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You're watching Open Interest. I'm Shinali Backzek. I'm sitting here with Aris Management CEO Michael Arraghetti and it's interesting. Mike. Good to see you today.
Thanks for coming down.
Oh, you're welcome. This is on the heels of some news at areas. This is on the heels of a big set of promotions. You announced co presidents for the firm, but that also set off a wave of promotions underneath them as well. What does this mean for the future of areas in the direction you're trying to be so happy?
So Kip Devere and Blair Jacobson, who I think you're sitting down with later two of my oldest friends. We've been friends for thirty years, business partners for twenty five years in the case of Kip, fifteen plus years in the case of Blair. So anytime you can elevate, you know, good quality people, it's caused for celebration. But as you hinted at, we've been I think really good at succession.
You know, private equity firms historically are great at succession I think within their portfolios, but when it comes to themselves have sometimes missed the mark, and I think any good, high quality growth company needs to be great at succession and needs to create pathways for growth for future leaders.
So the reality is, over the last year, we've elevated co heads in our European direct lending business, We've elevated co heads in our US direct lending business, We've elevated people in real estate, and there's just been this massive,
you know, wave of growth and promotion. I think part of what makes our culture unique speaking to the friendship that I have with Blair and Kip, but it pervades the whole organization is we have people here who are now running businesses that started at areas twenty twenty five years ago as an analysts and really grew up in this in this culture. So I just couldn't be happier.
You know, It's interesting this is not just happening at areas. It's kind of happening across the street, where you're seeing more people in high level roles being tapped to be elevated to the number two, three, four positions. What does this say about the talent war on Wall Street? What are you seeing when you talk to the banks and you talk to your rivals about people who might want to come here.
Look, I think you win in this game by developing and retaining great talent. I think we've been fortunate. We have very very low turnover, and you can see that in the way that our leaders are growing and developing here. There's always going to be a war for talent. I think the reality is the large firms in our business are getting larger. There's huge benefits to size and scale, So I'd like to think that we and others are
kind of net beneficiars of that war for talent. I would imagine certain other parts of the market, whether some of the investment in commercial banks are probably struggling to maintain talent just given some of the secular changes that are happening in our market.
To that end, a few people realize that you added about one hundred investment professionals last year.
We did, so, we grew our investment teams over ten percent last year, and we just came out of our planning meetings for this year and I would expect growth this year will be similar. So obviously the businesses are growing, they're diversifying, they're globalizing, and the way you support that growth and complexity is, you know, adding.
High quality time one hundred more people.
Yeah, well we're up to almost four thousand people now, obviously, so that's part of the conversation around the elevation of Kip and Blairs, obviously, just putting some of our most proven business builders and leaders against this growth and complexity.
You know, the growth is coming against an interesting backdrop. I was looking at the ten year yield from the beginning of the year to now and the drop off is pretty stunning. You are more than a half a percentage point from the highs that you suggest in January. The market is afraid of growth, are you.
We're not, you know. And if you look, consumer confidence is feeling a little wobbly, CEO confidence is not showing the same anxiety.
You know.
Obviously one of the benefits of running the business that we run as we see things happening in the real economy all over the globe and we're just not seeing the deceleration and growth. So our base case coming into the year was that you'd continue to see solid fundamental growth. You'd see persistently high prices and inflation. Labor markets are still very tight, so you know, it's interesting when you
think about public markets versus private markets. The public markets can get a little schizophrenic day to day, week to week, and I think in the private markets we try to keep a longer term view and at least based on what we're seeing. We haven't changed our faces.
But what are you preparing for more at this point for interest rates to be higher or lower from here?
I'm still in the camp of stable to higher for longer than changing our view that we're going to see increasing cuts throughout the end of the year.
We are still seeing a number of bankruptcy filings come to market. We are seeing some signs of stress. Given we're in this higher for longer environment, what are you seeing out there? Are there places in the market that you're avoiding right now because of it?
There's all the way that we've set the business up. It's interesting if you look at our history, we've grown at almost a twenty five percent growth rate over the last twenty plus years. We've grown fastest coming out of the financial crisis and coming out of COVID. So the way that the business is designed, just based on the products that we have is to be a liquidity provider in good markets and challenge markets. So coming into any given year. We don't have anxiety about the ability to deploy.
It's just a question where's that deployment going to come from. Obviously in the more interest rate sensitive sectors that we invest in, real estate will show signs of stress, low end consumer lending will show signs of stress. But when you look at it indexed across everything we do, it's still we expect it's going to be a good year.
So let's talk again about areas as growth strategy for a moment here, because what's been so notable is that you've made a recent multi billion dollar acquisition and the industry has been consolidating. Do you see more acquisitions in your near future?
I think acquisitions are always going to be part of our growth. The bar for acquisitions is getting higher and higher as we fill out our BINGO card, if you will, in terms of capabilities and geographies. But consolidation in our industry will absolutely continue. If you look at the benefits of scale in this industry in terms of capital raising, capital deployment, talent acquisition, and retention, the bigger getting bigger for good reason, and size is actually showing up in performance.
So unlike public markets where people get concerned that the bigger you get, the harder it is to perform. I think we and the large publics are showing that as we consolidate and accumulate capability information edge that we're actually outperforming, and so I think you're going to continue to see people fill out capability, geography, distribution in in this phase of growth.
Speaking of distribution, you're seeing some interesting partnerships starting to come together in the market, and a lot of it is for the idea of bringing private capital, particularly private credit, into the hands of retail investors. Just today you saw the launch of that Apollo State Street Private Credit ETF. Would you start an ETF?
Well, I always try to remind people there's a big difference between investment grade private credit and what the market generally thinks of as private credit private credit, and those are offering different types of exposures and they have opportunity for different types of distribution with both retail and institutional investors. So that's point number one. Point number two is if you look at Areas as an example, we run a
BDC called Ares Capital Corporation. We have a twenty year track record and an almost thirty billion dollar portfolio of private loans private credit that has daily liquidity and is available to any retail investor around the globe. We also have a large interval fund that invests in a diverse array of high grade and below investment grade credit exposures. It offers liquidity. So I think these are more evolutionary moves. But I think it's important that people understand this is
not a huge transformation. There's already technology that exists that's well understood, well Troden, well bought and has performed well where retail investors can get access to private credit and other private market assets.
So I totally have one more question with you, although I have many on the et Apple, I'll have your co presidents later. Got to ask you about the NFL. Yes, you really were involved in the first deal that went to the hands of private equity, the Miami Dolphins. What's the next team?
You know, I can't tell you what we're going to do next. But this NFL opening up to private capital, I think is so indicative of just the role that private markets and private capital plays generally in the opening up of new markets. Right, So if you just think about sports investing and the NFL five years ago, institutional capital was not actually able to access the NFL or the other major sports leagues around the globe and post COVID.
Now we've in aided to bring creative capital solutions into these markets and created just a whole new market, and now we're offering those exposures to institutional and retail investors. So I think this is, you know, this is a recurring theme of how private markets can actually come in with flexibility, creativity, liquidity where other traditional forms of capital can to really do something special.
It certainly brought me into the world of sports reporting much more. Mike, you glad, We thank you so much for your time. That is Michael Arraghetty, of course, the CEO of Areas Management