Ares Management Corporation (ARES) is a leading global alternative investment manager operating integrated groups across Credit, Real Assets, Private Equity and Secondaries. The company has demonstrated impressive financial performance, reporting annual revenue of $4,986,978,000 and net income of $474,326,000 in its most recent fiscal year. Additionally, the company generated annual operating cash flow of -$233,261,000 and annual free cash flow of -$300,444,000.
Recent Developments
In the first quarter of 2024, Ares Management continued its strong momentum, reporting double-digit year-over-year growth across key financial metrics. The company's assets under management (AUM) increased 19% to $428 billion, well ahead of its year-end 2025 goal of $500 billion. Fee-related earnings grew 18% to $301.7 million, while realized income increased 14% to $289.2 million. Quarterly management fees rose 15% to $687.7 million, driven by deployment of available capital, particularly in the company's direct lending, alternative credit and opportunistic credit strategies.
Business Overview
Ares' diversified business model, with operations spanning credit, real assets, private equity and secondaries, has been a key driver of its consistent performance. The company's credit group, which accounts for the majority of AUM, saw robust deployment activity, with $14 billion invested in the first quarter, more than double the year-ago period. This was driven by both incumbent borrowers and new companies seeking direct lending solutions amidst a relatively slower market environment.
The real assets group also experienced solid growth, with AUM reaching $64.1 billion. The company highlighted strong fundamentals in its highest allocated sectors, such as industrial, multifamily and student housing, both in the U.S. and Europe. Ares' private equity and secondaries businesses continue to perform well, with the company's latest corporate private equity fund, ACOF VI, generating a 24% gross IRR since inception.
Strategic Focus
Ares' strategic focus on high-growth areas like alternative credit, infrastructure debt, real estate debt and wealth management has positioned the firm well for the future. The company's alternative credit platform, with $36.5 billion in AUM, is one of the largest pools of non-insurance capital focused on non-rated asset-based credit. Similarly, Ares' infrastructure debt business is well-positioned to capitalize on the significant demand for private capital solutions as global players modernize digital infrastructure and transition to clean energy.
The company's wealth management platform has also been a standout, with assets reaching approximately $25 billion across six non-traded products. This includes strong inflows into the company's non-traded BDC, ASIF, and its European credit fund, AESIF. Ares expects continued growth in the wealth channel as it broadens its product suite and expands distribution, both domestically and internationally.
Financials
Ares' balance sheet remains conservatively positioned, with less than $900 million directly invested in credit assets or its affiliated insurance vehicle, Aspida. This represents only 0.2% of the company's total AUM, highlighting its asset-light approach across the business.
Outlook
Looking ahead, Ares expects to have over 35 different funds in the market this year, including new vintages in private credit, secondaries, infrastructure and real estate. The company remains optimistic about the transaction environment, citing pent-up demand for M&A, significant private equity dry powder and the need for LPs to return capital.
Investment Performance
Ares' consistent investment performance has been a key driver of its fundraising success. Across its credit strategies, the company generated gross composite returns ranging from 3% to 7% in the first quarter, and 10% to nearly 40% over the last 12 months. In real assets, the company's infrastructure debt and U.S. real estate equity strategies also delivered strong results.
The company's fee-related earnings and dividend growth objectives of 20% for 2024 remain on track. Ares plans to provide new long-term guidance at its upcoming Investor Day on May 21, 2024.
Conclusion
Overall, Ares Management's diversified alternative asset platform, strong investment performance, and strategic focus on high-growth areas position the company well for continued success. The company's conservative balance sheet and consistent cash flow generation further underscore its ability to navigate market cycles and deliver value for shareholders.