Ares Management CEO Mike Arougheti discusses his record breaking fundraising year and investment opportunities with Bloomberg's Sonali Basak at the Goldman Sachs Financial Services Conference.
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Questions asked in this interview
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0:06So how do you even begin to set up for 2025 when it was a record-breaking fundraising year for you in many ways?
1:22You know, even with the record-breaking fund that you just had, did you find a way to put a lot of that to work yet?
3:13Or do you think that there's actually a risk that rates go higher next year?
4:02Do you think that it changes the competitive landscape in a significant way?
5:12Does that mean that the direct lending businesses as we know it is kind of at its peak and you need to look elsewhere to consolidate in order for the real growth in private markets?
6:32How do you feel about the opportunities there?
I'm Shanali Basak. I'm sitting here at the Goldman Sachs Financial Services conference. Welcome to our Bloomberg television and radio audiences. I'm standing by now with Michael Arougheti, the CEO of Ares Management, and you broke records, record after record, really nothing but records. So how do you even begin to set up for 2025 when it was a record-breaking fundraising year for you in many ways?
Yeah, well, the year's not over, so hopefully we'll have a 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, 10, 15 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.
Fascinating. What does it look on the other side? If you're raising all that money, you need to put it somewhere. Are you finding enough investment opportunities? You know, even with the record-breaking fund that you just had, did you find a way to put a lot of that to work yet?
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 good one.
What role is M&A going to play there? There's an expectation of this big return, but of course you have a lot of concerns from private equity sponsors still out there. There's also a lot of uncertainty around interest rates, particularly if those Trump tariffs come to play.
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 a timestamp 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 values.
But do investors have it totally wrong? You look at the expectations for rate cuts, you get to as low as 3.5%, and do we get there? Or do you think that there's actually a risk that rates go higher next year?
I don't know if there's a risk that they go higher. I think that there's 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 that they will stay higher for longer and probably higher than the forward curve is predicting. But again, we've lived in a 3.5% 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 the markets transitioning to the new cost of capital, and that's really all you need to see volumes pick up.
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Arougheti, M. (2024, December 11). Ares Management CEO Mike Arougheti Talks Record Breaking Fundraising Year | Bloomberg Talks [Interview transcript]. Bloomberg Podcasts. CEOInterviews.AI. https://ceointerviews.ai/interview/902893/
MLA
Michael Arougheti. "Ares Management CEO Mike Arougheti Talks Record Breaking Fundraising Year | Bloomberg Talks." Bloomberg Podcasts, 11 Dec. 2024. Transcript, CEOInterviews.AI, https://ceointerviews.ai/interview/902893/.
BibTeX
@misc{arougheti2024_902893,
author = {Michael Arougheti},
title = {Ares Management CEO Mike Arougheti Talks Record Breaking Fundraising Year | Bloomberg Talks},
howpublished = {Interview transcript, Bloomberg Podcasts. CEOInterviews.AI},
year = {2024},
month = {dec},
url = {https://ceointerviews.ai/interview/902893/},
note = {Speaker-attributed transcript with timestamps}
}
