(Bloomberg) -- Ares Management Corp. grew its assets under management to $464 billion in the third quarter, up 17% from a year prior, driven by interest in its US direct lending funds and recent private equity acquisitions.
The alternative asset manager brought in $1.1 billion in total revenue in the third quarter, up 68% from the same period in 2023, according to a Friday filing reporting quarterly earnings. Ares raised $20.9 billion in gross new capital, in line with Bloomberg Intelligence estimates of $21 billion, and part of the asset growth was attributed to Ares’ acquisition of Asia-focused private equity firm Crescent Point Capital last year.
With over $64 billion of funds gathered through September, Ares expects to close out fundraising this year with a record level of commitments, expected to be in the mid-$80 billion range, Ares Chief Executive Officer Michael Arougheti said in a statement. Ares pooled $74 billion in funds in 2023.
Shares of the firm fell 2.96% from market close yesterday to about $162.74 per share, as of 7:15 am New York time.
The firm has taken advantage of swelling interest in private credit, with almost 40% of its gathered funds in the third quarter dedicated to direct lending in the US and Europe. In July, Ares said it closed its largest ever direct lending fund, with $15 billion in committed equity.
On earnings call Friday, analysts questioned whether Ares was concerned about competition from the broadly syndicated loan market, as leveraged loan sales have already hit a record $986 billion so far this year.
While the firm is “paying attention to the competitive dynamic,” Arougheti said Ares’ private debt strategy is more than “just a sponsor lending business,” but also provides real estate, infrastructure and other alternative credit. A “general de-banking trend,” Arougheti said on the call, “is outpacing whatever competition we’re seeing from the traded sub-investment grade markets.”
Arougheti also said manager selection was key as private credit competition increases.
“When you look at the public BDC market, you are already beginning to see meaningful dispersion in performance across the manager landscape,” Arougheti said on the Friday call. “And I think that’s an important thing to keep an eye on as we get into this broader conversation about quality and size.”
For the third quarter, Ares reported after-tax realized income of $316 million, or 95 cents per share. Of its total assets, about $74.1 billion is waiting to be deployed and not yet paying fees, including $33.2 billion dedicated to US direct lending funds.
In terms of returns for the third quarter, its opportunistic credit and Asia-Pacific credit strategies came out on top with 4.7% and 4.9% net, respectively. Ares posted lackluster returns for its real assets business, with US real estate equity returning a net 1.3% for the three-month period.
In response to an analyst question about negative returns in Ares’ credit secondaries business over the last 12 months, Arougheti said returns data “does lag” and is forward looking. Often, “if you’re buying discounted portfolios, you pull return forward and then give return back over the life of the fund,” he said.
Ares’ income from management and other fees in its credit business jumped 19% compared to the third quarter of last year, growing to $567 million. Fees tied to its real assets group, which houses its real estate and infrastructure business, jumped 14%.
Tied to real estate, Ares agreed to acquire GLP Capital Partners Ltd.’s operations outside of China last month, which will double Ares Real Estate’s assets under management to about $96 billion across North America, Europe, Asia and Latin America. Alternative asset managers have been racing to grow through acquisitions and become one-stop investing shops to gain scale and boost management fees.
(Updates to include comments from Ares’ earnings call on Friday throughout and stock price information in fourth paragraph.)
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