private Equity news, analysis and insights from WSJ's global team of reporters and editors.
SUBSCRIBE
Arougheti also said he sees the firm’s growth in capital deployment as an indication that sponsored activity is picking up going into the back half of the year. Ares’s perpetual-capital funds were the most active in deploying capital, with around $21 billion in the second quarter, up from $13 billion in the year-ago period.
The firm’s total assets under management reached over $671 billion as of June 30, up 17% from a year earlier. It also reported higher earnings and revenue with net income of $313 million, or 49 cents a share in the quarter, up from $226 million, or 46 cents a share, a year earlier. Fee-related earnings came in at $491.1 million, up from $409.1 million in the year-earlier period, while after-tax realized income reached $467.6 million, or $1.29 a share.
Total revenue climbed to $1.43 billion from $1.35 billion, with management fees up at $1.02 billion from $900.6 million.
“We continue to translate the scale and diversification of our platform into strong financial performance with many of our key financial metrics growing more than 20% year over year, and we remain on track to achieve our financial goals for the year,” Chief Financial Officer Jarrod Phillips said.