Ares Management Lp ((ARES)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Ares Management’s latest earnings call painted a picture of robust growth and positive sentiment, underscored by record fundraising achievements, substantial asset growth, and strong performance in management fees and revenues. The successful integration of the GCP acquisition and strategic expansion in wealth and insurance channels further bolstered the company’s outlook. While there were minor challenges, such as a temporary slowdown in U.S. deployment activity and slight compression in FRE margins, these are anticipated to be short-lived. Overall, the sentiment was decidedly optimistic, with promising growth prospects on the horizon.
Record Fundraising and Asset Growth
Ares Management reported its second-highest quarterly fundraising total, raising over $26 billion. Year-to-date, the firm has secured more than $46 billion in gross commitments, positioning it to potentially surpass last year’s record of $92.7 billion. This impressive fundraising effort has propelled Ares’ assets under management (AUM) to $572 billion, reflecting a 19% organic growth rate on an annualized basis.
Dividend Increase
The company declared a quarterly dividend of $1.12 per share, marking a 20% increase compared to the same quarter last year. This dividend hike reflects the company’s strong financial performance and commitment to returning value to shareholders.
Strong Growth in Management Fees and Revenues
Ares Management experienced significant year-over-year growth in management fees, which increased by 24%, while total fee-related revenue grew by 29%. Fee-related earnings (FRE) also saw a robust 26% growth, underscoring the firm’s effective revenue generation strategies.
Successful Integration and Growth of GCP
The acquisition of GCP has been successfully integrated, contributing $103 million in revenues and $34 million in FRE, with a 33% FRE margin. Ares anticipates continued significant contributions from GCP, particularly in the data center business, in the coming years.
Continued Expansion in Wealth and Insurance Channels
Ares’ wealth channel achieved a remarkable 54% increase in fundraising for the first half of the year compared to the same period in 2024. Additionally, the insurance strategy through Aspida generated over $1.9 billion in new premiums, highlighting the firm’s strategic expansion efforts.
Strong Performance Across Strategies
The company’s credit strategies delivered impressive double-digit returns ranging from 10% to 23% over the past 12 months. Real estate and private equity strategies also performed well, contributing to the firm’s overall strong performance.
Temporary Slowdown in U.S. Deployment Environment
A temporary slowdown in the U.S. deployment environment was noted, with transaction activity dipping in April before rebounding in June. This brief slowdown impacted the beginning of the quarter but is expected to be a short-term issue.
Modest Compression in FRE Margin
The integration of GCP temporarily compressed FRE margins by 90 basis points. However, this compression is expected to be temporary, with margins anticipated to stabilize as integration progresses.
Forward-Looking Guidance
Ares Management provided robust forward-looking guidance, highlighting a 20% increase in the quarterly dividend to $1.12 per share. The company’s AUM reached $572 billion, with a 19% quarter-over-quarter organic growth rate. Fee-paying AUM grew to $350 billion, with a 17% annualized growth rate. The firm expects to exceed last year’s record fundraising and anticipates continued growth in their Real Assets business, with significant contributions from the GCP International transaction.
In summary, Ares Management’s earnings call conveyed a positive sentiment, driven by record fundraising, asset growth, and strong performance across various strategies. The successful integration of GCP and expansion in wealth and insurance channels further enhance the company’s growth prospects. Despite minor challenges, the overall outlook remains optimistic, with Ares well-positioned for continued success.