Oct 29, 2026 earnings call — Fundraising and deployment momentum across strategies
Ares actively invested $35 billion in the quarter, while fee-paying AUM reached $416 billion.
Revenue $1.4B (est $1.2B) · EPS $1.26 (est $1.25)
Key quotes
"During the third quarter, we once again raised over $31 billion of gross capital."
"we invested $35 billion across the firm during the quarter with strength in European direct lending, alternative credit, real estate and infrastructure."
"Fee-related earnings were $524 million and FRE margin was 42.5% for the quarter compared to 41.4% in the prior year period."
Analyst Q&A 13
Interest rates and US direct lending
Q (Alexander Blostein · Goldman Sachs): How does the higher interest rate backdrop affect deployment in U.S. direct lending and the projection for 2027?
A: Management said high rates alone do not imply slower deployment. They pointed to the large installed base of private equity-owned companies and dry powder as the main driver, and said deployment is shifting across other products when primary M&A slows. They are cautiously optimistic U.S. direct lending deployment will start to convert in Q4 and into the new year.
"As we've talked about on prior calls, there are broader factors at play, just namely the aging of the installed base of private equity-owned businesses." — Michael Arougheti (CEO)
Digital infrastructure exposure choices
Q (Steven Chubak · Wolfe): Which digital infra exposures are you comfortable underwriting, and where are you finding the best risk-return opportunities?
A: Management said they have full debt and equity capabilities for the CapEx cycle and focus on the $2 trillion need for physical data centers rather than GPUs. They prefer large metropolitan core compute data centers pre-leased to investment-grade hyperscalers and find attractive risk-return in that $2 trillion bucket.
"And so without casting aspersions on GPU financing, I would maybe say that we are finding plenty of really attractive risk-return opportunities in debt and equity in that first $2 trillion bucket." — Michael Arougheti (CEO)
Growth drivers into 2027
Q (Craig Siegenthaler · BofA): How should AUM, fee revenue and management fees trend into 2027, and is U.S. direct lending the main upside/downside?
A: Management said they are within guided ranges and not seeing a decelerating trend. They noted AUM not yet earning fees represents about $100 million of potential management fee revenue year-on-year, and highlighted digital infrastructure as another potential upside through fund pull-through and catch-up fees in 2027.
"The accumulation of the AUM that we have now that is not yet earning fees is up about $100 million of potential management fee revenue year-on-year." — Michael Arougheti (CEO)
Core infrastructure fund momentum
Q (Benjamin Budish · Barclays): What's driving success in the core infrastructure fund and how should we think about near- and medium-term progress?
A: Management said the fund raised $2.7 billion equity in the quarter and AUM is about $8.5 billion, helping broaden capital sources and allowable investments toward core infrastructure. They noted the fund's tax-advantaged structure lets them deliver attractive equity-like returns on core assets and they're adding origination and portfolio management resources to support growth.
"From the infrastructure perspective, what it also has done is just broaden out our cost of capital and broaden out the nature of things that we can invest in to include more core infrastructure type projects and assets and we've typically been able to do before." — Michael Arougheti (CEO)
Margins and M&A strategy
Q (William Katz · TD Cowen): Can you clarify margin guidance, and update on M&A interest, including reports of interest in private equity?
A: On margins, management said based on current additive fund growth they expected to be closer to the midpoint of margin guidance of the 0 to 150 basis points, which gives tailwind toward the upper end next year and catch-up fees. On M&A, they said the bar is high, they continuously look, and will be opportunistic and strategic but only at the right price and people.
"On margins, what I said in the prepared remarks is just that based on where we're at with the additive fund raise in terms of the year, we thought we'd be closer to the midpoint of our margin guidance of the 0 to 150 basis points." — Jarrod Phillips (CFO)
Wealth redemptions and BDC tender activity
Q (Patrick Davitt · Autonomous): Do you have tangible signs underlying the ASIF gross flow improvement and distributor appetite, given BDC redemption concerns?
A: Management said the BDC redemption story has had too much airtime compared with actual investor appetite and pointed to strong SDL fundraise speed as evidence institutional investors remain engaged. They gave data: 80% of capital returned to those who tendered in Q1, net new redemptions down 60% quarter-over-quarter, and net new tender requests down translating from 8% to 3.4%.
"If you look at where we sit today, 80% of the capital has been returned to investors who submitted a tender in Q1." — Michael Arougheti (CEO)
Data center market reaction
Q (Crispin Love · Piper Sandler): Is the recent fixed-income volatility in data center financing an overreaction, and what's your near- and long-term outlook?
A: Management said markets are doing price discovery as investors learn structural differences across financings and are being more discerning about counterparty risk. They see crowding out of capital given strong AI CapEx demand and wider sovereign yields, so pricing will settle as relative value is found and that process will likely continue.
"I don't know if the market's overreacting, I think you have a little bit of just price discovery as people are trying to understand the structural differences in each of these deals and there are structural nuances that exist in each one of these financings that people are just having to get level set on." — Michael Arougheti (CEO)
Ongoing diversification plans
Q (Bart Dziarski · RBC): Will organic diversification continue and are you pursuing inorganic moves to diversify across asset classes further?
A: Management said many businesses are growing on their own trend lines so the product mix should remain similar for the foreseeable future, with credit remaining large given market share and TAM. For inorganic activity, they expect focus on noncredit areas like infrastructure asset classes, private equity and insurance through acquisition or partnerships to help those businesses catch up.
"In terms of inorganic, I would expect that inorganic activities would focus on the noncredit parts of the business, just given the market share and capability dynamics there." — Michael Arougheti (CEO)
Realized performance fees outlook for 2027
Q (Michael Brown · UBS): With 4Q realizations a bit below expectations, what range of outcomes do you see for realized performance income in 2027 given your visibility?
A: Management said the key point is the extraordinary growth in assets that generate those payments and that vintages from 2017 to 2020 are entering a harvest period. They said it's hard to project exact timing within a year, will give multiyear guidance at year-end, and if realizations shift between December and January it affects calendar recognition but they feel good about the earnings power.
"We'll do that again at the end of the year in the fourth quarter and give an idea of what we figure the number would be for '27 and '28." — Jarrod Phillips (CFO)
Portfolio purchases as a deployment channel
Q (Devin Ryan · Citizens Bank): You purchased a $1.1 billion direct lending portfolio; will more such portfolio sales appear and how meaningful a deployment channel are they?
A: Management said they expect more portfolio sales as PE-owned deals age and investors reposition their books, noting the portfolio purchased and MFIC are largely performing and not distressed. They said Ares is uniquely positioned to buy large diversified books because of underwriting and portfolio management scale, and this channel could add upside to U.S. direct lending deployment while core pipelines sit at record levels and are beginning to convert in Q4.
"I would think given, again, some of the commentary I made just around the aging of the installed base of PE deals and therefore, PE credit as well and the rate backdrop that we'll see more of this." — Michael Arougheti (CEO)
AI CapEx financing risks and protections
Q (Michael Cyprys · Morgan Stanley): How sensitive is AI CapEx financing to higher financing costs and what risks are not covered by protections in contracts?
A: Management said AI CapEx demand is unlikely to stop due to rates because equity financing is an alternative and debt can still be accretive versus equity; they distinguish their strategy as targeting pre-leased, high-quality sites and using bank markets for $3 billion to $5 billion projects. They emphasized protections from site choice, counterparties, lease terms, and that bank capital remains available for those project sizes.
"And from a financing perspective, given the fact that these are $3 billion to $5 billion projects, not $40 billion projects, we've always gone to the bank markets." — Blair Jacobson
Impact of rates on spreads and timing of deployment
Q (Brennan Hawken · BMO): Have higher rates affected market spreads, and will the Q4 pickup in deployment carry into 1Q and H1 2027?
A: Management said the seasonal pattern is normal with Q4 typically strongest and that core credit assets are mostly floating rate so higher base rates increase investor IRR and firm profits; they noted credit portfolios have handled higher rates before. On spreads, they said spreads are flat now, having gapped out 50 to 75 basis points earlier in the year, and spreads usually follow credit performance rather than base rate moves.
"As we talked about with some of the competitive dynamics and capital leaving the market, we saw spreads gap out 50 to 75 basis points earlier in the year." — Michael Arougheti (CEO)
Drivers of guided realized performance income
Q (Wilma Jackson Burdis · Raymond James): Does the $160 million to $185 million guide for 4Q '26 reflect a pickup in transactions or existing portfolio visibility?
A: Management said much of that guidance is already baked in from tax payments received late in the year tied to vintage funds, and repayments from 2017 to 2020 vintages are beginning to come. They emphasized because these are credit funds, timing of tax-related payments and monetizations is more predictable than relying on a surge in transaction activity.
"A lot of that, Wilma, is already baked in, in terms of tax payments that we received towards the end of the year for some of our vintage funds." — Jarrod Phillips (CFO)