By Arasu Kannagi Basil
July 31 (Reuters) – Ares Management, one of the biggest names in private credit, reported a record fundraising of $36 billion in the second quarter on Friday, as institutions continued allocating to the asset class.
The results place Ares among the strongest fundraisers in alternative assets, as institutional capital shifts to larger, established managers.
Top asset managers have pointed to broad-based demand from institutional investors despite negative headlines around private credit in recent months, helping cushion a slowdown in the wealth channel.
Institutional investors such as pension funds tend to allocate capital with a long-term perspective and are more patient through pockets of volatility.
Ares has broadened its investor base, with the number of direct institutional investors more than tripling since 2019. Bulk of its business is institutional-focused.
“Clients continue to reward us due to our strong and consistent fund performance across our strategies,” CEO Michael Arougheti said.
Inflows were led by the credit segment, which drew $23.7 billion during the quarter. The real assets division raised $9.7 billion.
Major fundraising included Ares’ flagship asset-based finance fund, which raised $8.5 billion in the quarter.
Assets under management jumped 17% to $671.3 billion, while fee-related earnings rose 20% to $491.1 million from a year ago.
Much of Ares’ earnings comes from the fees it earns on assets it manages, providing a more stable and predictable stream of income.
DEPLOYMENTS TICK UP
Deal activity for private credit firms remained slightly subdued during the quarter, as geopolitical uncertainty kept a lid on sponsor-backed M&A activity.
Ares struck an optimistic tone about the road ahead as it sits on a record investment pipeline.
“Our diverse global origination platform enabled us to remain active investing in attractive opportunities across the platform in a slower transaction environment and we are now seeing a meaningful pickup in our firmwide investment pipeline,” Arougheti said.
Ares deployed $35.9 billion of capital in the quarter, driven by its U.S. and European direct lending, real estate and alternative credit strategies.
Among the notable deals in the quarter, Ares led a more than $1.7 billion debt financing supporting buyout firm KSL Capital Partners’ acquisition of private clubs operator Invited Clubs.
Fundraising, capital deployment and investment performance are key metrics that Wall Street watches closely as it drives future earnings.
Uninvested capital jumped 13% to record $170 billion in the quarter. That positions Ares well to execute on its largest-ever forward investment pipeline and support continued earnings growth, finance chief Jarrod Phillips said.
Ares starts generating management fees as it deploys uninvested capital, further boosting profit.
Alternative credit posted a gross return of 4.1%, while U.S. senior direct lending returned 2.5%. Infrastructure equity returned 9%.
After-tax realized income per share of Class A common stock was $1.29 for the quarter ended June 30, compared with $1.03 a year ago.
(Reporting by Arasu Kannagi Basil in Bengaluru; Editing by Arun Koyyur)
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