Ares CEO Michael Arougheti on M&A, Competition, Real Estate

Yeah, well, the year is not over, so hopefully we'll have a good, good push to the end of the year. This will be a record fundraising year. But what's nice about the way that our business has evolved and developed, ten, fifteen years ago, we and others like us were very dependent on the traditional institutional market for fundraising. If you look at 2024, about 30% of our capital raising is actually coming from that traditional institutional part of the market. The other two thirds is coming from places like wealth and retail, our publicly traded permanent capital vehicles, our insurance business, our CLO franchise. So there's been a broadening out and deepening of our product set and our fundraising capability, which means that when we're going into a new year, we're doing it from a much higher base. So we're equally as optimistic for what next year holds as well.

Yeah, it's actually, as we grow, we keep investing in our deployment, which is the big driver of our business. If you look at the last couple of years, as our dry powder has grown, so has our deployment almost one for one. So we need to keep investing in new products, new markets, people, etc., which we're doing organically and inorganically. So my expectation is deployment will pick up in 2025. M&A market feels like it's picking back up. Transaction volumes are accelerating. So we had a really good year, but I think 2025 is setting up to be another big year.

I think that is the big question in my mind for '25 is the trajectory for rates and the impact of tariffs. We have believed and now continue to believe that rates will stay higher for longer. That's actually really good for our private credit businesses just because we capture all of that excess return. It's not so good for the M&A market. And so I think 2025 will have to strike that balance. That said, there's a lot of pent-up demand to transact, right? You have people that have largely been sitting on the sidelines for 24 months, plus the capital that they manage has, you know, the time stamp on it. It needs to get invested. It needs to get returned to their investors. So I think it's more important that we have rate stability at this point as opposed to needing to see rates come down dramatically in order to see the transaction volumes.

I don't know if there's a risk that they go higher. I think that there is a real possibility that they stay high. A lot needs to go right or wrong, depending on which side of the market you're in, to see them actually move back up. But I think that there's a real strong case to be made that they will stay higher for longer and probably higher than the forward curve is predicting. But again, we've lived in a three and a half and 4% base rate environment before. And so it's not as though the markets can't function well there. The key is how do we transition? And we're already beginning to see, you know, the markets transitioning to the new cost of capital. And that's really all you need to see volumes pick up.