Ares Management

Ares Management exited June 2026 with $409.9 billion in fee-earning assets, up 2.6% sequentially and 17.3% year over year. Base management fee revenue increased 14.4% year over year to $1.0 billion in the quarter, while fee-related earnings increased 20.0% to $491 million.

Why it matters: Ares continues to generate positive flows, despite rising concerns about private credit, with its mix of alternative products benefiting from the ongoing demand for nontraditional investment products. The firm picked up $22.2 billion from fundraising efforts during the second quarter, above its quarterly run rate of $17.4 billion over the past eight quarters. Credit inflows of $12.9 billion were much better than our expectations for $7.5 billion (given the headwinds posed by the hysteria surrounding the private credit markets). Ares also deployed $35.9 billion during the period, above its quarterly run rate of $33.3 billion over the past two years, as well as the $26.9 billion deployed in the second quarter of 2025. The solid fundraising and ongoing investing activities during the second quarter supported a 17.3% year-over-year increase in total assets under management, or AUM, to $671.3 billion, and a similar 17.3% increase in fee-earning AUM to $409.9 billion.

The bottom line: We reiterate our $130 per share fair value estimate for narrow-moat-rated Ares and view the shares as slightly undervalued, trading at a less than 5% discount to our valuation. Increased uncertainty about the equity and credit markets tied to fiscal, tariff, and monetary policies, as well as economic growth, and increased concerns about the private credit market (and more recently the segment's ties to the artificial intelligence boom) have pressured the share prices of most alternative asset managers. Since the start of the year, private-credit-heavy alternative asset managers, like Ares (down just over 20%) and Blue Owl (down just under 30%), have been among the hardest hit firms in our coverage.

After-tax realized income (which removes the effects of unrealized activity) was $468 million, or $1.29 per share, during the second quarter, compared with $368 million, or $1.03 per share, in the year-ago period. This was above the FactSet consensus estimate of $1.28 per share but below our own internal estimate of $1.30 per share. 

Even with the increased volatility we've seen in the equity and credit markets, especially surrounding the private-credit markets, we still expect Ares' AUM to expand in the near term—albeit at a much slower rate than we were forecasting coming into 2026. 

Total fundraising of $22.2 billion during the second quarter was well above the $15.5 billion that was pulled in during the year-ago period. Fundraising was driven primarily by Ares' private-credit ($12.9 billion) and real estate/real assets ($6.7 billion) segments, with its secondaries and other funds ($2.6 billion) and private equity operations providing a smaller portion of the capital raised. 

Going forward, we continue to expect the negative perceptions currently attached to the private-credit market to be a drag on fundraising and overall results. As such, we see Ares raising just $55 billion to $75 billion in new capital annually on average during 2026-30. This is down from $65 billion to $85 billion in our forecast at the start of the year, with most of the impact coming from the firm's credit segment, where we envision Ares facing more headwinds raising capital than it has in past years. 

While there have been concerns raised about the private credit markets over the past year, we feel like some of these concerns have been overblown. For starters, the bulk of the financing for Tricolor and First Brands, two firms that went bankrupt in the fall of 2025, came through more traditional channels, with very few private credit firms exposed. 

Since the start of 2026, investors have grown concerned that the growth of AI will allow software customers to dispense with their software licenses, which would have an adverse effect on the alternative asset managers—with some 20% of the private credit industry's loans the past decade being made to software companies. 

While investors have some reason to be anxious about potential bad loans on the books of the alternative asset managers, just as they do with the banks, the loss rates for the industry have been more akin to traditional high-yield bond markets over the past several years, with no real discernible uptick in risk or losses. 

This is to be expected, as the private credit industry is focused on the higher-risk parts of the market, charging much higher fees and/or requiring better terms in order to extend credit to companies. More importantly, all the credit and loans that the alternative managers are extending are coming from their investment funds, not from the companies themselves, so there is no balance sheet risk. 

The biggest risk for the alternative asset managers is that a marked increase in loan defaults on the part of their borrowers has an adverse effect on investment performance, which impacts future fundraising and monetizations. On top of that, investors that are spooked by the potential for losses from their private credit investments will continue to make redemption requests from the funds, which, while slowed by the existence of redemption gates for most funds, would still be a drain on fee-earning AUM. This is what we have been seeing at firms like Ares and Blue Owl, which have more of their fee-earning AUM tied up in credit alternatives. 

For more insight into the trends and other issues affecting the alternative-asset managers, which influence our long-term forecasts for firms like Ares, please see our latest Industry Pulse, "US Alternative-Asset Managers: 2026 Q2," which was published on June 30, 2026. We also have a broader industry primer available for all of the US-based asset managers in our annually updated Industry Landscape, "US Asset Managers," which was last published on Dec. 18, 2025. 

On top of that, our special report, "Financial Services Observer: US-Based Alternative Asset Manager Moats Remain Solid; Largest Firms Should Continue to Capture Bigger Share of Market," published on Dec. 2, 2025, provides deeper insight into the seven alternative asset managers we cover, including our take on Ares.

We've raised our fair value estimate to $135 per share from $130 to reflect revised expectations and the effects of the time value of money since our last update. Our fair value estimate implies price/earnings multiples of 23.0 and 18.5 times our estimates for distributable earnings during 2026 and 2027, respectively. For some perspective, during the past five (10) years, the shares have traded at an average of 31.5 (25.8) times trailing earnings on an adjusted basis, with the highest (lowest) multiple during that period being 44.9 (14.3) times. We use a 21% US statutory corporate tax rate, an 11.6% cost of equity, and an 8.9% WACC in our valuation.

Consistent with other alternative-asset managers, we view fundraising, deployments, realizations, fee-earning AUM, base management fee levels, realized performance fees, and compensation costs as key drivers of our valuation. Total fundraising (exclusive of new debt commitments) during 2025 was $72.1 billion, above full-year fundraising efforts of $58.1 billion in 2024. Inflows of $42.0 billion during the first half of 2026 set the firm up for $75 billion-$90 billion in fundraising this year. Even so, we expect the company to raise $60 billion-$90 billion in new capital annually during 2026-30, owing to fundraising headwinds we foresee for the alternative credit markets.

Ares deployed $145.7 billion of capital during 2025, above full-year deployment efforts of $106.7 billion in 2024. First-half deployments of $68.2 billion in 2026 put the firm on pace to surpass last year's deployment levels. We expect Ares to put $90 billion-$120 billion to work annually during 2026-30. As for realizations, the firm does not disclose these details, but distributions have averaged around $25 billion annually during the past five years and will likely average between $30 billion and $40 billion during 2026-30.

Ares exited June 2026 with $671.3 billion in total managed assets, with fee-related AUM up 17.3% year over year to $409.9 billion. Over the next four and a half years, we envision the firm's fee-earning and total AUM to reach $585.0 billion and $863.9 billion, respectively. We expect to see modest levels of fee compression, with base management fee revenue increasing at a 9.2% CAGR during 2026-30, while realized performance and incentive fees will continue to be constrained, with total revenue expected to increase at a 7.9% rate annually on average.

While compensation costs averaged 62.8% of revenue the past five years, we see these expenses averaging 55%-60% of annual revenue during 2026-30. Realized income (which removes the effects of unrealized activity) is likely to average $1.7 billion annually during our five-year forecast. Our current 2026 and 2027 EPS estimates of $5.86 and $7.29, respectively, are based on our expectations for aftertax realized income of $1.2 billion and $1.5 billion.

We project a bull-case fair value estimate of $209 per share and a bear-case valuation of $81 per share. Our upside case implies a P/E multiple of 28.5 and 22.9 times our 2026 and 2027 estimates for realized income, respectively. This scenario assumes rising equity markets, more stable credit markets, solid capital-raising efforts, and improved realization levels. The net result would be a 13.3% (14.9%) CAGR for base management fees (total revenue) during our five-year forecast period, with realized income being 20%-25% higher than our base case over the course of our projection period.

Our downside scenario implies a P/E multiple of 18.4 and 14.8 times our 2026 and 2027 estimates for realized income, respectively. This scenario assumes weaker equity markets, less stable credit markets, lower levels of capital-raising, and lower realizations. The net result would be a 2.6% (1.9%) CAGR for base management fees (total revenue) during our five-year forecast period, with realized income being 20%-25% lower than our base case over the course of our forecast period.

Unlike more traditional asset managers like Invesco and T. Rowe Price, which focus on traditional asset classes like equity, fixed-income, balanced, and money market funds, alternative-asset managers like Ares deal with less-liquid alternative investments like private equity, credit alternatives, real estate/real assets, and hedge funds. Even so, we think that the alternative-asset managers, much like the traditional asset managers, benefit from switching costs (the core moat source) and intangible assets, which include organizational attributes—such as product mix, distribution channel strength, and geographic reach—and true intangibles—like strong and respected brands and manager reputations.

We assign Ares a Narrow Morningstar Economic Moat Rating. We believe that the company has built a solid position in the industry, using its reputation, product portfolio, investment performance record, and cadre of dedicated professionals to not only raise massive amounts of capital but also maintain its reputation as one of the go-to firms for institutional and high-net-worth investors looking for exposure to alternative assets. Ares is the fifth-largest stand-alone alternative-asset manager in the world with $671.3 billion in total managed assets, including $409.9 billion in fee-earning AUM, at the end of June 2026.

While Ares operates with scale in each of its segments—credit strategies ($440.5 billion in total AUM and $266.1 billion in fee-earning AUM), private equity ($24.5 billion/$13.9 billion), real estate/real assets ($151.2 billion/$88.6 billion), and other alternatives ($55.1 billion/$41.3 billion)—the firm would, in our view, benefit from some diversification away from its heavy concentration in credit. The company currently derives 65% (68%) of its fee-earning AUM (base management fees) from credit strategies, 22% (20%) from real estate/real assets, 3% (3%) from private equity, and 10% (9%) from other alternatives. Of the $440.5 billion in total AUM that Ares reported for its global credit operations at the end of June 2026, just over two-thirds came from direct lending.

On a fee-earning AUM basis, the company's exposure was slightly less, with direct lending (at 59% of assets) still accounting for the largest part of its private debt offerings, with alternative credit (14%), opportunistic credit (4%), liquid credit (21%), and other credit funds (2%) accounting for the rest. Even so, we expect that direct lending is still a larger contributor to base management fees, given that these are likely higher-coupon issuances generating higher returns for the firm.

Much like its peers, Ares has built out a large base of employees—including in-house executives, consultants, and advisors—with decades of industry experience that can successfully revitalize a company through cost-cutting, acquisitions, or other strategic maneuvers, increasing the chances of producing a successful private equity or real estate investment. These attributes have provided Ares with the ability to not only gather but retain assets in various market conditions, as well as a means of differentiating itself from peers.

While the barriers to entry are not particularly significant for the industry, the barriers to success are extremely high, as it takes time and skill to put together a long enough record of investment performance to start gathering assets and even more time to build the scale necessary to be competitive (exemplified by the fact that BlackRock is the only legitimate traditional asset manager of size competing in this part of the market, even though most of our coverage has been focused on building out alternative-asset manager offerings during much of the past decade).

On the switching cost front, alternative-asset managers like Ares (unlike their traditional brethren) have not had to rely heavily on investor inaction to keep annual retention rates high, as the products they offer tend to have lockup periods, preventing investors from redeeming part or all of their investment for a prolonged period. These types of arrangements have allowed Ares to post an annual retention rate of well over 90% on average for the past five years. That said, we expect competition for new investor capital—which has traditionally centered on manager reputation, fund size, and investment performance—to only increase, especially with more traditional asset managers like BlackRock increasing their exposure to alternatives and showing a willingness to be fungible on fees.

During the past decade, Ares has produced adjusted returns on invested capital that have averaged 500 basis points above our estimated 8.9% cost of capital for the company. We expect the firm to continue to generate excess returns over our estimated weighted average cost of capital during the next decade. While Ares should benefit from the level of interest that still exists for alternatives and the potential for the retail market—a large, untapped market for alternative assets—to open up gradually to alternative-asset managers, we think private credit headwinds are likely to blunt a lot of that positive momentum. We've also modeled the firm addressing some of its relative scale disadvantage with more acquisitions over 2026-35. Altogether, our forecasts call for average annual adjusted ROICs of 14.2% over the decade to come, above our estimated 8.9% cost of capital for Ares.

Ares, with $409.9 billion in fee-earning AUM at the end of June 2026, is a go-to firm for institutional and high-net-worth investors looking for exposure to alternative assets.

The company's increasing scale, diversified product offerings, long record of investment performance, and strong client relationships have left it well positioned for a variety of market conditions.

Customer demand for alternative assets has increased, and Ares could benefit from increased demand from high-net-worth individuals or the successful expansion of retail products.

A prolonged downturn in the credit and/or equity markets could leave potential investors in Ares' funds with limited liquidity and large commitments to other funds, making it difficult for the firm to raise new capital.

Generating two-thirds of its fee-earning AUM and management fees from credit strategies, Ares would be affected more than most of its peers if the segment performs poorly during an economic downturn or credit crisis.

Private equity and real estate/real assets are both highly cyclical and heavily reliant on market-timing and exits to generate incentive income.