Bloomberg Audio Studios, podcasts, radio news. We've got to look at alternative asset managements, which is really what so many different investment managers have been talking about. Is the alternative to this whipsaw headspinning world that we've been talking about
all morning. Areas Management, a global alternative investment manager with over five hundred and seventy billion dollars in assets on our management reporting second quarter earnings today, highlighting solid financing growth momentum and seeing the market come back to life. Joining us now, I'm so pleased to say, is Ares Management CEO Michael Aragetti, thank you so much to be
here with us. For being here with us, I want to start with this idea that you did a really solid performance despite the fact that LBO volumes were materially lower than last year, and there's this expectation that deals were going to pick up in the second half because.
Of trade certainty.
Well have we gotten that certainty to really kickstart that type of corporate activity.
There's a misconception that alternative asset management is just driven solely by M and A and private equity volumes. But when you really zoom out, you say, what is going on in the private markets. We are active in digital infrastructure, real estate, private credit, asset based finance, and really a broad cross section of the global economy. So if you look at our quarter, we put twenty seven billion dollars to work this.
Quarter in a very subdued deal environment.
What's happening now in the private markets is there's a huge need for liquidity solutions and refinancing. If you look at private equities one example, there's about three trillion dollars of private equity that's been invested that needs to get returned to invest to investors, and about a trillion dollars of new capital that needs to get put to work.
So there's this huge imbalance. And so one of the things.
That private market providers like us are doing now is really coming in with creativity and innovative solutions to try to buy down that install base of private equity. So we're not really reliant on deal volume. Obviously, we love it when the markets are ripping, but whether or not it's still pretty good.
Does that mean that the lesson you learn from this period of when things are backlogged and again just given the breath of the success in your earnings, that you need to de emphasize some parts of the business that are more sensitive to M and A, that have more of a cyclical type of attribute to them.
I think I don't know if we want to de emphasize.
I think part of what we have tried to build is a business that provides solutions through cycles to our investee clients, whether they're private equity sponsors or large corporates, and our investor clients. And the only way that we could do that is to diversify the products set geographically, where we invest in, the capital structure, what returns, what
the structures are. So ideally what you want to have is a business which we're demonstrating that can perform regardless of the market environment.
Well, part of the diversification was also things are uncertain in the US. To Lisa's point, is that period over is certainty restored? Is it time to hit the go button again on deals?
You know?
It felt it's always great when I come on the show because you go to bed and you're like, oh, we're going to have this really nice, calm conversation about how certain things are and how deal lines are going to pick up, and then we get a new headline and as you said Lisa. I think you have to try to find this signal through the noise, and when we look at our portfolios around the globe, fundamental performance is still really strong. There's a lot of liquidity in
the markets. There is a lot of pent up demand to transact. We saw that in June. I think once we got the tax bill done and we saw some certainty on tariffs, the market really picked up. So I don't want to say that one headline on one day is going to knock us off course, but yeah, I think there's a real pent up demand for M and a corporate m and as picking up. Private equity pipelines are picking up.
So I'm still optimistic.
What does that optimism look like throughout the year. What is your expectation when we get something that does look back to normal, that does see this pipeline that's being built up really be put into force.
I think in the on the private market side, you have to appreciate that the structure of the capital actually has a timeline on it, and so one of the things that people need to understand is just the weight of money in the private markets requires transaction activity, and so that three point two trillion dollars that I mentioned. You know, half of it is over five years old, and there's a desire to get that money back to investors,
to get the gears moving again. And so even if you don't have M and A, people are going to be looking for ways in the secondary market, for example, to do transactions. So I think you're going to continue to see, you know, the weight of the money and the time constraint push companies into the market, and I think on the corporate side, you know, there's there's a desire to grow too.
We did see.
Corporate M and A pick up dramatically even in the last week. I'm sure if you talk to the cell side bankers, they'll tell you the level of pipeline pipeline activities picking up dramatically. So you know, I can't quantify what that looks like, but if June was an indicator and we get some stability here, I think third and fourth quarter could be pretty robust.
You mentioned the tax bills behind us, tariff uncertainty potentially some of it behind us, and you see a lot of signal less noise coming from that, and then there's this idea of deregulation.
Is that's what pushing potentially some of this M and A.
I think there's absolutely a tone that's funny. You saw pre Liberation Day January February, just the exuberance with the new administration pro business deregulation, and you saw people come off the sidelines dramatically, and then we took a pause. Now that we've digested, you're beginning to feel that again.
So I don't want to say that the animal spirits have been unleashed, but the confidence that the administration wants to push transaction volume is pro business and focused on drag, I think is going to be a catalyst for sure.
When you talk, I hear an economy flush with capital. I hear an economy that has plenty of access to financing. I hear that financing is not tight in any capacity. We're talking about titus spreads in the global credit market in public markets going back to two thousand and seven.
Do you think it is appropriate to start talking about more accommodation from the FED or do you think that that's problematic given what you're actually seeing on the ground with some of the companies that you're investing in.
Everything that we're seeing says that the economy is on stable footing.
We're seeing continued growth.
As an example, we reported earnings in our publicly traded BBC thirteen percent year over year ebitdog growth and those companies, while LeVert, have actually digested the higher cost of capital pretty well. So to your point, we're living in a higher rate environment. The plumbing is working, nothing's broken. Almost every liquid market is near all time tights, so it doesn't feel necessary to take a more accommodative stance. I
think tariffs will be inflationary. I know that there's an argument that some people put forward that it won't be, but to the extent that they will be, and the economy continues to grow, that would argue for rates to stay higher for longer, or at least to see a slower trend down.
So, Mike, in this quarter you had really robust fundraising coming from a variety of sources, but part of that was wealth too. We're in this environment right now where there's an expectation that the Trump administration is going to open up four A one ks to some private assets. You've seen some of your peers, KKR, Blackstone, Blue Owl already set up partnerships with four oh one K providers is that something you're looking at as well.
Yeah, we're probably the number two or number three player in the wealth channel right now. We raised about six point three billion dollars in wealth product alone this quarter. Close to half of our AM is in permanent capital vehicles right now. The four to one K conversation is an interesting one. I am a huge believer in increasing access to alternatives to the individual investor, whether that's directly
or in the retirement market. There's no reason that an individual shouldn't have the same access to alternative assets that institutional investors do. The four toh one K question, I think is reason for enthusiasm if you look at the size of that market and the solutions that are already there.
That market for forever has really been fee first, and when we talk about fiduciary duty to the retail investor in defined contribution, it's what's the cheapest solution that I can get, And I don't think that that's the way that you want to be.
Shopping for investment solutions.
It is a complicated set of circumstances in the sense that you still have to get through the executive order, which we haven't seen, although we expect to come then we need to see rulemaking. There's going to be a whole flurry of class action lawsuits. I'm sure we're going to have to get plan sponsors comfortable with the idea, and then we're going to have to demonstrate that we can deliver excess return net of new fee agreements to the investor that get them excited.
So we're enthusiastic.
We have product that's already geared and ready to go into that market. We have had significant dialogue with potential partners in that market. So if and when that time comes, I think you'll probably see us jump in, just given our leadership position there. But we're being a little bit more tempered in our enthusiasm.
Yah.
It's interesting to hear some of that caution because other people have decided that this is off to the races for getting that involved in the four oh one K And part of the criticism that comes up sometimes is they're going to get players that dump their worst assets in there, and then that brings with it more regulation and hurts the industry as a whole.
Is that a real concern. I've heard people say that that is not the concern.
I think one of the significant transformations we've seen in wealth from prior versions is you are getting the largest brand name managers around the world that are coming into this market with institutional quality product.
We're not going into these markets because we have to.
We're going into these markets because we want we want to, and so there's really no motivation or incentive to do that. So I don't really understand that. But one of the things I always try to say to our people and even to our investors in the research community, when the four oh one K market opens, similar to just the wealth market opening, it doesn't have a transformational.
Impact on what we can do as a manager.
I'm just now taking assets that otherwise would find their way into an institutional fund and putting them into somebody's four oh one K. That's exciting because it now increases accessibility, it opens up new fundraising markets, it diversifies our business, but it doesn't give me a new product to then go into the market and deliver value to my customer.
So we're excited about it, but you know, until we get to a world where we're feeling like we're constrained in our ability to raise capital and other channels, I just you know, again, I have temperate enthusiasm. If you look at our fundraising this quarter, we had our second largest fundraising quarter on record. We raised about twenty six billion dollars of capital this quarter. The fundraising has not been the challenge I think for most all managers. Really,
can I find great quality things to invest in? And so the idea that we're going to continue to bring more capital, and you know, it has as much possible risk as it does opportunity.
Michael Aauergetti Areas Management, Chief executive Officer. You've reported earnings, you go on vacation now Monday. Okay, well a lot of people are hoping to do the same. Thank you so much for being with us this morning.