CEO Michael Arougheti on Strategic Opportunities, Leadership Appointments and Q4 2024 Earnings

Great to see you too, Sarah. How are you?

Look, Ares has been enjoying some significant growth and globalization, and I just feel so fortunate to have a long-standing partnership group here that's been by my side for 25 years. Obviously, I still have a lot of gas in the tank and a lot to do, but the opportunity to elevate Kipp DeVeer and Blair Jacobson to co-presidents, I think it's just a huge opportunity for us to accelerate into a lot of the strategic opportunity that lies ahead of us.

Yeah, look, we want to be policy aware, but one of the benefits of being in the private markets for as long as we have is we know that we can deploy into really attractive opportunities regardless of the administration, regardless of the economic backdrop, and regardless of the rate picture. The good news is we're coming off of a record year in 2024. Obviously, we were able to deploy over a hundred billion dollars, which was almost a 60% increase from the prior year in a world where M&A volumes were significantly muted. So I think the breadth of the platform now is allowing us to be a real interesting creative liquidity solutions provider into the global markets that we participate in. The pipelines that we're seeing in the markets are building, so I do think that with the change in administration there is an enthusiasm in the markets. A lot of the pent-up demand that we expected to see come off the sidelines is in fact coming off the sidelines. So I would expect 2025 to be another meaningful deployment year for us as well.

Yeah, it's really all over the map right now. I mean, I think the good news is if you were to look at our deployment in 2023, it was dominated by private credit just because the equity markets were still thawing. I think valuations were uncertain, the rate backdrop wasn't clear, bid-ask spreads between buyers and sellers were still pretty wide. As we got towards the back half of 2024, we saw the secondary market pick up dramatically, so we're seeing good deployment there. The real estate markets are thawing, and so we're now beginning to see good deployment in both real estate equity and real estate credit. So I think 2025 deployment will frankly be a little bit more balanced across the various products and less private credit heavy.

Yeah, I think history would tell us that as the cost and efficiency of technology and compute improves, we'll actually see a pickup in demand. I always remind people that if you look at data center demand today, it is dominated just by cloud computing, and obviously the transition to AI is a meaningful growth driver, but it's not the only growth driver. We continue to be focused on long-term relationships with the highest quality hyperscale counterparties in major metropolitan areas. Most of the data center pipeline that we're working on now is entitled, powered, leased, and on its way to financing. So the size of the opportunity is so significant that even if we saw a reduction in demand or a slowing of the pipeline, it's still a significant, significant investment opportunity for the private markets.