Ares Management Targets Record Fundraising and Investment in 2024

Ares Management, a global alternative investment manager with $464 billion in assets under management (AUM) as of September 30, 2024¹, is on track to raise over $80 billion from investors this year. This would mark a record for the firm, surpassing its previous fundraising achievements.² The company has secured more than $64 billion in gross capital year-to-date¹, signaling a growing investor appetite for private credit, real assets, and alternative investments, and highlighting broader industry shifts toward diversified yield sources and global expansion. The firm's strategic acquisitions and geographic reach underscore the trend of consolidation and scaling among alternative investment managers, positioning them to meet evolving market demands and capture opportunities in emerging economies.

During the third quarter of 2024, Ares raised nearly $21 billion in gross new capital.¹ Key areas of investor interest included private credit strategies, with over $13.5 billion raised in that segment alone.¹ The firm's fundraising success is attributed to:

• Institutional and Retail Demand: Investors are seeking durable yield and returns that exceed traded market equivalents, irrespective of current interest rate levels¹.

• Diverse Investment Offerings: Ares provides a range of investment options across various asset classes and geographies.¹

Highlights of Recent Fundraising Activities

• Senior Direct Lending Fund III (SDL III): Closed with $2.8 billion of equity and debt commitments, bringing total investment capacity to approximately $34 billion¹. This capacity is nearly double that of the previous fund.¹

• European Direct Lending Fund VI: Raised approximately €14.5 billion to date, surpassing the prior vintage of €11 billion¹. A final close is anticipated in the fourth quarter, potentially making it the largest European direct lending fund raised to date.¹

• Wealth Management Products: Raised over $2.5 billion in equity commitments and nearly $4 billion in total AUM during the third quarter¹. Year-to-date equity flows into wealth management products totaled over $7 billion, tripling the fundraising pace compared to the same period last year.¹

Investment Activity and Deployment

Ares reported global deployment of nearly $30 billion during the third quarter, marking its second-highest quarter on record¹. Year-to-date deployment stands at $74.6 billion, positioning 2024 to potentially be a record year for the firm in terms of investments.¹

Key Investment Areas

• Private Credit Strategies: Invested nearly $16 billion in U.S. and European direct lending across more than 100 companies. The firm is focusing on middle-market companies, including those in the lower and core middle market segments, to capitalize on higher risk-adjusted returns.¹

• Alternative Credit: Deployed nearly $3.8 billion in the third quarter, an increase of over 35% compared to the same quarter last year¹. Investments span various asset classes, including fund finance, residential assets, auto leases, digital infrastructure, and asset management.¹

• Real Assets: Invested over $2 billion across real estate strategies, with emphasis on industrial, multifamily, student housing, and single-family rental sectors¹. The firm is observing increased transaction activity and promising supply-demand dynamics in these markets.¹

Strategic Acquisitions and Expansion

Ares has announced significant acquisitions aimed at expanding its presence in real assets and enhancing its growth profile:

1. GLP Capital Partners International (GCP International):

   • Acquisition Details: Agreement to acquire the international arm of GLP Capital Partners for up to $5.2 billion.²

   • Impact on AUM: The acquisition will add $44 billion to Ares's AUM upon finalization.²

   • Strategic Significance:

     • Expands Ares's real assets presence in the Asia-Pacific region, including Japan and Vietnam.¹

     • Enhances capabilities in industrial real estate, digital infrastructure, and clean energy sectors.¹

2. Walton Street Mexico:

   • Acquisition Details: Agreement to purchase an industrial-focused real estate manager with $2.1 billion in AUM as of June 30, 2024.¹

   • Strategic Significance:

     • Positions Ares to capitalize on near-shoring trends in supply chains.

     • Enhances the firm's presence in the Mexican industrial real estate market.

These acquisitions align with broader industry trends of consolidation and expansion into private credit, insurance, and infrastructure sectors.

Implications for Investors

The developments at Ares Management reflect broader trends in the alternative investment industry, with several implications for investors:

• Growing Demand for Private Credit: Investors are increasingly seeking private credit opportunities due to the potential for higher yields compared to traditional fixed-income investments. The rise in private credit fundraising suggests a shift in investor preference toward alternative sources of income amid low interest rates and market volatility.

• Industry Consolidation and Expansion: The alternative investment landscape is experiencing significant consolidation, with firms expanding through acquisitions to enhance their capabilities and offerings. This trend may lead to larger, more diversified investment platforms, affecting competition and potentially impacting fee structures and investor access.

• Focus on Real Assets and Infrastructure: There's a notable increase in investment in real assets such as real estate, infrastructure, and clean energy. This shift is driven by long-term trends like e-commerce growth, supply chain reorganization, and the global push for renewable energy. Investors may find opportunities in sectors that are expected to benefit from these macroeconomic changes.

• Global Diversification: Expansion into international markets, particularly in the Asia-Pacific region and emerging economies like Mexico, reflects a search for growth beyond traditional markets. Investors interested in global diversification may consider exposure to these regions, which could offer higher growth potential but may also come with additional risks.

• Impact of Economic Conditions on Investment Strategies: Anticipated changes in interest rates and economic recovery can influence investment opportunities and asset valuations. Investors should be mindful of how macroeconomic factors, such as monetary policy shifts and global economic growth, may affect different asset classes and investment strategies.

Industry Trends

• Shift Toward Alternative Investments: There is a growing trend among institutional and retail investors to allocate more capital to alternative investments, seeking diversification and higher returns outside traditional public markets.

• Technological Advancements and Infrastructure Needs: The demand for digital infrastructure and clean energy is increasing due to technological advancements and a global emphasis on sustainability. Investments in these areas are expected to grow, presenting new opportunities and challenges.

• Regulatory and Competitive Landscape: As the alternative investment industry grows, regulatory scrutiny may increase. Investors should stay informed about potential regulatory changes that could impact investment strategies and the operations of investment managers.

Conclusion

Ares Management's significant fundraising and investment activities in 2024 exemplify key trends in the alternative investment industry, including growing investor interest in private credit, strategic acquisitions, and global expansion. These developments highlight the evolving landscape of investment opportunities and underscore the importance for investors to consider macroeconomic trends and industry dynamics when making investment decisions.

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_{1. Yahoo Finance, Q3 2024 Ares Management Corp Earnings Call Transcript, 2024.}

_{2. Financial Times, Ares on course for record $80bn fundraising year, 2024.}

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