ARES - Earnings call transcript Q2 2019 | Ares Management Corporation

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Operator

Hello and welcome to Ares Management Corporation’s Second Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded on Wednesday, July 31, 2019. I will now turn the call over to Carl Drake, Head of Public Company Investor Relations for Ares Management. Please go ahead.

Carl Drake

Thank you. you conference us call. thank second for and XXXX quarter afternoon for today joining our Good I our McFerran, CFO. CEO joined and am today Michael our by COO Michael Arougheti, and

and of will Group available for Private Co-Head our session. be Kaplan, question-and-answer David Head of addition, Equity In Group Kipp the DeVeer, Credit our

subject you begin, call forward-looking contain and remind made to and the that are uncertainties. risks we Before will course during webcast statements comments I of conference and this

from in no such differ including forward-looking could Please Corporation. not actual that performance a investment update expressed any also in Please our is from Our any investment statements materially reason, forward-looking note past performance those those results. SEC note performance results guarantee of for of filings. discrete or obligation such in of Ares that listed and Management future We statements. an assume is to funds

to such other comparable for like-titled principles. These and fees. Please be isolation accepted second like earnings as person, prepared nothing measures any to this or an our in fund. call, call quarter other remind Ares any These purchase website financial as can we’ll refer to to accounting an as offer of managed Investor interest for substitute including in measures Resources not operating may use directly solicitation presentation note measures a available these the on not used a is GAAP would ARCC in any offer accordance this of of any generally measures that presentation please Part reconciliations non-GAAP or I in reference the our measures. also measures with companies. we certain of by measures our to of include Also, that filed We this comparable liquidity. should earnings to a at be fees an I as measures, measures not refer to as securities income. the be considered call. most During sell for morning today’s and and definitions from fee-related performance or of constitutes under used conference realized www.aresmgmt.com section you The interest

announced per XX% quarter The on our third September we share, will morning, XXXX, of September we a be $X.XX dividend year-over-year record dividend, XX. common This XX, increase. to holders on declared paid

to our declared Series preferred also XX. on A payable of is September record of quarterly per which We XXXX, preferred $X.XXXX effective dividend on September share, holders XX,

the start and Now will Arougheti business financial I turn with will call highlights. to over some quarterly who Michael

Michael Arougheti

is Good Great. everyone. Hope Thanks, Carl. everyone afternoon, enjoying their summer.

fees XX%. raised can you morning, margin year-over-year. as On increased sequential to over and our AUM, our financial XX% for A great a already basis earnings not core see ninth grow XX%. fees, as QX AUM increased embedded up accelerated expanded nearly of growth, was our fee-related XX% future management earning fee-related XX% Management As from our steadily our yet earnings but FRE metrics consecutive report quarter marked indicator this AUM year-over-year continue QX, and to growth. of earnings fee our

fundraising products. new metrics expansion our strong in performance fund success, reflects core these quality deployment and our Our globe, the into steady momentum around our

economic you rebound on stance The markets on briefly into business. continued me I each the generally performance. those dovish walk Fed’s our monetary and impacting steadily solid amid a policy strong reflecting let of how consumer quarter, stable through the Before areas, macro second one update it’s and the have employment, environment to

also system. are broad credit decelerating, there’s diverse Real remain footprint is growth stable geographic our stable. low remain Default earnings estate and investing for and in In trends across corporate generally active. competition remained fundamentals in order for selective liquidity healthy increased by and historical are relationships positioned expertise constructive rates deep remaining In particularly management the to self-origination trusted While seeing capabilities, invest. to critical strategies. general, well asset industry it’s investment and extensive assets, we and this be we’re environment, quality have to but standards

low, investors rates of lower To degree products for only and increase remain current we our correlations and continue that during remain With our This and a investment durable assets believe today, will income, end, with longer. alternative after broad-based of find to meaningful the that need clients. to resonate lower much traded should solutions. we fund downside differentiated may to strong Interest yield protection, institutional high suite to bringing investment our client commitments the momentum, fundraising again the $X.X commitments, and billion. new capital new raised. of over quarter, of our contributed which second continued provided the our Existing investors $XX of the of strength gross stickiness to raised XX-month we model relationships. highlights last adding the the billion capital direct XX% groups client capital three in investment All for our

as fund inflows incremental to bringing of in special strategy additional and billion into equity billion. inflows in opportunistic all target And our lending strategy. across an date target funds of billion $X experienced since for major vehicle, we direct commitments our fifth now our held real European a raised more on real close first-time with In $X U.S. our $X.X credit estate, estate we opportunities In our total than credit. In to inaugural liquid and equity, U.S. also our our raised final we we our close strategy in and near alternative over held of opportunities credit, of debt energy which end, $X first billion, half private strategies European over capital on close in this global quarter at we exciting fund. new our is

momentum to months, strength continue. this XX we expect fundraising Looking forward to next over and the XX

and our raise business. equity junior all private in In real including strategies lending addition equity, add on successor investment to add of strategic our debt flagship continued funds partnerships, capital groups, in opportunistic and in and growth private meaningful and investments to managed X we expect estate value corporate accounts direct

pipeline, visibility we fundraising ahead years high. continued our good our growth double-digit the Given strong conviction for in have AUM very percentage in remains the

drawdown of across platform. invested our During billion second entire $X.X funds the quarter, out the we

We’re most as the loan borrowers. funding lending active primarily commitments needs selectively on incumbent we in with and senior of funded existing U.S. growth an our direct emphasis European

private was strategies. million invested We our power diversified $XXX also ops equity, corporate across in special which approximately infrastructure and and

As second we the fund positive continue our returns outset, with I quarter. for perform stated at steady well for to the investors

Our between reported quarterly QX and estate with real corporate X% estate strategies credit range PE and returns and all way. our X% leading the for real PE

alternative product examples strategy, we private energy products in on, our income, continue expansions expand secured you further platform. of diversify our strategies credit opportunities, line climate include infrastructure, lending, so senior see, and successful As so junior broadening and our opportunities, special to enhanced and forth. Several can recent and our debt,

latest Solutions product that wanted highlight The expansion I business. our in to Insurance is

of may seen, next of the we month, Financial, solutions launch Aspida you have in of this step the evolution announced earlier many As the our insurance platform.

to to inorganically believe sales agreed our platform alone. a that This has with Michigan in $X and well organically insurance will insurance as in and has in billion. $X.X for clients to over acquire We grow based XXXX annuity reinsurance us enable that partner us platform billion Aspida annuity assets life to through more transactions. responsible allow Aspida continue as than was

details call through And the to Mike now McFerran more to over in the walk with that, QX Mike? I will detail. turn

Michael McFerran

Thanks Mike.

almost improve with shadow we management continue and in As to Mike fee-related continued stated, fee AUM, metrics in AUM, paying growth fees all double-digit earnings. AUM,

in capital over AUM raising market quarter, year-over-year at second the approximately up $XXX Our XX% driven reached billion existing and end both by strategies and the of new appreciation.

fee X% in of and by AUM the Our from to deployment the XX% last year quarter not largely XX% earning growth grew fees the billion yet over Management is second over fees. from quarter AUM $XX paying past XXXX. previously of driven

fee-related from XXXX. commitments XX% rate. last grew from Similarly, an of improving solid capital fee new quarter growth second quarter Management and the earnings deployment, benefited fee X% from and

Our fee-related growth margins leverage from FRE from line XX%. strong earnings benefit with approximately margin an reaching operating and expanding top

rate we to that deploy fees, yet future XX% earnings line capital we plus not fee-related AUM of believe as is continue raise Looking clearly expected a from benefit in ahead, margin our sight annual and growth incremental is earning expansion.

here expect the should XX be a in the next months. the sit few in today, mid-XXs to quarters achieve in we XX and we to next margin XX% As

realized quarter up was $XX million of million compared the $XXX XX% slightly of income second realized was period income Our year-to-date, last down same year-over-year. to But year.

Our share year. of per second quarter share $X.XX time per last common was after-tax income $X.XX realized at versus down this common

$X.XX was reflects XXXX rate flat roughly more it versus This versus $X.XX year. common higher at comparison year-to-date largely flat share in on tax normalized year-to-date and last per However, a XXXX. a basis,

that of year, could to we While slightly half year. lighter the our or one than second to realizations were realizations more income visibility second realized potentially have the significant prior quarter contribute this for

reminder, values. performance To or give realizations performance which at new fees. record by sense of XX% a a lumpy share difficult. makes in net you evaluating within are had measure end accrued fees, the ended basis them such fees quarter, second million our and lies our realized realized the at $XXX embedded increased a At nature, net good of performance a common year-to-date future value if accrued a of As quarterly $X.XX on of per

performance the metric determining our earnings our metric to in important important inherently and realized fees respect recurring Realized since our stable results, as it earnings fee-related view most investment more With our we are is income dividends. financial reflects and most volatile.

fee-related performance you policy and capital expected our XXXX annual to volatility realized to in by that income earnings activities. dividend a support we sought management recall, As retaining future corporate and our pegging growth may this other new adopted to address

benefit more realized a earnings challenging, have as growing While quarter over is and we the fee-related is longer given income for of predictable estimated stream base. periods, any it

represented quarter, income. For second XX% fee-related earnings realized of the

it on the XX Over of quarters, XX% average. realized has represented last income

realized for I our think useful growth. its data points investors evaluating are and these future income

to visibility. provide shift me several that other future metrics Let

AUM on prior $XX.X billion, prior available over million. to incremental at is future this include the approximately available impact in billion yet was Part the fees quarter quarter shadow per of the also $XXX.X up from the annual our earning increased I million end of does the third leverage It’s ARCC not earn XX% totaling in for this waiver $XX not XX% of over finish potential fees or $XX the the management the year Of expiration fees billion billion. to future expect Our of Part with potential the million deployment any of capital $XXX.X and important we fees quarter or I the year $XX corresponding fee increased AUM to $XX management XXXX. note ARCC that

about expect fees. would I we QX, Part ARCC incremental FRE a in the to earn on XX% Starting margin

not in funds our AUM up eligible and direct European XX.X% $XX.X incentive European this and XX% to our driven total. years. quarter incentive-generating yet record is second Of net deployment direct our over fee-related grew in approximately lending capital Our U.S. represents for quarter, available of our for fees strategies. a billion significant second coming un-invested which invested lending upside the that both performance and deployment, future potential year-over-year flagship – amount, earnings The our the in of $XX by billion represents

in billion private XX% AUM incentive Our of year-over-year in equity increased XX% strategies credit currently generating and XX% $XX.X strategies. consists and of

Mike with up a opening to few thoughts now will this close Q&A. before

Michael Arougheti

Mike. Thanks Great.

as steadily summary, continues business can in So our expand. you see, to

a we a very believe we addressable growing foundation to large we and that well-positioned had be growth in for consider market. great have and future what We are

we at structure that base client enable enduring attract a we clients We the in coverage globe. the turn and improve continue a attractive our client amount returns have investors And while over solutions sticky professionals investment to continues very shareholders. originate XXX model of to funds investment unique that our competitive, new strong deal significant and we across and to to expand clip as platform and our our a to to add fund and very advantages for are and have flow platform talented the markets generate and us growing

better. been we and internal that that have business all forward has external I excited feel the where So of momentum we about our activities across and never are

As support for appreciate time and continued your our always, we company.

the that, will line with for questions. now And open we

Operator

[Operator Thank you. first come will question ahead. O’Hara with Jefferies. Please Instructions] from Our today go Gerry

Gerry O’Hara

for moving anticipation think one of leverage that from Great. my that Good was question. are notes yesterday, for target the midpoint ARCC actually, call lines right afternoon and thanks I if something Perhaps for taking – into along the the the increased the target? of or was hoping into I target on of how accelerate elaborate XX to to slow months. little Thank takes move you. XX the might able occur, puts might bit the some be might what be might you or that that a what around Kipp leverage

Kipp DeVeer

Sure.

the are Thanks You question. welcome. for

obviously there decided think XX XX off forward the became So sort cooling where months we after relief approval period a ago, Board it regulatory X-year it June and push of the I is and with was had to effective.

been actually I – been increasing the BDC, put think if or talked modestly I key ARCC at have if a know we but don’t has investing leverage the it’s yesterday about I call that consideration the for So as just a etcetera. been has but the environment just take, the it’s challenging, on the competitive, key

X.XXx to X.XX of the So period. tried year of target a you in our a a up Capital kind showed and model where range Corporation look X-year a what leverage to actually the people at, do leverage website a that Ares is around maximum the we was again over on give back can X-year from presentation that’s increasing today take

introducing financial the leverage comfortable on feel we company. more So,

we in the there there. our going consideration just we to I key to but get X thinking, think is towards are X to slowly that are not marching get

We there that are get we a find going for see investment only exciting our of company. to don’t investment want lower terms and as to opportunities in what enough bar we we good if

Michael Arougheti

I will you earnings are be against is core Kipp dividend for income lower And at being when the a up just company, at leverage add, think a itself is I inappropriately because core the the to $X.XX line we environment, $X.XX dividend, company run-rate put $X.XX modest, at given much earnings current cautious appropriately Gerry, and I the including company you model, special. regular go projections the look level. with earning positioned market quarter in those look the think probably when a that a

the taking combination that’s harvesting the look fee assets and the without at I generating are risk an been where are that increased of So income a contribution fee enviable commitment Management, position income, gains. back in the when ACAS repositioning we to job unbelievable underwriting increased actually you the profit Ares we yielding incremental syndication income, of and corollary and lower think

on they So I profit BDC we sustainable think new enjoying but out done. appreciate higher the a there based hopefully the of coming is still already considerable fine level that upside, have people of are work

Gerry O’Hara

into that lower helpful. shifting That’s might And you of be the we I kind environment. maybe insurance the rate platform guess to and gears on headed fact touched a

on kind able a expand of Just kind to of hoping you outlook backdrop of growth might within be the balanced platform that bit lower a against insurance little the potentially rate environment?

Michael Arougheti

Sure.

past pension my very our side As a come product strategic been with clients, institutional and interesting foreign insurance recognition insurers products product. of lot buyers operating our company companies. of with years through over the very spent of whether partners. given some community rate this about about much be folks growth so domestic fixed on other with a we active creative very business now with a of for large. would on X also more the manage we’ve on prepared we’ve about insurance ago I said Varagon suite XXX remarks alternative separate on on like market investors, the we ourselves here broad-based assets around in AIG the And the for large we done that investment, environment that are talking persistently in so talked at the we We a we’ve or or and driving as and calls, and And at insurance, that for with number retail rates time interest forth. under where to ARCC that in leaned up for in our Ares about very things talking retail of clients about talked but over an interesting interesting XX $XX interest behavior of developed around insurance insurers frameworks X nuances we’ve how a solutions income partnerships low based Ares very but insurance regulatory partnership of people area this insurance some years, opportunity, What’s just capital rate-driven position the product. we’ve our insurance not community that pushes ABS and that’s We’ve SDLP we’ve around behalf lot billion a strategic be And well some find and private and a formed us.

So a this been has us. for of area big focus very

if to ability last distribution originate the the our platform, a and retirement that as did of market on brings about reinsurance talked of we insurance I the platform annuity puzzle, having is to piece will, one capability not in Aspida an asset access the here as And the life owner have that the new you now annuities. a call, internal

piece a this set. really the final maybe complete capability me massive our puzzle to market. and next the So is to is of This end

transaction and what expected of the very last telling strategy that we people billion life may amount the grow retirement the to about the written require but $XXX assets around think having $XX seem organically end of third-party a can will going inorganically this space relative rate use I It’s ambition to The the capital environment, year a to small be think the annuities to of we we our is on given exciting. year. as forward. Ares by table probably about capital trillion execute capital grow current significant or on they And permanent are know, issues in vehicle alone. were

I lot next think quarters hearing over you’ll plan. business So coming about as the rollout the we be this is a something

Gerry O’Hara

you. Thank great. That’s

Operator

go Please Our ahead from will come Bank America next Lynch. of with Merrill question Carrier Michael

Michael Carrier

question. the margin, outlook Hi FRE provided helpful. for it’s Thanks for great. the Mike, you taking the

predict, bit outlook a tougher to were the seasoning the at how realized yet are continues portfolio? XX said on provide realization next the net looking some the months, the in the build. fees but quarter, you you XX I lighter activity realize context given balance can either or you to stands guys performance Maybe like where, portfolio over on during given accrued to the think the it’s

Michael McFerran

Sure.

So Mike, are with periods. dollar that the funds past amount don’t why respective performance their majority is we The fees. accrued in investment that start debt of

So they’re realization in technically mode.

important. think I that’s

that assets. highlighted, we environment dispositions think an in remain to of is favorable As we

predict is given quarter, slower to things for So the continued of think you quicker moving for a bit always when realizations. environment occur timing can we I happen transactions conducive operate hard things, it’s it’s the any Obviously, anticipate. than as or

we on So remarks of that’s on prepared the mentioned, we average last on flash science, emphasize this FRE longer why quarters, and lot XX% perfect we think you’ve the the got at did horizon. this that call, income. the saying really over over not I’m represented We realized XX but is a

albeit This quarter, realizations strength with – of I reflecting quarter also think was light of that strength of number XX%, FRE. illustrative being continued and growth a

still continues are attractive. to pretty that performance harvesting most already mode, grow give you coming of over it’s are from that next you So net again, end, fees hard feels I as good. and in that Again, to valuations the dollar accrued know, going what’s realizations think and it’s in as to funds up the But in year number. quarters into year, that be baked a think XX% we

Michael Carrier

say maybe, the some lending would infrastructure niche, competitive the more guys you want the U.S. just to deployment out. know look when like just have compare dynamics? if like you yet of at fund versus in guys given the side, I is on how And quick don’t the and that Okay. And raised follow-up, Europe competitive think market build maybe you the it, I backdrop you That’s the helpful. a direct then you

that deployment out environment? look how dynamic does you when in Just at play this

Kipp DeVeer

Yes.

take the materially and year on I business is business direct to will lending U.S. DeVeer, Kipp of market that for the Europe terms that U.S. in further younger we in in in here despite lot lot to of course, actually around we’ve in of two is U.S. in our Look, our expect the development. larger the in expectations market in and scale deployment. it’s deploy a opportunity and think is than yet. the is will despite this the competitive matures. significant a as and lending U.S. what this Both along here that. than We’ve development, fact We new we add expectations of there counterpoint But itself more capital probably we great deploy lesser again, and both So growth Europe. think a business can offices, more continue the direct our of will market its that got business, and U.S. Europe, people. XX The UK the the market the been for the UK the growth the deployment than we’ve opened that in and in its as be years, offers we It there continue scale of its not

Michael Arougheti

direct quarter, lending borrowers. Yes, value U.S. believe scales quarter, just look the in seen was of this in incumbent XX%. to the or business one the numbers you quick to quarters, be follow-on, into Kipp, I European not script, We’ve XX%. in existing it still approach as I As think deployment that prior about talked it we at XX% When as we develop deployment, we’ve business undervalued. our the relationships close XX% should actually was of that mentioned this the

good given and when type the have much us that U.S. benefit up. just more we Europe development. in size competitive, state Europe’s of of slightly a you given so have But the to markets, a we than being it’s obviously quickly more the creating defend allows the the we and catching incumbency the larger of think – of so business So value just for that indication have, relative about the we’re longevity

Michael Carrier

a lot. Thanks Alright.

Operator

question Suisse. Siegenthaler Our will from with come Credit Craig next

Craig Siegenthaler

Thanks. Good afternoon everyone.

with the Ares arrangement to you business Pavonia fee looks us see like the first between Just growth Aspida? could including business. potential help if us frame and a you organic of both new Can the life help what with I reinsurance? also wanted share Life, and follow-up And

Michael Arougheti

of One this you company so targets. capability Pavonia what’s Aspida what mentioned, our to well. been here, With servicing to purchased added you little market, really the a we’ve harder two transaction here. We can’t is that at a in what sure community, regard growth predict. of mentioned Craig, transactions if you a prepared dollar But insurance relationship the forward think with be. peers remarks, and that for Aspida is that the two a the multi, But is of the continued the year in occurring about originated that’s can will. as could the assets. that’s get I some will, are meaningful if company, is folks to to and growth accomplish meet I general reinsurance, will XXX look for best billion market, to do as And new at thing with of we manage just that there, that’s assets we exceed the as growth. that our distribution multibillion $X.X Life, that engine, would be think go I last have bit story the those tell or interesting sense. given organic we The to distribution Obviously, expect opportunity going So over have about in types able time, I investment piece

Craig Siegenthaler

back for second Ares can sixth my the organic gross $X see investment you here, one, guess, buyout due given I question when But means now when get just we add you out smaller fund? there Mike, of to billion something when backdrop, And it. global consider runoff. and a raise that current Got net

Michael Arougheti

into on to moving mentioned, to expectation our the As given our V where we VI have we’re very deployment put quickly stage in I we where Fund been market. are going is, Fund the that

going talked flagship XXXX, I expect. that we the funds people that’s as into about that of think one So should

Craig Siegenthaler

Mike. Thanks

Sorry missed if I that earlier.

Michael Arougheti

worries. no Yes,

Operator

go next come Harris question from Fargo. will Please Wells Chris ahead with Our

Chris Harris

Mike, Question for sold a decent amount stock Ares of you, you recently.

red you an who might to opportunity a to could flag? then you how And somebody be address this thinks did So potential answer wanted perhaps give why so? you

Michael Arougheti

all meaningful guess relative. I Sure.

Just with and so shares, for this I X building have X% to total my I’ve partners I believe of that believe here million sold my I years stock. people which appreciate, never XX or business been sold represents X% of holdings. over a share close

people bulk in my product. I is appreciation. Ares family, My and fund when you take think stock as as getting I am older. people comes in particularly worth towards my more stock have and Ares move and and am think concentrated estate salary distributions compensation obviously do as that, than I bonus any the of Ares net stock worth young or doing I on not a know, heavily but the through I price which of think what and product. is stock percentage read diversification I most and be and and concentration do, should planning, it nothing I it a think of Ares net

Chris Harris

Thanks Mike. for that,

guys is the focused in talk Ares the initiative. insurance bit about team a that squeeze building out this on and a just on little to question it? want Can you Now follow-up growing at

Michael Arougheti

Sure.

expertise So depending lot dedicated with over a is at is the led partner has supported to been Reilly team XX gentleman on a by of, who named people it, and insurance a XX to by platform of the years, comes here call for how the team a Dave we now calculate Ares FTEs. X

time. As really the terms solutions of I their and what we management, continue would to M&A in and how allocating build it’s the insurance asset teams as into spending broken out well are down strategy call allocation as time business, the capital and solutions capital

grow. as business, will continue so that insurance that well. expand grow, Aspida Financial our to Ares will then the I the then a Solutions I over partner to number side as to mentioned, market us our you’ll the investment resources, clients solutions see relevant as Aspida build life out in out broaden more be partners secondarily And the co, has company try good employees. consultative be the And as and probably to to Group Now I as management as on first XXX adding for think we think the continue to we insurance other as Insurance to capabilities we grows. continues try And

Operator

Lee Our will from with Robert question KBW. next come

Robert Lee

afternoon addition have in to peers lot update or investments for or question. Asia a I making, already. you’re is, lot my Thanks terms question first your you broadly? opportunities Europe, intermediate-term – for while. to the have us But as been expansion, there of a put a you on just guess Good clearly Could there talked European of taking a Asia maybe in thoughts priority. about

Michael Arougheti

Sure.

call think, a franchise we’ve have experience for of a Rob, in European good things you’ve terms those capabilities investment success, the about locally, – strong up lot funding organically to very span very of businesses as a local would of what I our design So hiring mentioned, issues around I and we building managing building region. and learned will in with lot inevitably geographies. when the talent learned and far-away control We’ve we had ingredients inorganically, manage a that experiences, kind come partnerships the Western organizational

in with which growth so, And to up capabilities dollar-denominated funds. growth until organic R&D-denominated Asia, build been that private we’re and has applying focused our our around and in equity now in largely equity

many As significant of our I priorities talked about in years. growth believe, strategic on we calls for Asia most many, two the last one is

not other geographies. For think a been whole investable as of Asia I most reasons, has as

shift. that see to beginning We’re

to And of region. continue see potentially inorganic organic you’ll I think through a scale driving that so, combination growth, us and into

Robert Lee

ahead as XX% traditional has successor that reason maybe been you of the And experience funds I from upsizing kind raising, sit wouldn’t what kind think fund of, to where is XX%, your there follow-up flagship you point? Great. the just at this mean, look you the on a on any today

Michael McFerran

funds, closer because we’ve again seeing No, interesting sequential the XX% on some of to larger growth. it’s the been actually

raised, on capital it’s funds. you is rates been new with where I As the look getting from investors XX% sequential very re-up high flagship mentioned, existing at plus when

the of such reasons one with have So, conviction incremental seeing that funds rate growth around we is XX% capital always in to XX% high plus re-up flagship increases commitment. we’re XX% on

we’re we the fund lot before fundraises by almost allow into new a of So these at definition size product. into the prior investors going

expect So, for the future. I continue would that foreseeable to

Robert Lee

Thanks Great. taking my for questions.

Michael McFerran

you. Thank

Operator

Cypress come from question will with go next Stanley. ahead. Our Please Michael Morgan

Michael Cyprys

look approach insurance the to initiative it versus question. wanted could about just the I in like? to the guess is out look If I see little Hi follow that? good assess what will how hoping like initiatives. bit was peer the on others metrics your successful, you what’s thanks that does look how as X it you morning for being And talk how as with X the just is insurance to next, differentiated a success say you up taking looking over what it years, I set. at you? to you be will and

Michael Arougheti

Sure.

insurance everybody general don’t the So opportunity product is in other income end-user investment-grade alternative insurance, that high-grade continuing effectively through clients space. doing. create again, I same a seeing the I fixed what are and for people in or to is to have company I product think whether know or a sense, annuities retail delivering below

I the time, expect managers we other over models. gravitate would So and to that business large continue towards will alternative similar

we the the the channel. perform this to by, are put positioned at through what that returns first annuity alternative would somewhat in the the of insurance and if platform, delivering you set. are is response our around and foremost similar look really coming growing when company we think much and And we here we to and are success geared in is a to to income delivering solutions grow. lot and we’ve building transaction, good upon insurance out set best-in-class a doing go product our well, slide that, that we done everything if product of investment look demand of define partners. fixed we’ll we’re deck if our really, I you value elsewhere buyers I capability at we’re from so uniquely and announcement product And

and get with be think performance, growth. on we’ll that, focused we’re to going I So, primarily

us. of I business the terms growth base And this not case the could the said, on as relationship in reinsurance that ownership on would platform’s that that’s levels, then think that which leadership a see and disappointed annuity consistent past side, could create I organic be exciting for of side I itself, with under be again, substantial think In we the and very capital we would of our of at accomplish just to going partnerships can clients. able when to be their of look company that’s with platforms space grows and lumpier you ton of white But develop with companies types peer reinsurance a they’ve of been how our that some I to little what that of think the scale insurance a and and the us. available the terms annuities there’s companies, in we if inorganically

Michael Cyprys

real guess a acquisition of of just thinking you any growth you franchise? it across quick do accelerating accelerate do meaningful in sort estate. and you’re could about it’s I little business as that you the an And the further a how see what follow-up, make platform? today, portion help hoping sort a you of Ares about and And look I the to talk need was a much gaps just different topic, estate real bit on just

Michael Arougheti

Sure.

So and well. level standpoint, extremely the you’ll off from if what kind continue that fund information fund real it’s would across And make a that charge are, actually suffice you their real said, newer that available, scale say, larger our see are of funds the And that performing equity grow. is just very right performing very, terms performance. funds in platform the estate a look performance funds. And private estate I into public leading very to expect that leveraging well of at we now to easy to Building of performance. we’re see with business and to I’ve frankly

than businesses quarter-over-quarter. that we’re scale year with in organically you we’re in what a to similar some the if the good business mature business, margins on to way their are what look more the of still seeing at lower but doing albeit organically XX% platform, rest growth, XX% that well growing So the they’re of very margin we’re

where we that think businesses meaningful we business. the were real have where of opportunity, lending terms not estate could are In in, growth I

substantial is it that new While fund and significant are products growing, we’re specifically some promise. growth showing in that business, open-ended creating product around

real franchise that market best-in-class I have we in to our think the PE. in the opportunity business what think backs meaningful is of estate a lending on we Europe grow for real estate

build to already reside core and development the those business broader be to of track into A wouldn’t over time. core to record surprised development opportunistic here continue itself the off us capabilities at business or We to of capabilities, see Ares. getting create our lot I

every we the that’s want acquisition. less growth So, markets have that growth versus we but about with the of getting trajectory do one think be there organic scale I the believe or just acquire the that here that’s fund business question there. acquisition couldn’t to important these going is discussion products business, particular the also same conversation happier enough of be it’s the that ongoing an scaled we’re through fundamental and but of to are acquire to is we we estate in going terms versus that capabilities in real of And state in performance any

Michael Cyprys

Thank Correct. you.

Operator

question Kenneth go with next from come will Lee Capital Our Please ahead. RBC Markets.

Kenneth Lee

Hi question. thanks my taking for

be Aspida on to the would could would reinsurance platform, you do through if sources? would anticipate be structured? likely available to that third-party one from Just financial, that acquisitions so, And insurance anticipate the come you be capital inorganic how transactions mainly

Michael Arougheti

will it announced, control like the $XXX already platform we’ve $XX initial and we somewhere will million from and platform we’d that million as acquisition coming publicly require the organize the organized. it as to so way be capital Management Yes, Ares and be of between

here but capital capitalize to and support will organic as with looking Management growth. to of we’ll for the meaningful the support the need to pretty business the its growth growth LPs help to the own its well Ares some be inorganic forward, well. support as Going strategic capital as significant, be continue also both will

Kenneth Lee

then areas further And portfolio either about mentioned which, half. in or X it. in as is you question, if of one the just just you you which can terms the realizations? there details second other prepared expected other realizations Wonder to X those Got remarks, could disclose any

Michael Arougheti

We really specific realizations. it’s Yes, about talk hard. don’t

not So, I names. going the specific you to unfortunately am give

actually about you past and We a McFerran available investment Mike performance significant when private where we look in exits now would reiterate but you at have available period. our their is I’d funds positioning that down, think are which announcements equity made XX% encourage are I and some to of portfolio, what folks, standpoint, I just some in that public to that track said, fee are harvesting which is from

So, flagship start of the over of should I as quarters. into next the see fundraising, we’re realizations phase couple accelerate this you moving next think to

Kenneth Lee

Thank it. Got you.

Operator

question will Blostein Please come go Our Sachs. with from next ahead. Goldman Alex

Daniel Jacoby

my for This Thanks is Daniel questions. filling in afternoon. good Jacoby Hi taking for Alex.

you. sector in while why is only bigger about just ramping next think little closer Just converge color, take XX% years there helpful. versus appreciate the XX of of a the structural the management there at something points. of new this products, up we to back the more significant can’t to margins to circling the the from bit and guess reasons are expansion fee I FRE closer picture, they’ve And would expanded that of margin few fees maybe and bridge a year-over-year. if business tracking guidance. I gap kind back a us the little there’s step Thank be margin, averages, modest are bit growth I the helping XX% basis management the over range just margins, that we if I about kind and about in recognize look investment guess

Michael Arougheti

Sure.

about just, been bps, XX think look talk I that. I have if the I expanding you we more than So, mean mean margins

If you to ago, of grown we years look couple XX%. had a margin a a XX% that had

quarter along kind This was quarter, year. so next I of per prepared just we path mid-XXs points last feels of XX like a the project of it round will are, our And talk, XX% the path XX over remarks voiced I think we if basis points I think out. I up a the, in from we margin if to hit continue from when this something kind around sequentially quarter. how was XX basis out this of you to where that XX, expansion we months,

of what’s think we such talked one we’ve it. we amount support such invest past front number of And significant meaningfully. large is vested yet capabilities that off is the the in grow in thing capital to and a in a in as So expenses right the capital happening have not assets, AUM we’ve I is raise, why fees and which about heavily to continues a pays invest, us lot is earning

raised in expansion management years, the you So continuing starting strategies deploying that’s the those in years and the to how look, And deployment front great put management north benefit the see last look with with new fees at having now had bear of couple that’s why of the labor function fruits of to the over taking the expense of businesses that think capital and capital strong falling pace where to the of when we you expenses of next our the I capital match on work, years, at we’ve and fees over much the as extended XX%. of on the capabilities, couple coming consistent all of visibility to is continuing we’re put for those to going a came of them. to is revenue up elevate the be margin to off couple

apples-to-apples basis to have and things far business. margins look go peers I think As at on the the you referenced, as you an more by

decent of other peers businesses. have amount Some capital advisory-type markets transactional-oriented of income their our a from or fees or businesses coming

time we to demonstrate, have, of fees. very there our more are a we us We as specifics, comfortable earnings. us that few have get right be one, a can would management the clarity earnings it’s price little alignment around think are growing driven why to is over but think our model years. fund But lot and get for continue of out the can we again, right believe putting we’re we interest which the next margins, good, line core and the we get how to really which in by of the with core investors, Our is stable private a we

Daniel Jacoby

what’s the And I Any of within That’s to on strategy. kind color. modeling share past, And count-neutral helpful guess higher you it. share creep? of then for other to that driving creep quarters one the question just pointed think we’ve the very just have cleanup seen several in that count, color I Got a as Okay. context now. guys

share thinking path the here? any and updated So, is count from of kind the there around strategy

Michael Arougheti

primarily. awards from count of share ticked employee divesting up The investing has sorry, of

happen associated them. see So doesn’t that’s of happen doesn’t the have That different as being you the what them the different year. dates on with It date. same course happening during all awards

disclosed X of quarter. see during we Our price our so XX-Q, repurchase expired IPO the our $XX.XX. XXX,XXX in than the average We sort of did more lockups as that. program, around was repurchases you’ll shares share actually ago, inaugural years no share repurchased The have at

white, we’ve uses of pursue count-neutrality performance It an our So, to of objective pursue that. to objective was how fees is we But awards the earnings we versus do begun we’re the from a as employee again and intended strategy. share a black it. one going from strategy definitely that to it’s retained

Daniel Jacoby

Alright. Thank for the you color. all

Operator

questions time, we this closing At in showing to more for would are question no queue. any Mike I to Arougheti like remarks. back it turn

Michael Arougheti

appreciate much support the the you. forward questions for We everybody, all time Thank summer. the great speaking enjoy quarter next and look and to so thanks, Well, continued rest Great. today. and of with us to spending the everybody

Operator

Ladies this call our today. conference and for gentlemen, concludes

X XXX-XXXX. today’s XXXX, throughout If (XXX) missed archived be of call, international will to conference (XXX) by callers dialing dialing XX, August this and XXX-XXXX replay part available you any of an by call

Thank conference of website. An available Investor a also homepage on link be our archived all reference For replay please replays, #XXXXXXXX. you. the Resources of webcast the section will on located

Ares Management (ARES) 1 Aug 192019 Q2 Earnings call transcript