Ares Charges Ahead With Plans to Reach $500bn in AUM

Sep 6, 2021 | News, UKPEC

Ares Management has revealed plans of more than doubling their $262bn in assets by 2025. That moonshot guidance was based on robust 2021 fiscal second quarter financial results reported in late July, which the company said was a snippet of what could come.

On investor day, Ares didn’t drum up much excitement or generate headline news with its goal of reaching $500bn in assets under management.

Instead, those who attended the video-streamed assemblage of analysts, investors and shareholders listened to the business projections in uncomfortable silence. The stage was taken by newly appointed CFO Jarrod Phillips, without mention of McFerran’s departure. Phillips is an Ares partner who served as chief accounting officer before his new role became effective Aug. 4.

The firing might have put a damper on investor day, but it hasn’t stopped the Wall Street kudos for Ares’ ambitious plans. Ares stock, which seems to have brushed off the McFerran termination, jumped 6.6% to $77.66 on Sept. 1 from $72.83 on the day the former CFO was fired.

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“We think it was very timely that Ares Management held its investor day to outline its current growth opportunities for the next several years, given the recent additions, over the past year or so, of new ‘growth engines,’” Kenneth Lee, a New York-based analyst with Toronto-headquartered RBC Capital Markets, wrote in an Aug. 12 research note.

Aggressive strategy

Though not unprecedented, Ares’ huge surge in growth by more than $100bn from June 2020 through June 30 is unusual for an alternative asset manager, according to analysts.

As for the catalyst behind Ares’ rapid pace of growth, the analysts point to the 2019 sale of crosstown rival Oaktree Capital Group to Toronto-based alternative asset management company Brookfield Asset Management Inc., which took a 62% majority position in the downtown-based firm for $4.7bn.

At the time of the sale, Ares had roughly $131bn in assets under management. By mid-2020, it had tacked on nearly $30bn in additional assets under management, after which time its growth began to accelerate.

Ares grew 65% to $262bn as of June 30, from $158.4bn a year earlier while profit rose 151% to $141.6m from $56.4m in the same period. Revenue jumped 116% to $1.3bn from $602.8m over the same period.

In SEC filings, Ares has mapped out how it plans to get to $500bn in assets under management by 2025, mostly through new lines of business, organic growth and some blockbuster acquisitions.

Lee cited growth areas such as Ares’ purchase last year of a majority stake in Hong Kong-based alternative asset management firm SSG Capital Holdings Ltd. — a move that gave it a huge direct lending footprint in the Asia-Pacific region — and the buy of Landmark Partners from BrightSphere Investment Group Inc. for $1.1bn in March. Landmark is one of the largest investors in secondary private equity funds with an ownership stake in the alternative asset management industry.

He also cited Ares’ acquisition of Black Creek Group’s U.S. real estate investment advisory and distribution business, and Ares’ ongoing effort to build out its Aspida insurance platform.

“What is clear to us is that management intends to utilize the same playbook as it did historically with its credit, private equity and real estate businesses in order to capture the growth opportunities of the new additions,” Lee noted.

Source: LA Business Journal

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