Ares Management Corporation Q2 FY26 Earnings Analysis

- The firm expects compound annual growth of 16% to 20% in Fee Related Earnings (FRE) for 2026 and beyond. - Realized income is projected to grow 20% to 25% annually. - Dividends are expected to increase by approximately 20% annually. - FRE margin expansion is anticipated, targeting the upper end of a 0 to 150 basis points increase in 2026. - Fundraising is on track for a record year, supporting future growth. - Deployment activity is expected to scale strongly, driven by a broad investment platform and abundant dry powder (~$150 billion). - Institutional capital raising remains robust globally with no major geographic shifts. - Market conditions, including wider spreads and higher fees due to geopolitical and credit dynamics, are seen as favorable for growth. - Long-term, the firm's business model emphasizes diversified income from multiple strategies supporting sustainable growth.

- Ares expects compound annual growth of 16% to 20% in fee-related earnings (FRE) for 2026. - Realized income is projected to grow 20%, and dividends by 20%. - FRE margin expansion is anticipated within the upper end of the 0 to 150 basis points annual target for 2026. - Fee-related earnings increased 26% year-over-year in Q1 2026, and FRE margin expanded by 90 basis points to 42.4%. - Realized income for Q1 grew 24% year-over-year. - No indication of changing guidance; confident in meeting financial objectives for the year. - Long-term shareholder value driven by strong fund performance, diversified strategies, and deployment opportunities. - Dividend increased by over 20% compared to the same quarter last year. - Operating leverage and scale efficiencies expected to support margin expansion.

- Investment in AI integration across company systems to enhance efficiency without replacing core platforms like Excel (Page 13). - Launching a global data center equity fund targeting the digital infrastructure sector, addressing multi-decade supply-demand imbalances driven by hyperscalers' cloud and AI computing needs over the next 5 years (Pages 2 and 5). - Significant investment in Data Infrastructure, a vertically integrated operating platform with hyperscaler relationships and multiple pipeline seed projects in top-tier markets (Page 2). - Strategic capital allocated to emerging investment products, including new direct lending funds offering both commingled and evergreen opportunities, enhancing fundraising capabilities and investor offerings (Page 2). - Continued deployment in real estate, credit, infrastructure, and private equity sectors, with capital raised exceeding previous fund sizes, indicating ongoing capital commitments (Pages 3 and 8).

- Raised over $20 billion of capital in credit strategies in Q1, including $5 billion in wealth products. - Launched third vintage of the alternative credit fund with a $6.5 billion target; oversubscribed and expected to close at hard cap in Q2. - Accelerating launch of fourth Senior Direct Lending fund due to improving market conditions; first close expected late Q3 or early Q4 2026. - Structural enhancements planned in U.S. senior direct lending funds: fully levered fourth fund and new unlevered Evergreen core product. - Raised approximately $15.3 billion in SDL III fund equity commitments, exceeding $10 billion cover. - Raising global data center equity fund in digital infrastructure to capitalize on supply-demand imbalance driven by cloud and AI growth, with significant first close expected this summer. - Continued strong demand from institutional investors across credit, real assets, and secondaries driving fundraising momentum.

- The aggregate pipeline across the firm is at a record level, with the direct lending pipeline increasing in momentum. - Deployment activity increased modestly in Q1 2026 compared to Q1 2025, driven by real estate, alternative credit, European direct lending, and private equity. - There was a slowdown in U.S. direct lending deployment in Q1 due to market uncertainty (e.g., Iran War), but momentum and pipeline reengagement have been observed in recent weeks. - Longer-term catalysts such as aging private equity investments needing resolution continue to support deal flow. - Institutional investors remain constructive, bringing liquidity to take advantage of dislocations and excess returns. - The pipeline and deal flow are broad-based across sectors and geographies, benefiting from global diversification. - Strong demand and capital raises in infrastructure, real estate, secondaries, and European direct lending funds. - Optimism that deployment will accelerate in the back half of the year, similar to recent historical patterns after brief market pauses.