Good afternoon, my name is Patrick Davitt. I'm the U.S. Asset Manager Analyst at Autonomous. It's my pleasure to welcome Ares CEO, Mike Arougheti. Congratulations on 10 years of being public. Thank you. Yeah. Thank you. Thanks for coming. As a quick reminder, if you want to submit any questions, you can do it on Pigeonhole, and I'll try to work them in as they come up, on my iPad here. So Mike, maybe to start, given we have most of the public alts here at this conference, I'm starting all these discussions with some higher level questions, so we compare and contrast easier. Given your position as one of the largest credit managers in the world, private credit managers in the world, I think it's best to start with macro. I'm sensing some increasing concern that a sticky inflation, higher for longer, slowing economic growth environment, could be particularly bad for levered risk assets. Do you agree with that view? Through that lens, what is your outlook for inflation rates and the economy, with the summation of, do you believe we've achieved a soft landing? Sure. That was like a six- The big- Six-part question. The big question. Good to see everybody. So maybe let's... we'll go backwards first. Yeah. I would say, we have a portfolio of 3,200 middle market investments, so we do think that we have a pretty good lens into the state of the economy, health of consumer in the US and Europe, and to a lesser extent, but growing in Asia. And I would say, and we've been consistent on this for the last two plus years, everything that we're seeing in our portfolio would indicate that the economy is still quite robust. Mm. Albeit growth is slowing, we're still growing. Consumer is largely healthy. We could poke around on that if you want a little bit later. And the Fed is accomplishing its policy objectives for the most part, when you look at where CPI is and how the, you know, the system has held up. So we're feeling pretty good about what we're seeing. Just by way of example, if you look at our private credit portfolio in the U.S. last quarter, we said that we grew EBITDA 10% year-over-year. In our European portfolios, we grew at about 13%. Our U.S. buyout portfolios, we're seeing year-over-year growth in the high teens, low twenties. Our real estate portfolios are similarly showing strong fundamental performance, so there's nothing to indicate that, you know, weaker growth is imminent. In terms of higher for longer, our base case is absolutely higher for longer. I think that's a function of stickier inflation, tight labor market, and just fiscal policy. And what it means for risk assets kind of depends, and I think we have to be clear that when we're talking about credit, most of the private credit investments that we have are supported by some form of institutional equity. And so while we've seen debt service ratios come down generally into the, you know, high 1s, 1.7 range, they're sitting at very low loans to value- Mm ... across the corporate book. So most of our private credit instruments are below 50% loan-to-value, which means that you have significant equity subordination. And that doesn't get talked about enough because when you're saying, "Where is the pain going to get felt in levered risk assets?" It's really, it's an equity issue, not a debt issue. The debt side is obviously the big beneficiary of higher rates, and one of the benefits of private credit is when rates are higher for longer and there's a need for any kind of a loan modification, you have a bilateral negotiation with the equity and, you know, you effectively get paid more- Mm ... to preserve optionality for the equity. Default rates are still really low relative to historical averages. We've seen them stabilize, if not go down. So yeah, we're, we're feeling well positioned. You mentioned real estate, and I sense some investors are starting to worry more about things beyond office, which you and others obviously have a more exposure to things like multifamily, industrial. Yeah. So, can you speak to what you're seeing in those pockets, which are obviously much larger exposures for most of the alternative managers, and are you experiencing any slowness there? It's similar to what I just described, largely in corporates. Fortunately, we're underexposed to office. Yeah. About 1% of our equity portfolio is in office. The remainder is in our high conviction sectors of industrial and multifamily, and then what we call specialty sectors, student housing, self-storage- Mm ... single family, for rent. Yeah. So underexposed to office by design. And if you do put office to the side, we are seeing very significant strength in the industrial and multifamily book. Just to give some perspective there, occupancy rates in our industrial portfolio is in the probably 97% range. In our multi-portfolio, it's somewhere between 95%-97%, depending on the portfolio that you look at. We're rolling over new industrial leases, about 45% up from- Mm ... prior. Our commercial exposures, we're rolling over leases up about 25%, and in residential, call it low single digits, 3% or 4%. Okay. I would say on multis, still growing, but slower growth. But in terms of the industrial experience, we're still seeing some pretty significant tailwinds. Great. So moving to credit, I'd be remiss in not pointing to Jamie Dimon's comments this morning. They're getting a lot of press. I think he mentioned that he sees some bad lenders in private credit, and there could be, quote, unquote, "hell to pay," if the broader private credit world sours. He also had some complimentary things to say, that the press is obviously ignoring. About who? No- Were we mentioned? Didn't mention- Did he mention me? No, not you. Although I'm sure he was talking about you. Right. To that point, I'm sure he thinks you're one of the good and smart players. Right. Right, uh-huh. But seems to think there's irresponsible behavior happening elsewhere. So are you, are you seeing that? And if he's right, is there a risk that these bad apples kinda spoil the party for everyone else? I, I don't think so. And look, I, I respect Jamie. He's one of the greatest financial service executives that, that's ever been in the business, continues to demonstrate that day-to-day. I don't know where the narrative of private credit - the banks has really kind of- Yeah ...emanated from, because the reality is, and I don't know if he said this, we're one of their largest clients and have been, and we continue- Mm-hmm ... to grow with them. And if you really think about what has happened over the last 20 or 30 years, because of the structure of bank balance sheets and because of the regulatory capital framework, appropriately, certain types of risk assets- Yeah ... have left that system to find more natural holders of risk, and that's just the nature of capital markets generally. We've been in the private credit market for 30 years. We've probably put out $200 billion and 2,000 investments. Our loss rates have been, I think, 11 basis points. We do it with a higher margin and a better efficiency ratio than any other- Mm ... structure in the market. So this idea that the asset class hasn't been cycle tested is just wrong. Yeah. The idea that there's risk in the private credit market that doesn't exist elsewhere, I also think is wrong. Mm-hmm. Because what it comes down to for me is a loan to a private company is a loan to a private company, a loan to a consumer is a loan to a consumer, and the argument needs to be made, like, where is it best held? And when you wanna talk about systemic risk or structural risk, at the end of the day, if you're managing a 10-15 times levered balance sheet as a bank or an insurance company, credit underperformance- Mm ... has a much more material impact than if you're doing it in an unlevered, long-duration, institutionally held private fund. That's not to say one is better than the other- Right ... they're just fundamentally different. So, based on everything I see and some of the comments I made earlier, just about where these loans are positioned, who they're made to, how much equity is in the system supporting these loans, I do not think that there is undue risk. Mm ... in that part of the market relative to other parts of the market. With regard to bad actors or bad apples, look, the reality is, we had some poorly managed banks that have been quite visible in their mismanagement over the last couple of years. That doesn't mean that, you know, every bank is bad, the same way that- Mm ... you will see dispersion in results in the private credit market, like we've seen in every prior cycle. But I don't think that those bad... I wouldn't even call them bad actors, just- Mm-hmm ... bad investors are not going to spoil the bunch. Yeah. The reason they're not gonna spoil the bunch, the private credit markets are still very concentrated in terms of how the capital is getting raised- Mm ... and deployed, because scale drives performance in private markets investing. So if you look at the top 25 private credit managers over the last five years, 60% of the capital is raised by them. So if you say then 40% of the capital has been raised by the other 975 managers- Mm ... that raised their hand and say they're in private credit, you may have some bad performance there- Yeah ... either because of a lack of experience or the quality of the companies. But when you look at it indexed to the whole private market, I just don't, I don't see it. Makes sense. You keep coming back to the equity subordination, and I think it's a totally fair point, and all of your competitors say the same thing. So as we think about, you know, risk, slowing economy, sticky rates, are you saying basically that maybe private equity might have more of an issue? This is the one- Or the IRRs are gonna be a lot lower there? Yeah. Yeah. Not to pontificate about private versus public markets- Yeah ... but it's very hard if you're a public market practitioner, to kind of understand the way the private markets- Yeah ... function, right? And so even when you make comments, and I know that came out in some of the earlier panels about mark-to-market versus non-mark-to-market, and the mark-to-market is a function of technicals, right? Mm-hmm. If you have an asset that is liquid and you have one person that wants to sell at a price- Mm ... the price goes down, even if that's not reflective of the intrinsic value of the asset. In the private markets, you have willing buyers and willing sellers, but most people are coming into these capital structures with a long-term view around intrinsic value and value creation. And so you know, it promotes stability at the end of the day, and the equity is not forced to sell. Mm. So what's happening in private equity now is, even though the valuations are lower, in theory, there's no forcing mechanism for anybody- Right ... to take a loss. So what winds up happening is, if someone bought a company for 15 times cash flow that's now worth 12, and their cost of capital just doubled- Mm ... they go to their loan provider and say: How do we actually get this company back to a place where we can reinvest in growth? Because collective value creation is for the benefit of everybody. Mm. That conversation looks something like, "Rather than pay you 10%, we'll pay you 14%, but we wanna pay you 7% cash, not 10% cash. Or maybe- Mm ... we're gonna go raise a preferred, and we're gonna pay down your debt, and we're gonna reduce the cost of capital on the debt, and we're gonna free up growth." So they are going to... This vintage, they will theoretically make lower IRRs. Mm ... than were underwritten, but they will get higher MOICs, 'cause they're just gonna hold these companies- Right ... longer. And I think people need to get their heads around that, because they're staring at these big installed bases of, of capital- Mm ... and everyone's wondering, like, "Why isn't everybody's hair on fire? Yeah. Because they're theoretically less. And the reason is, there's really not a forcing mechanism. Right, right. Back to why I'm so confident in private credit performance, we're more than happy- Mm ... to support our private equity clients by giving them runway to maximize return, right? That's a win. That's a win-win. The liquid markets don't give you that luxury- Yeah ... because if you have an underperforming company, your bonds trade to 70, 60, 50, 40, someone comes into your ca-... I think you'll see lower returns, but not, not, you know, realized loss. On that point, a lot of public BDCs actually make the point that, you know, some incremental stress, credit stress, and the workout process is actually positive for earnings. Could you walk us through kind of the drivers of that? Kind of what I just said. I mean, the way that I think about it, and this goes back to, you know, what works in a bank balance sheet versus what doesn't. Any enterprise, asset, or company has an unlevered cash flow yield, and people are just gonna decide where they want to attach to it. Bank regulatory framework forces you to stop investing in a certain risk level. The private markets allow you to capture, you know, more of that free cash flow yield, and the private markets have gotten very good at knowing where the, you know, risk-return cutoffs are gonna be. And so when you get into a period of distress, what winds up happening is you go to the table with the equity owner- Mm-hmm. They give you equity upside, right? In that enterprise at the top of the capital structure. Right. So again, if you look at the loss rate that I quoted earlier, the reason that that happens is, even in periods of volatility or distress, everyone's aligned to par, and you have an opportunity to actually get a transfer of value from the equity to the debt. Mm-hmm ... in the form of warrants or incremental coupon or fees or whatever it is- Hmm ... to give somebody runway to ultimately realize value. And so our experience has been, not in every case, but if you have patient capital and you can actually... You have the capability to work out- Yep ... these loans, you can actually accrete beyond par. Right. One more, and then we can move to Ares specifically. I'm hearing increasing concern as the broadly syndicated market has reopened, that there could be, like, a quality drift in direct lending portfolios as higher quality companies refi into BSL, maybe lower quality companies can only get financing from private. So does that mean that the weighted average portfolios are trending riskier, that trade-off, or how would you- No, I don't think so. I, again, there's a lot of what I would call misinformation- Yeah ... about private credit. Private credit is not there to fund risk that other parts of the market- Right ... don't want to. It's there to provide some level of flexibility or creativity- Mm ... or structure that isn't available in the public markets, right? In order for the liquid markets to function the way that we all want them to, they have to be quite rigid in the types of risks and structures that work, 'cause you need ratings, and you need consistency, and- Mm-hmm ... and once you get into the private market, you have more degrees of freedom to structure and price risk. So people go there not because they can't get financed elsewhere. They go there because of the value proposition of being- Yep ... of being private. In this moment in time, it's interesting, the pipeline of opportunities that we're seeing is probably higher quality than we've seen historically, because the folks that are liquidity constrained- Mm ... are the ones that probably got the most leverage, that are dealing with the most liquidity stress, even though their fundamental operating performance is good. Got it. And two, they're also the ones that can actually transact- Hmm ... at a valuation that works for buyer and seller, right? So both public and private credit right now, I think, are seeing a very high quality pipeline- Yep ... in terms of the companies that are coming. Good to hear. Mm. So you had a big investor day last week, so I wanna ask a few questions on that. The big takeaway I heard from investors, at least, was that your five-year FRE growth CAGR target of 16%-20% appeared to be at least meaningfully below where consensus is for the next few years. But then you look through all the underlying content, and I think it's, it certainly suggests the growth algorithm's a lot better than that. So how conservative do you think that target is? And I guess, in other words, should we consider it a baseline that you can beat, like the last investor day? Sure. You know, I can't really answer that other than to, other than to say- I tried ... our guidance is our guidance. Yeah. Obviously, you know, it's interesting when you say... I don't know, consensus or not, the guidance that we try to focus people on is our RI and dividend expectation is to grow 20%-25% per year for the next five years. And there's a lot that goes into the makeup of the guidance in terms of your AUM growth, the trajectory of that growth, the nature of the assets- Mm ... what your fee rates are. So there's a lot that goes into the mix to- Mm ... to come up with that guidance. And I guess we're the victims of our own success. The last time we put out guidance four years ago, we said 20% plus, and we did 30, 33. Mm. And so people have gotten accustomed to that outperformance. That's not to say that we can't outperform in the future, but I remind people, I can't think of an industry- Mm ... other than ours, that actually has the conviction to be able to put out five-year guidance, right? I mean, you have companies in other industries that are putting out, you know, quarter-over-quarter guidance, and they can't- Right ... they can't hit it, and we're putting out five-year guidance with a high level of predictability and precision, and meeting or exceeding that guidance. So whenever I get into a conversation with you and others about, you know, is it conservative or not, you know, 20%-25% plus dividend growth for five years, that's high-conviction guidance. Yeah. If we do better, that would be great, but, you know, I think people need to take a step back and understand what that's really saying about the quality- Yeah ... of the underlying business, the cash flow, and our ability to actually understand it and predict it, because that, that... I think that's quite unique. Yeah, that's totally fair. Staying on the theme, the underlying AUM target underlying that is $750 billion plus. I think we have a pretty clear picture of the strategies in the market this year and next, but I think it'd be helpful maybe if you could frame how you see the mix of your AUM and flows evolving in the more medium- to long-term? In other words, do you see the mix shifting more balanced away from private credit? Or does the still significant growth rate in private credit keep it fairly steady? I think you'll see some mix shifts. Obviously, private credit is a big component of what we do. And what we tried to articulate at the Investor Day was obviously, when we talk about private credit, it's not just middle-market corporate direct lending, right? Yeah. It's infrastructure lending and real estate lending and asset-backed finance and commercial finance, and all of those things. And so when you look at the diversification of strategies in private credit, you get a little bit of a different, you know, picture- Mm-hmm ... in terms of the concentration. It's 75% of what we do, so even as we ramp other parts of our business, it's gonna be hard to- Yeah ... to, you know, move away from that, and I wouldn't suggest that we don't want to- Mm ... 'cause it's a really, really good business to be in. Two places where we had highlighted growth that will at least shift the mix through the eyes of the public market, one was insurance, and we had articulated that our expectation was gonna be that we would grow our affiliated insurance assets to $50 billion- Mm ... by 2028. And we had also articulated that we expected our wealth management business to grow to about $100 billion. So if you said $150 billion on $750 billion, that's about 20% in those two parts of the, parts of the business- Mm ... which are, you know, that'll show you a slight- Yeah ... skewing of the asset mix versus where it is today. That makes sense. In that vein, you highlighted the build to kind of a $40 trillion addressable market just for private credit. It's the same number a couple of others have put out there, so I guess it's right. How much of that... I get this question a lot from: how much of that do you think is truly, you know, addressable, in other words, like, will- Yeah ... transition from- So you have- - traditional channels? You have to be very careful—like, this is the- Yeah ... this is the challenge of being a public company in a market like this. Yeah ... or even, you know, going back to your questions about Jamie Dimon's comments, news travels very fast in these markets. Yeah. People love headlines. Yeah. So it's like, "When are you getting to a trillion?" or, "How big is the market?" So when you put out $40 trillion- Yeah ... it's an eye-poppingly large number relative to the size of the market, and no one is, no one is articulating that, that, that all is going to transition. I think what we're all trying to articulate- Yeah ... is just the breadth and depth of the addressable market that's available to us off of what is currently a very low market share. The biggest chunk of that market is what we would, you know, call the securitization- Yeah ... adjacent market or the asset-based finance market. That's probably over half of it. And some of that will become increasingly available through people's insurance businesses. Some of it will be increasingly available through the growth in alternative credit and the private securitization market. Mm. But you don't need to see huge portions of this TAM go into the private market, right? If you just say the private credit market today, as people define it, is somewhere between $1-$2 trillion. Mm-hmm. Right? So if you wanted to sustain the type of growth that we're all putting forward in our guidance, you don't need a- Yeah ... big market share gain in that $40 trillion to, you know, to, to get the results that we're all hoping to get. So I think it's a very accurate number. It just... It's a question of how much is gonna transfer- Right ... versus not, but you don't need a lot to come out. To your point, asset-backed finance, I think, represents a little over half that number, and, and you and your competitors are all pointing to this as kind of the next big hockey stick growth opportunity within the broad private credit label. But I sensed a little bit more caution from you guys last week, maybe versus others. You're expecting—I mean, you're still expecting the AUM to double, but that's still only $70 billion through to 2020. So what's driving that more cautious stance, on what seems like a, it seems like maybe that you, you expect it to be a bit, a little bit slower. No, no, quite the opposite. I mean, I, you know, I actually think we were early in this market. Okay. We've been building this business for, you know, well over a decade. You know, I think that business was $5 billion at Ares in 2018, and so we've grown that business at a 30% CAGR since then, and we put out numbers that would indicate that it will continue to grow at that, that- Okay ... high rate. So that's not conservative, right? When you're putting out 30% growth rates, that's not conservative. But what's not there is this whole conversation that we're having with the market in terms of what we're calling quality AUM and where you reside- Mm-hmm ... in the, you know, the ratings spectrum. So in most levered capital structures, in ABF, you're... You know, you look at the securitization market, you're gonna be taking on anywhere between 3-10 turns of leverage. Mm-hmm. A big portion of that capital stack would be in the high-grade equivalent part of the market, at a lower risk-adjusted return and a lower fee. In the non-rated part of the market, which is where we spend most of our time, you're buying the, you know, the bottom half of the capital stack at a higher risk-adjusted return and a higher fee to your investor. So when we're going from 35 to 70 and doubling that business in the guidance, that's not accounting for- Right ... all that kind of growth above it, supporting the equity returns that- Right ... we want to generate. So we could easily go out and say, "We're gonna add $200 billion of high-grade equivalent- Right ... assets in ABF at 25 basis points. Mm-hmm. We do a fair amount of that, but I think you have to, again, think about the AUM growth, where it sits in the capital structure- Right ... how it gets fee'd, you know, and what rate of return we're trying to generate. So it's anything but conservative, and I do think that we've established a pretty meaningful leadership position in that market- Mm ... with the depth of our capability, the size of our team, but we are-- think of it as the unlevered- Yeah, that makes sense. ... piece. ... Right, helpful. Thanks. I'll switch to deployment, which is, which is more meaningful for you, given the way your fund structures work. The 1Q call, you talked about deployment trends being a little bit obscured by this refinancing activity, but also that the pipeline is looking much stronger into 2Q. So why don't you update us on how that give and take is tracking, and, and when you think maybe more medium to long term, we could see more tangible impact of that deployment on your fee-paying AUM growth? Sure. Yeah, Q1 was an interesting moment in time 'cause you probably had a little bit of a technical imbalance- Right ... where you had more money wanting to come into the market than there were deals. Right. And so that was definitely peculiar. Q1 is usually a seasonally slow quarter, where you see spikes in Q2 and Q4 in normal markets. Mm-hmm. As an example, at ARCC, which is a good proxy for deployment, you know, we said in April, we did $1.2 billion gross and $900 million net. Mm. So the gross to net was, you know, more akin to what we're used to seeing, and that we had a backlog behind that of about $1.3 billion. What I will say qualitatively is that we are seeing significant momentum building in the pipelines. Got it. You know, the deal machine is thawing. I think the stability in rates, even though we're not seeing rate cuts, is allowing buyers- Mm ... and sellers to come together more productively around transactions, and so we're seeing that in corporates. We're also seeing it on the real estate side of the business as well. So our thesis coming into the, you know, the back half of the year, which we talked about Q1, was that we would expect transaction activity to pick up meaningfully. Got it. I guess taking a bigger step back, away from just direct lending deployment, you have a lot of dry powder, your competitors have a lot of dry powder. So, how close do you think we are to seeing more deployment away from private credit, specifically, and how do you differentiate yourself with just that sheer volume of dry powder coming into the market? Well, again, back to private markets, you have to lead with sourcing and origination. Mm. Right? At the end of the day, you get that amount of dry powder because you have convinced the markets that you have the ability to deploy it and deploy it well. Mm-hmm. When we're talking about our own growth objectives, we're always trying to keep that tension between the capital we're raising and what we think the, you know, the opportunity to deploy is. Mm. Generally, Jarrod had a good segment on this in the Investor Day, when you look at our deployment to dry powder ratio, it's been surprisingly consistent- Mm ... you know, over the last, you know, five or 10 years. And so part of the way that you need to execute on the plan is, as you're driving growth and profitability, you need to reinvest in the origination and investment engine. Open up new markets, new offices, more people, bigger investments in portfolio management, and that, you know, that flywheel of growth- Mm ... is pretty easy to sustain if you're willing to reinvest in it. So we have not seen a market where our dry powder is outrunning our ability- Right ... to deploy. I would think the same for our large peers as well. Although I've expressed some concern, you know, in prior formats, where I think that as you move to insurance and retail-heavy capital raising- Mm ... it hinders your ability to be as precise as you would be in drawdown funds- Right ... in marrying your capital with the deployment, because when the money comes in, you have to put it in the market. You have to put it to work, yeah. Got it. So away from direct lending, where, where are you seeing the best opportunities to deploy this year or right now? Well, I mean, private credit is a wonderful- Yeah ... place to be right now, both performing and opportunistic. Mm-hmm. And the reason being, back to the earlier conversation about private equity, owners of assets have more dollars in the ground than they have new dollars in dry powder to deploy. So this is the first, call it, cycle, where we've actually seen a lack of parity, right? Mm. So if you go back to prior cycles, you would have seen $1 in the ground for every $1 uninvested. Today, it's about $3.5 invested versus $1 able to be invested. Mm. Because of that mismatch, everyone's conversation right now is around: How do I husband, you know, that dollar and protect value- Yeah ... in the 3.5 that I have invested? And that's gonna take the form of opportunistic credit solutions, preferreds, minority equity sales, secondaries, all of which kind of fit in our wheelhouse- Yeah ... in terms of private solutions. Mm. It's pretty exciting everywhere across the platform right now, but a lot of it just comes down to plugging that liquidity gap. To my earlier point about protecting the value but not seeing a lot of realized losses, you're getting paid handsomely to create option value for the equity in all of these situations. Right You're doing it at a place in the capital structure where you feel really, really good- Mm ... about your basis. Makes sense. There's a question from the audience, on this topic broadly: Could you please explain your statement that, quote, unquote, "Scale drives performance in private credit?" Isn't it a diseconomies of scale business? Well, it's... It hasn't been yet. So the way that we've experienced growth is, it all starts again with origination. So you wanna have more people in more markets with more product that's relevant to the borrower universe. And so then when we talk about scale, it's scale of people, it's also scale of capital. So to put that in perspective, if you went back to the origins of our private credit business at Ares over 20 years ago, the average EBITDA in our portfolio is probably $25 million. Today, it's probably $150 million. Mm. So as you keep investing in that origination machine- Right ... you touch companies that have $5 million of cash flow, and you touch companies that have $1 billion. But those $25 million-... $25 million EBITDA companies grow up to be $100 million- Yeah - EBITDA companies. If you don't have the scale to source it, you never see it. Mm. If you have the scale to source it but not grow with it, you ultimately give up that bar whereas it's actually getting higher and higher- Yeah - quality. Mm. What scale allows you to do is just be more relevant in the market, and to capture a greater portion of a company's growth cycle than you would if you were- Mm If you were small. Then maybe back to the J.P. Morgan conversation, it also puts you in a position where you're just more relevant in the capital markets. Yeah. You know, you could borrow more effectively, you can borrow more cost-effectively, your capital markets executions are more efficient. Mm. You have more profitability to invest in attracting and retaining talent. You know, you have a different risk profile for your employees- Mm 'cause you're not beholden to the performance of, you know, one fund or one small fund or one vintage. Mm. It promotes a lot of stability in so many ways that maybe people don't appreciate. Mm. The reason it's not diseconomies is back to the TAM, right? We're, we're probably the market leader in private credit, and our market share across all of these markets is in the low single digits. Mm. Generally, when you see that kind of fragmentation, you're gonna see a benefit of scale and a benefit of consolidation. In theory, there's an academic point where you're gonna tip over to have diseconomies, but I... That's a long way away. Let's pivot to wealth. This is obviously a part of the growth algorithm you're really excited about with the $100 billion target. So could you update us on how, you know, the platform pipeline is looking, the product platforms, the product suite is building out, especially for your new non-traded BDC product? Sure. Yeah, we put out a, you know, pretty high conviction target on what we want to be, and I think our goal would be to be a top three provider in that market with a broad product set, you know, in and around 10 products and $100 billion of assets. Mm. I feel like the ingredients are there to do that. You know, when you think about what it takes to win in the wealth channel in alts, it's pretty simple- Mm ... but it's a big investment. You first need to make an investment in your platform. So to put that in perspective, we have 125 people globally that are just dedicated to- Yeah - selling and servicing our wealth portfolio. You need to have real product differentiation and diversity, because ultimately the value proposition to the advisor community is giving them, you know, a pretty consistent access to everything in, in the alt universe. So we have six products today, and we said that we'd expect that to grow meaningfully. You need track record and a brand that gives the retail investor the confidence that they're getting access to institutional quality product that they heretofore- Mm ... haven't been able to access. You need a relationship with the large platforms. So it's a meaningful investment when you just- Mm - think about the office footprint, the people, the product development. These funds increasingly need to move to scale- Mm-hmm in order to get traction in the channel. So that means you need relationships with the institutional investor community and/or a balance sheet to get these funds seeded so that they- Mm - can ramp quickly. So there's a lot that goes into it. I think there are very few people that have that today. I think if you don't have that today, it's gonna be hard to catch up. So at the end of the day, there's probably five or six, you know- Yeah ... firms that have made the requisite investment with the requisite product and track record to actually accelerate into this. And we are seeing that growth accelerate, obviously, when you look at the capital raising that we've been doing month-on-month versus what we were doing- Mm-hmm ... even a year ago. Makes sense. So on this point, KKR made a splash last week with this announcement of a partnership with Capital Group, to build products that have both liquid, traditional assets, and illiquid private credit assets, which they believe will allow them to better address the mass affluent market. Do you think that's a path Ares could take as it seeks to broaden this franchise, or you think it makes more sense to develop similar products on your own, or, or at all? It could be all of the above. Yeah. And again, I... not knowing- Right ... a lot about the partnership, I'll kind of restrain myself- Yeah From commenting, only because I don't really know what it looks like. I don't know what the economics are. I don't know- Yeah ... you know, what their growth ambitions are. But it is an interesting commentary, and I think it's probably more an interesting commentary on the feeling that traditional managers are having on kind of missing out on the solutions that alts provide. Right. We already have significant partnerships with traditional managers as a sub-adviser, delivering, you know, certain alt solutions into products that they already have. So this is not new, right? Again, it's a good headline, but it's not necessarily new. Right. You know, the Holy Grail in all of this would be to begin to see the use of alts in defined contribution plans. If that happens, you will begin to see- Yeah ... more tie-ups just because the product's gonna need to get delivered- Yeah ... you know, differently. So it's something we spend a lot of time on, whether we do it through big partnerships- Mm-hmm ... a series of small partnerships, or on our own, you know, time, time will tell. But I think it's important that people realize this is already going on and has been going on for, for years in terms of white labeling- Right ... you know, alt exposure for traditional managers. All right, let's move away from direct lending and private credit. I think you presented a strong case for growth in things like infrastructure, secondaries, at the Investor Day as well. And I think, infrastructure in particular, it feels like something that you and others seem to be particularly excited about, with new geographies, sectors, product extensions, all kind of coming together at the same time... and driving pretty punchy TAM numbers. I think you said $5 trillion of spend needed annually. Mm-hmm. So could you maybe better frame how the alternative management arm in Ares are positioned to take advantage of that need? Because the numbers are so eye-popping, back to the $40 trillion- Yeah. I think many struggle to figure out how real they really are, and more specifically, pegging how much of that will really be addressed by you and the other alternative managers. Yeah, it's, it's a meaningful shift, right? And so this goes back to just the bank, non-bank, and the structure of these markets. So large-scale infrastructure projects up until, you know, the current iteration, were largely funded by project finance- Mm ... banks and institutional equity, you know, with support from things like tax equity. Mm. Fast-forward to the new reg cap regime, and some of the liquidity challenges in certain of the large project finance banks, plus a significant amount of equity that is being raised in the infrastructure equity space, and you have the ingredients to again see innovation in capital structures away from just project finance banks- Mm ... and equity or tax equity, to everything I talked about earlier, which is creative structuring- Right ... along the risk spectrum. The numbers are eye-popping because they're eye-popping. Right? I mean, the digital revolution is real. The amount of investment that is going to be needed to support the growth in hyperscale data centers to support the relative AI- Mm ... is significant, and there's just not enough capital in the market to get that done. Yeah. Interestingly, a lot of the incumbents who were in that market prior were doing it in a different cost of capital. Mm ... environment, right? So what they own is currently stuck. Yeah. So I think there's also a lot of enthusiasm, because while typically when you see a market transitioning like that, you're worried that the incumbent providers have accumulated, you know, all of the capability to execute- Mm-hmm ... and they have accumulated a significant, significant amount, but many of them are capital-constrained because they've amassed these huge portfolios of core, core-plus data center assets at a completely different discount rate environment, and aren't necessarily in the position to kind of- Yeah ... jump in at the scale necessary to support the Mm ... you know, the new rollout. So it is probably one of the most exciting, you know, supply-demand mismatches that we've seen, which is why everyone's talking about it. Makes sense. Oh, I'd add one more thing, too, which isn't really, doesn't jump off the page. The marriage of renewable energy- Mm ... and data centers is something that everyone is going to be talking about. Because at the end of the day, the power constraint that exists- Mm ... in order to actually see this rollout is real, too. Right. So there's this huge amount of enthusiasm around how do we innovate and marry renewable power capability to have standalone power supporting this rollout? So you are beginning to see kind of the coming together of- Mm-hmm ... renewable energy, infrastructure investment, and more- Yeah ... you know, traditional industrial and data center-type construction. The other one is secondaries, and it's a place you've been talking about for a while, particularly, as PE sponsors are clearly having more issues getting liquidity, to our discussion earlier. And you smartly staked a claim on this business with your landmark acquisition three years ago, but the growth has probably been a little slower than I think a lot of us expected. So on that point, firstly, do you think we're closer to more of a hockey stick moment for secondaries? And secondly, specifically to Ares, where do you think the firm is best positioned to surprise positively on that theme? Yeah, again, I don't know what people's expectations were. For the first, for the first time since the acquisition, we actually put out more detailed numbers on what we were trying to accomplish there, and the investment thesis for making that acquisition was we were seeing transformational change in secondaries- Right ... and we thought scale would be critical in order for us to win. And the transformation was twofold. One, it was a move away from private equity-centric industry to now expand into real estate infrastructure and ultimately credit secondaries, given the large primary market. And two, it was going to be a shift from LP-led secondaries to GP-led secondaries- Right ... meaning LP-led, large institutional investors looking for liquidity on pools of alternative fund investments, to GP-led, i.e., the general partners using the secondary market as a liquidity tool within their funds or within their GPs. And those, to us, were two big secular transformations that changed what would be required to succeed there- Right ... away from traditional, and that was why we, we made the acquisition. But as you saw in the Investor Day, we bought a high-quality market leader at a 10x cash flow multiple, so highly financially accretive. We've grown their AUM and FRE 30%+ since the acquisition, you know, three years ago. So again, that to me is not underwhelming- Mm ... growth. In order to pivot that business, we needed to reposition them to take advantage of the shift to real assets and credit, and to take advantage of the shift to GP-led. Mm. And so where we think that you'll see the growth is, we've launched a credit secondaries business. Mm. We are opening that market up. It's a new market that didn't really exist a year ago, and we're scaling into that. We continue to scale our real estate and infra fund family- Mm ... 'cause we do think that we have some first mover advantage there. We've raised a non-traded secondaries fund called APMF that's crossed over $1 billion. So you will begin to... Whether it's hockey stick or not, you know, I don't know exactly what that means- That's all right. ... but you will see a meaningful, you know, again, diversification and consistency in the growth... because of those, you know, the, those factors. So we're, we're pretty excited about it, and obviously the basis is good, so that gave us a lot- Yeah of degrees of freedom to make the investments we needed to get it growing the way that we wanted it to. Yeah, I doubt you could get it for 10x cash flow now. Be hard to do. A couple more to finish up. Firstly, on capital, you've obviously been one of the more acquisitive alternative managers. Through that lens, are there any major verticals or geography that you think inorganic could still be a priority? Or do you think, you know, it's really about pivoting to the organic opportunities that you outlined last week? Yeah, look, it's... Acquisitions are important, again, where we see markets that are large, growing, or going through some form of transformational change- Right ... where we could attack it organically- Yeah ... but there's a, you know, a sense of urgency. The bar is getting higher because given our current positioning, capability, capital, et cetera, we can launch businesses organically and scale them, you know, pretty handily. At the Investor Day, we gave a couple of examples of businesses that we've launched within the last five years that have grown to be meaningful contributors to the firm's profitability. So the bar is getting higher. We did highlight a couple places where we could be acquisitive. One was real estate in Asia-Pacific region, and two was global infrastructure equity with an emphasis on- Mm ... digital. Again, those are two kind of big markets. They're under-penetrated, in my opinion, by folks like us. They are transforming rapidly, given the structure of those markets, so that is a place where we could probably look again. But again, the bar is very, very high, given how strong the organic growth is. Makes sense. And then more broadly, I guess you talked a lot about, you know, your European waterfall performance fee visibility, which suggests, you know, in a few years we could be talking about a lot of incremental cash flow- Yeah ... coming in. Mm-hmm. How should we think about, you know, capital return when that excess cash starts coming in, either through special dividends or more repurchases? I think it's gonna be all of the above. Right. You know, Jared talked about it on the Investor Day. We are going to see a meaningful acceleration- Mm ... in cash flow from that portion- Right ... of our balance sheet, and the expectation would be that it will be there to continue to reinvest in that growth engine- Right ... which is what we've always done. It will be there for dividend support or incremental dividend growth in excess of what we put out. It will be available to support acquisitions and new strategic initiatives. Mm. You know, part of the way that you launch businesses organically is by bringing capital to the table. Mm-hmm. Even though we're running an asset-light business model, that capital can be pretty impactful in terms of its ability to amplify profit by us putting our own- Yeah ... our own dollars in. And then lastly, would probably be share repurchases. You know, not to say that we wouldn't, but- Mm ... I think at these valuations, and given everything else that we have in front of us in terms of the ability to invest in growth, I would probably put that at the bottom. All right. Perhaps to finish, a quick question on the stock. Ares has been by far one of the best performers in asset management, probably even all public financials at this point. So as some investors might be incrementally concerned that all this growth discussed today and at your Investor Day is priced in, what's your elevator pitch today for why the incremental buyers should be stepping in to buy Ares shares now? Sure. Well, I'll go back to what I said earlier, is- Mm ... 20%-25% growth- Yeah ... in realized income and dividend, if you just did a dividend discount model, would get you to a, I think, a pretty- Yeah ... compelling answer. The reason that we're willing and able to give that type of guidance is because of the stability of the underlying business. So what's interesting, I think, about the company is we have predictability, diversity, and stability in the underlying without sacrificing growth- Mm ... which is very, very unique. So I think predictability and growth. You could look at our FRE contribution to RI and the dividend, and you'll see, you know, in every market environment, it's 80%+. Yeah. In certain market environments, like the one we're in now, it's 90%+. Wow. So this is a highly diversified, predictable cash flow stream. Two, obviously we have a leading market position in some very high growth areas with meaningful secular growth tailwinds. We have an asset-light business model, so we are not, you know, a huge consumer of capital in order to drive these types of growth rates. We have a huge opportunity still ahead of us to see the benefits of scale flow through in margin expansion. And I think what we've demonstrated now over 30 years is the ability to deliver this type of performance, regardless of what the underlying- Yeah ... capital markets, interest rate, or economic backdrop is, which is also quite unique, right? If you look at our... How long is this elevator ride, by the way? Two minutes. Okay. But if you look at what we've been able to do through the GFC or COVID, those have been our, our most profitable, fastest-growing periods, right? Yeah. So again, in a world where everyone's still, you know, wring their hands about when the recession that never came is gonna come- Right ... I don't want to say we're agnostic, but we know- Yeah ... that when those types of environments present themselves, it's actually proven to be a pretty big- Yeah ... catalyst for growth and performance. Which again, is hard to get your head around- Yeah ... because that's a pretty unique thing. But, that's part of the stability, which is we're not really fussed if rates are going up or down, or we're not fussed about who's in the White House. We're not fussed about what the M&A environment looks like. Yeah. We're kind of able to execute consistently throughout. Makes sense. Compelling. Thank you. Thank you. Great. Appreciate it. Yeah. Thanks for your time.