Ares Management Corporation (ARES) Earnings Call Transcript & Summary

Good morning, and welcome to Ares Management Corporation's Investor Day. Before the presentation begins, we need to inform you of important matters and legal disclaimers about today's presentation. Today's presentation contains forward-looking statements and results. These statements are not guarantees of future results or financial conditions and are subject to risks and uncertainties. Our actual results may differ materially. Note that Ares does not undertake any duty to update the information presented today. Please see the risk factors in Ares Management Corporation's annual report on Form 10-K and other filings with the Securities and Exchange Commission for details of these risks that could impact results. Viewers should not view the past performance of Ares Management Corporation, as a guarantee of future results. We will also refer to non-GAAP measures during today's presentation. Non-GAAP reconciliations to GAAP figures are available in the full presentation, which can be found on the company's Investor Resources page of its website at aresmgmt.com. Today's presentation does not constitute an offer to sell or a solicitation of an offer to purchase an interest in any Ares Fund. Please reference the disclaimer for additional information. We will now start today's presentation with a short video. [Presentation]

Good morning, and welcome to the Ares Management 2024 Investor Day. My name is Greg Mason. I'm Co-Head of Public Markets Investor Relations. And for those of you in the room and for those of you online joining us today, thank you for taking the time. We've got a lot of great content for you today, tightly packed in the next 3.5 hours, plus time for your questions, but I hope to set the stage for some key takeaways for today. You're going to hear from over 25 different presenters. I have the privilege of working with these people. They're smart, hard-working and genuinely nice people. And I hope you get a sense for what I know is that we have an amazing leadership team that works collaboratively together to drive the entire business forward. We also operate in large addressable markets where we think each of our business segments has tremendous runway for future growth. In addition, we're going to talk about our business model and how our FRE-Rich asset-light balance sheet, generates consistent growth, and we believe has the ability to thrive throughout market cycles. And I also hope you hear that not all AUM growth is the same. And our target of $750 billion in total AUM by the end of 2028 is driven by high-quality AUM growth. And then the bottom line takeaway for today is that we expect our realized income to grow at a compound annual growth rate of 20% to 25% through 2028, and that our dividend will grow by 20% or more CAGR over the same time frame. Now just to set the agenda for the day, you can look at the agenda at any time on the mobile app. But this month actually marks our 10-year anniversary as a public company. And so our Executive Chairman, Tony Ressler, is going to kick us off with his perspectives on the last 10 years for Ares as well as his outlook on the next 10 years for the industry. Then our CEO, Michael Arougheti; and our CFO, Jarrod Phillips, will come up to give a strategic and financial outlook. Then we'll move to our fundraising where we'll talk about our institutional and wealth channels. And then we'll bring our entire credit group leadership up to highlight the large and diversified credit platform that we have here at Ares. Around 10 a.m., we'll take a 10-minute break, and then we'll come back in and we'll have a panel on the next frontier of what we believe is exciting growth in private credit. Then we'll move through our remaining businesses of real assets, secondaries, private equity in our insurance business. And then Mike, Jarrod and I will come back up on stage to take your questions. So we've got a lot of great content for you today, and I'm excited to turn the stage over to Tony to kick us off.

Thanks, Greg. I'm Tony Ressler. I'm Chairman of Ares Management. Delighted to be here. Thanks all for -- thank you all for being here. I have -- I guess my job is a fairly easy one. I'm supposed to describe the past 10 years of Ares management in the next 5 or 10 minutes. And I think the best way to start is to make quite clear. No, I did not expect that Ares Management would grow in market value 10x over the past 10 years. No, I did not think Ares Management would grow its FRE 10x in the past 10 years. And no, I did not think Ares Management would grow its assets under management 5 or 6x over the past 10 years. What I did know when we went public is that we were a very good company and had the ability to become a great company. We weren't sure, but we had enormous confidence when we went public that we could do something special. It's tough I would say tough to know what was most responsible for the past 10 years and for that somewhat extraordinary performance. I think one might say it was the collaborative culture or the power of the platform that you hear about so often, and certainly could have been the commitment we had to building really an extraordinary origination platform. I think it could also have been the fact that we were utterly committed to credit and understanding credit. I think some of us might argue 20 years ago when Kipp and Mitch and Smithy and Mike came to this firm to launch a U.S. direct lending business. My personal favorite was 6 years ago when we replaced the then CEO with the current CEO, Michael Arougheti. I would say all of the above had a meaningful contribution. And as far as I'm concerned, we're just getting started. We get asked all the time what was that secret sauce? We tried to answer this, but to me -- sorry about that. But to me, assets follow performance. And we've had really good consistent performance over an extended period of time. We've stayed disciplined to what we do well. That to me, for an investment firm that's focused on a massive market with extraordinary opportunities stick to what you do well. Assets follow performance. And if performance is solid, impressive and long term, good things will happen. I must also say in this picture, bringing my son. I still can't figure out why I brought my son. I think he just graduated college, but most importantly, I don't think anyone else in our senior management team had a college age child at that time. So it seems like I was the only one, but I don't know if that's core to today's presentation. I get asked, and I think we have a fairly interesting discussion of what the next 10 years looks like. And for me, it's really pretty straightforward. The private markets will grow faster than traditional markets. Corporate, asset-backed, real estate, infrastructure, all will grow as asset classes in the private markets. The United States, North America, Europe, Asia, all will grow larger in their private markets activities. And we see the bigger guys getting bigger. We see average deal size continuing to grow. So the simple and to me, obvious perspective is we could not be in a better place. Our next 10 years would appear to be actually far more exciting even than our last 10 years. And as far as I'm concerned, all of us have so much more to offer at this moment in time. We have so much more expertise. We have so much more credit and lessons learned over the past 10 years as a public company. And I think as you're about to see, we have such depth in our management team that we could not be better positioned for this next 10-year run. And now I guess I get to introduce my favorite Chief Executive Officer, Mike Arougheti.

Good morning, everybody. Thank you, Tony, for the kind words. I could not be more excited to be here with all of you today. Anniversary is always a great time to reflect on where you are, where you're going, how you got to where you are. So I'm happy with the coincidence of this day with our 10-year IPO anniversary. And looking at those pictures, it feels like yesterday, but obviously, it was a long time ago. It's always very humbling for me to sit in front of all of you and see all of my partners and friends as well when we talk about the extraordinary company that we've built together. We have been at this for 25 years. To Tony's point, we have figured a lot out, we've made mistakes, we've learned from them, but we keep pressing forward. And as we sit here today, we have an extraordinary business. And hopefully, you'll get a sense for that and for the people throughout the course of the day. Ares today has $430 billion of assets under management. We have 3,000 employees in 40 offices and 20 companies. We're a truly global platform, and you'll see that as we describe each of our businesses, and we have room to continue that global expansion. But what sets us apart is that from day 1 of the founding of the firm, we have been focused on the middle market. We understand the value of being local. We understand the value of building entrenched relationship networks in those markets. We understand the cultural nuances and sensitivities of operating in these markets, but we marry that with a global perspective, a global scale, a global relationship network. Very rare to see a company that can run at that scale with that global perspective but stay true to its roots. So that scale, that scale benefit we're going to highlight a lot today and talk about. What it also allows us to do is to have foresight into where we think the markets are going, how is capital flowing globally, learn from what we see in a more mature market and export it into a less mature market, but that foresight is always married with local market insight, take what we see globally and apply it into these local markets. And by doing that, we're able to create new product families and new growth engines. We've done that consistently since we started the firm. Part of that is diversifying our strategies, and you can see how our growth is not just accelerating but it's diversifying at the same time. This diversification obviously smooths our growth that gives us higher confidence in the trajectory of that growth and it allows us to open up new markets. You could see as we're getting larger, that growth is accelerating as we diversify, having grown our AUM over 20% in the last 5 years. Importantly, we have engines for growth that are following behind this, setting us up for the future, and that's reflected here in the number of fund families that we have on the platform in excess of $1 billion. So if you go back to 2014 at the IPO, we had 10 funds on the platform and $1 billion that we're poised to scale. That number has tripled to 32 and continues to grow. Importantly, if you view that through another lens over the last 5 years, we are not being driven by one business at this firm. All of our strategies are growing. Everyone is pulling their weight, and you can see how broad-based the growth engine here is. Some of our newer businesses like secondaries that have actually grown a little bit below trend as you'll hear today are coiled for growth into the future. So how do we do this? What's the playbook? When we talk about the business in the halls of Ares, we try to keep it very simple. There's a flywheel that we need to create. We need to be best-in-class at raising capital, to Tony's point about the value of consistent performance. We need to be best-in-class at investing capital. And then everything we do on the noninvestment side needs to be best-in-class as well. How do we support our client relationships, how do we support our growth, how do we drive margin efficiency. So that flywheel ultimately is what sustains our growth. And as we invest in that flywheel to Greg's point, we want to be sure that we're not just growing for growth's sake, but that we're growing with a view that size is a huge benefit to our performance, and we want to focus on high-quality growth, high fee, high margin, scalable growth. We're not chasing AUM numbers. We're chasing high-quality FRE. When we think about our journey to get here and the competitive advantages that scale has given us, I break it down into 3 simple buckets. One is origination. This idea that we have built an origination engine across asset classes in local markets differentiates us. The binding constraint to growth in our markets over time will be the ability to source unique assets for our clients, and to be more relevant to more people and more markets than anybody else. So when you look at our footprint in terms of the number of people and the capabilities we have, we have a very significant head start, and we keep investing in that competitive advantage of origination. And what origination also allows us to do is to be extremely selective in what we ultimately invest in, which drives performance. And you'll see, again, not coincidentally, that each of our businesses tends to invest in close to 5% of what they see in any given market, saying no 95% of the time. Saying no, 95% of the time. So when you're seeing more flow and you're saying yes to only 5%, hopefully, that risk filter improves over time and it shows up in performance, which it has. Two, we need to marry that origination capability with scale of capital and flexibility of capital. Both are critical. You can't just be large and you can't just be nimble. You need to be nimble at scale. And the reason is it improves your origination. We need to be more relevant in our markets. If a good company or a good asset finds its way to Ares, we need to get it on the platform, and we need to keep it here. And the way we do that is to broaden out our capability set and the type of capital that we manage. And then lastly, we need to harness as Tony said, the power of the platform. We need to look across the investment portfolios, the deals we see, the deals we do and don't do and leverage that insight into the way that we invest money in the way that we manage our portfolios. To put that in perspective, we currently have about 4,500 middle market investments on the platform. There's only 2,500 traded companies on the New York Stock Exchange with a heavy concentration in the top 10. Think about that in terms of the insight that we get into local economies, local markets, industries, capital flows that we're then able to leverage into the business on an ongoing basis. Putting aside the 95% of deals that we say no to that also inform the decisions that we're making. So when we get this flywheel moving, again, we're going to get quality growth, we're going to get consistent growth, and we're going to get economies of scale. And you can see that showing up in the financials. Since 2018, over the last 5 years, we've grown our capital raising by a compound annual growth rate of 16%. The investments we're making in origination are keeping pace. We've increased our deployment at 16%. But here's where it gets exciting. When you look at the leverage in the system, we've been able to grow our realized income 25% and our FRE 35%, and that performance is beginning to accumulate in our net accrued performance income balance, which is similarly up 30%. So when you put all of that into the mix, what comes out is a highly reliable return on Ares management stock. We've generated a 52% compound annual growth rate and total stock return over the last 5 years. Juxtapose that against the S&P 500, which generated 17%, so 3x the S&P over the last 5 years and a 14% return for the Financials Index. So I think the market is similarly recognizing the value of the system that we've created. We try to make it simple, but it's not easy. And it's not just about investing in the architecture of the firm, it's about investing in your people. I liked it when Greg said that we're genuinely nice people. And that sounds so simple, but how do you build a culture that scales with the business? How do you create a culture where your employees and your partners think about shared success and shared prosperity in a way that others don't so that you can actually harness the synergies and deal flow origination and information. And we spend as much time investing in and building our culture than anything else at this firm. And of the things I love most about these types of days is you all get to see that. You get to see the depth of our team, you get to see the quality of the people, and you get to see the quality of the relationships that exist here. And one of the reasons the relationships are so high quality is we've been doing this together for a really long time. My business partners and my best friends. We have built a company together over 30 years that is highly differentiated. The values that got us here, as Tony mentioned, are the same values that drive us into the future, and our culture and our values permeate the fabric of this place, and it gets passed down from generation to generation. And you can see here our EMC has an average tenure at the firm of close to 20 years. Our senior most professionals have been with the firm close to 10 years. We have very low turnover. That fundamentally ensures that the culture that got us here will continue to thrive and take us forward. That culture is informed by our values. We approach our business with a deep sense of purpose and a deep sense of service. And the reason for that is when you manage money on behalf of the largest institutional wealth clients, insurance clients across the globe, we are not just in the business of generating return. That's table stakes. We have to generate great return. But we have to know who we're generating that return for and why? And when you talk to anybody at Ares, they understand the profound responsibility that people put in us, the responsibility to support people's retirements, workers, teachers, firemen, policemen, annuity holders, people rely on the returns that we generate and everybody that works at Ares understands who they serve and why we do what we do. One way to think about this architecture that we've built is to understand that the capability set that we've created has established us as a meaningful solutions provider to our investment clients and our portfolio of clients. We've created a feedback loop based on the depths of those relationships that informs how we form capital and how we deploy capital. The key when you're in these local markets is to understand what that market needs. And if we don't have it, build it. And then when we build it, deliver it in the right package to our clients to give them a differentiated investment outcome. And when you do that well over 25 years, you get a broad-based set of product across the risk-return spectrum, across geographies to meet the needs of more clients around the globe. And so when we hear from our partners, Raj and Ryan about what we're building on the distribution side, a lot of the growth opportunities in our ability to provide broader based solutions to our clients in more geographies at different cost of capital and to package them and cross-sell them consistently over time. Tony, asked a lot of questions, how did we get here? One really never knows, but I can tell you it was with great effort, but great intentionality. We were always guided by our values, but we had a system to think about growth, to understand how these markets were developing, and it always starts with understanding the markets that we play in, where can we differentiate, where are those competitive advantages in origination and information most valuable. And importantly, when you look at the markets that we play in, these are large, large addressable markets with very fragmented competition. And you can go down this list and you could see each and every one of them meaningful, meaningful addressable market, meaningful growth. We have a leadership position in each of these markets, and yet we have a less than 1% market share. I like that setup. We have fragmented competition in large growing markets with meaningful competitive advantages to scale. Importantly, too, as I showed you our fund families, the growth is broad-based. But when you look at the market backdrop that we're growing into, the growth is similarly broad based. Each category in the alternative asset space is growing. Each geography is growing, but we happen to be over-indexed to the fastest-growing markets and the fastest-growing geographies, private credit, secondaries and North America. That's not to say that we want to ignore the opportunity set that is emerging in other parts of the world and in other parts of the market because that is the growth of tomorrow. There are a number of meaningful, meaningful secular trends that are propelling our business forward that we are acutely aware of and that we are investing behind and they will show through today as each of the businesses are talking about their own growth path. But just to name a few, there is a significant transformation occurring in the private credit markets as those markets continue to expand against the backdrop of the growth in private markets, the transitioning of the banking system globally. We, as the largest manager in that space, continue to benefit, and we're growing well in excess of the market growth rate opportunity. Global Infrastructure. We are going through a digital transformation propelled by the advent of artificial intelligence. The dollars needed just to support that market alone are roughly $5 trillion over the next 15 years, $5 trillion. That capital does not exist in our system today, given our capability in renewable energy, digital infrastructure and infrastructure debt, we will be riding that growth wave. And then as Raj will talk about in a few minutes, the growth in wealth, the democratization of our markets has created huge growth tailwinds as well. But size matters. The big will take share, The big will get bigger. When you look at LP behavior, LPs are consolidating their GP relationships. If you look just at the private credit market over the last 5 years, close to 60% of the capital raised has come to the top 25 managers with Ares at the top of that list. That's almost twice the market share that we had in the 5 years prior. Our markets are growing and they're consolidating. You could also see that in increased M&A activity. GPs are consolidating smaller LPs that have unique capability but don't have the capacity to benefit from this market growth. You're seeing a similar share trend happening in the wealth channel as well. So knowing that, that is happening, knowing that scale matters, knowing that size matters and knowing that these markets are consolidating, we have continued to invest in building out scaled solutions for the market. This is something that we showed you all at our last Investor Day in the summer of 2021. And you can see the rapid evolution of the product set. I mentioned earlier the growth is diversifying, but it's accelerating, and you can look at businesses like alternative credit, $36 billion in that business. In the summer of 2021, we had that on this chart as an emerging business scenarios. It's now a $40 billion business. Infrastructure debt, emerging. It's now a $10 billion business and rapidly growing. And then when you look at what we're building for the future in places like Asia Pacific private equity, credit, secondaries, sports meet and entertainment, I have a hunch that when we're together with you in a couple of years, you'll see movement of those new strategies at an accelerated pace as well. I mentioned global expansion. This is important, and this is the value of having these local market entrenched relationships. We need to see where the puck is going. We need people in these markets, understanding the behavior of businesses and assets and consumers and regulators in those markets so that we can build the businesses of tomorrow. And if you look at the historical growth of the firm, we used to be a North American-centric business. In 2006, we expanded into Europe. Europe is now a fully deployed business for us. We are in all of the local markets with all of our products, and we hope to replicate that as we continue to move the business into the Asia Pacific region. Again, I mentioned that we do this with a significant amount of intention. And I think that we are ahead of the pack on the way that we think about attacking these opportunities. We have a corporate strategy group within the firm. It's comprised of 25 people. They are charged with focusing on the growth strategy of the business, the operational strategy and how we deliver innovation through technology into our own company and into the portfolio. If there's a business for sale in our market, they've seen it. If there is an industry opportunity for growth, they are building a white paper on it and a strategic road map for how we're going to attack it. And when you look at what they are able to accomplish operationally, when we're bringing on new businesses, they're able to get them integrated quickly against the growth plan and deliver results. And to that point, we haven't talked a lot historically about the acquisitions we've made. So I thought maybe we would give you a little bit of context for just how powerful this group is in identifying scalable opportunity and driving value. And again, we have a very simple filter for how we think about acquisition. We wanted to be culturally accretive, we wanted to financially accretive, and we wanted to be strategically accretive. We want to take good businesses and make them great. We want to see meaningful revenue synergy, not meaningful expense synergy, but I mentioned culture first because, again, in order to do this well, you need to bring people into the firm that are culturally aligned to us and our values. One great example of this is Black Creek. This is an acquisition that we made in the summer of 2021, market-leading industrial real estate manager with a fairly narrow but exciting family of non-traded REITs. We acquired this company for $725 million, 40% cash, 60% stock. And when you look at that in terms of an FRE multiple in 2022, 5.5x. Financially accretive clearly. But when you look at what we've been able to do with the business in the short time that we've owned it, we've been able to grow FRE at a compound annual growth rate of 35%. We took it from $56 million to $107 million. And when you look at the AUM and wealth, we were able to take that capability, pull it up to the top of the house, and you can see that we've exploded the growth in the wealth channel by 50% in the last 3 years. Similarly, if you look at landmark partners, we identified a transformation occurring in the secondaries market, a shift from LP led to GP led and a shift away from private equity to a broader collection of alternative strategies. We went out, we acquired Landmark. We paid $1.1 billion for it, 75% cash, 25% stock, 10x purchase price. We've now revamped the product set. We've added a wealth product. We've grown a credit Secondaries business. We've invested in the team. We've globalized, and you can see the AUM up 30% since acquisition and accelerating. And you can see the FRE contribution up 30% since acquisition as well. When we're making these acquisitions because of the scale of our platform and our ability to invest in growth engines, we also are able to take what we would call underutilized assets in a number of these situations and pull them up to the top of the platform to then redeploy them into other parts of the business. So in the case of each of the 2 examples I gave you, Landmark had a quantitative research group of 25 data scientists that were basically supporting the underwriting of Secondaries portfolios. We pulled them up into our Corporate Strategy group. They are now delivering that type of analytics, both to other parts of the firm and to our LPs as a way to help them think about portfolio construction and risk in a way that they otherwise wouldn't. And in the case of Black Creek, as Raj will demonstrate, we were able to take a very well-developed wealth distribution capability, grow it, globalize it and build more product for it in order to take advantage of that as well. And then we can't have an Investor Day in 2024 without talking about AI. So I asked ChatGPT to put together a slide about the opportunity for AI in the private markets, and this is what they came up with. But in all seriousness, about being forward-looking, our corporate strategy team went out and said, we're not going to be able to do this alone. We need to go out and acquire capability and experience to drive innovation into the business in a way that is required to support future growth. We recently closed on the acquisition of a venture AI firm called BootstrapLabs. We've brought a dozen technologists onto the platform at the top of the house, again, to deploy into the investment portfolios to enhance margin and create efficiency. We've unleashed them into the business to help drive efficiencies in the investment process, look for ways to harness our data to make better investment decisions, and we're unleashing them on the business operations side of the house as well to help us figure out ways to scale our margin to support our future growth. And then lastly, as I said, we have a plan. We are thinking about where the puck is going and where new markets will open to us. Things we're focused on is the continued growth in insurance, which Dave Reilly and Lou Hensley will talk about a little bit later. We continue to think about how to grow in the APAC region with a focus on real estate, and we continue to think about how to scale up in infrastructure with a particular focus on the digital revolution that's occurring. And so if we do all of that, if we build this flywheel and we invest in our people and we bring new capability, we should see that consistent repeatable performance that Tony talked about, which at the end of the day is the lifeblood of this company, consistent outperformance. And you'll see this throughout the course of the day, so I won't dwell on this, but each of our strategies over decades continues to deliver performance to our investors that has them coming back, growing with us, trying new things and building enduring relationships, which is key to the future growth. So where are we going from here? I mentioned we're going to continue to globalize and broaden out the product set. We will continue to build capability organically and inorganically. We will continue to invest in distribution so that we can get the front end of the funnel in terms of the capital formation, continuing to support the growth of the business. We will continue to build unique capability in local markets with a global perspective, and we're going to continue to drive synergy across the platform and the portfolio using technology. I started my comments just talking about the opportunity to reflect on where we've been. Anniversaries are great for that investor days are as well. And in August of 2021, we sat before all of you and put out what we thought were pretty robust growth assumptions for this platform. We told you that we were going to target $500 billion of AUM by the end of 2025. That was an implied growth rate of 17%. We've grown at 20%, and I think everybody can see that we're well on pace to hit the $500 billion. We told you that we were going to grow our FRE by 20% plus. We've grown it at 33%. We told you that we were going to grow our dividend 20% plus. We've grown it at 26%. So when we look at the next 5 years and Jarrod will drill down into how we get there, not from just a strategic perspective, but a financial perspective. It is our expectation that by the end of 2028 over the next 5 years, will land at $750 billion plus of AUM, and again, quality AUM. We want to raise AUM that is durable, long duration, high fee, high margin, and that excludes acquisition. Two, we expect that we're going to be growing our RI 20% to 25%, and our dividend will follow at a 20%-plus growth rate, landing us at roughly $7.66 per share at the end of 2028. So as Tony mentioned, for all of the great things that have happened here over the last 10 years, as we reflect back and learn from that success and apply it to the future, the growth trend that is in place here is still here, and we expect will be for the foreseeable future given the quality of the business that we've built together and the quality of the market opportunity that lies ahead. So looking forward to a great day. Thank you for your continued support I'm grateful that you're spending as much time with us. And with that, it's my pleasure and honor to call up my friend and partner, Jarrod Phillips, to dive into the financials. Thank you.

Good morning. It's great to be here. It's great to see all of you here in person. Hello to all of you on the live stream. Sorry, you couldn't be here in-person with you -- with us, but we're excited to have you. And it's my pleasure to talk to you a little bit about our financial results, where we've been to where we're going. And ultimately, I do want to just stop and reflect on the last 5 years. So we're talking about our 5-year plan here. So what do the last 5 years look like? You can see in our last 12 months, we've hit records across all of our major metrics, and we've been up more than 25% on CAGR for all of our major metrics. This is a great launching point. We've done it consistently with a business model that we believe has us well positioned for future growth and is going to continue to drive growth forward. I'm going to spend a little bit of time today talking about each of these items. First, I'm going to talk a little bit about our management fee-centric business that drives high-quality FRE that makes us more stable and predictable within our growth. I'll talk about the long-dated long-duration capital that enables that. I'll spend a minute on our balance sheet-light model, which we believe enhances the cash flow to our investors and enhances the cash flows available to invest in new management fee growth areas. I'll talk a little bit about how our growth has come with an expansion of scale and an expansion of our margins. And lastly, I'll spend some time on our European waterfalls. To start with our management fees, this is our slide of many colors with our numerous platforms that we've put together lovingly and we're very, very proud of. So you can see up here how diversified that we've been over the last 5 years. We've grown our core businesses. At the same time, we've added new businesses, and we've seen growth in management fees across the platform. This is core to how we view our growth going forward is continue to grow what we do well, as Tony said earlier, but find new areas to grow in an outsized manner. And it's important to understand how we grow our management fees in different market environments. When you take a look at what we put up here, we tried to summarize as we were thinking about the questions we get from all of you, what are the different market environments we get questions about. When default rates are high, how have we grown? And you can see up here that we've grown when default rates are high. When M&A volumes are low, we've grown. As we've seen for the last year, M&A volumes were relatively depressed. And in fact, if I took this graph back a little further back to the turn of the century in 1999, 2000, you'd see a dollar value of M&A transactions that was reasonably similar to what we had last year. When you adjust that for inflation, it's almost 60% higher in terms of dollar value. So we know that M&A works in cycles. The ability to grow when that cycle is slower, like it has been for the last year and be prepared for when that cycle kicks back up is very important. And then a question we often get is, well, what about interest rates? When interest rates were low, we got the question of, well, are people just coming here in search for yield. Now that interest rates are high, we get asked, well, how is it going to change when things are low? You can see here that we've been able to grow our management fees throughout interest rates being low and interest rates being high. One of the reasons for us to be able to grow in all of these different scenarios is that long-dated long-duration capital. That means that when investors commit their dollars to us, we can continue to hold that without fear that they can call it back. We can invest it when it's the best time to be investing. We can generate alpha for them by investing in the right companies at the right times, and we don't have to be on defense protecting the portfolio. That's what it's enabled us to grow. And you add to that, that the majority of our growth comes from the speed of our deployment and our deployment in our portfolio. Unlike equity-based strategies that are really just committed and rely very much on the next fund to grow as we raise, we prepare to deploy. So that shows that we're also not as correlated to a fundraising cycle. When fundraising cycles have been low or when they've been high, we've continued to grow. That's because of the nature of the AUM that we manage. So we are very focused on deployment and how much we can deploy within a given period and what the markets are for that deployment. Just like that first slide that I shared, you can see here that the deployment that we can have off of our platform has diversified significantly over the last 5 years. And in there, you see that coiling for growth that Mike talked about. You see that we understand that those M&A markets, they go in cycles, they come and go, we need to be prepared for higher deployment environments. So we build behind that. We build based on our dry powder, and we build based on the markets that we operate on. So I wanted to come up with a way to help you understand how we can view what our deployment could be within a given year, and what are some correlations that we've seen in the past. In our earnings presentations, you'll often hear me talking about our AUM not yet earning fees available for future deployment. That amount, if you take that amount at the end of any given year. So if you take it at the end of 12/31/23, we had $63 billion of record for that amount. That would equate to a little over $620 million of management fees. But then you see what's our drawdown deployment been like in the years after that. And you could see from up here that there's a pretty high correlation. Our drawdown deployment has run from 85% to well over 100% of what our AUM not yet paying fees were in the prior year. So that would tell you we have a tremendous capacity for deployment going into this year. And as we continue to fund raise, we continue to look to build that capacity so that we can deploy in all types of markets. That diversity in management fees also is carried over into our other fee income. And when you take a look at our fee income, that's really because of some of the new businesses that we've added and some of the things that we've enhanced. For instance, we have a registered broker-dealer that can now participate in capital markets transactions. So you've seen us grow our diversification and the ability to generate other types of fees in addition to just our management fees. When you take that fee income plus your management fees, you have very strong FRE that supports your RI through various periods. So if you look here, you could see that FRE has maintained a high percentage of our RI year-over-year. And again, looking at a market where there's not as much realization activity, you can see that FRE has continued to propel our RI to growth year-over-year despite that. Now we would expect in a more normalized environment that FRE is going to run about 80% of our total RI. And one of the important things about our RI is these represent earnings that actually are distributable. They're not earnings that have to go back into a capital machine or have to go back in to support our balance sheet. And that's one of the presets of our balance sheet light model is creating free cash that enables us to grow our management fee business. If you see here, our balance sheet investments represent 0.5% of our AUM that stands in a pretty large contrast to our peers, whose average is about 8.5% of their AUM. We're not actively investing in our funds. We invested in them strategically when it allows us to grow our management fees. That also means that we can put together a better ROE because our ROE is not dependent on the compounding of investments on our balance sheet, but on the funds that we manage. And having that limited balance sheet exposure makes us less exposed to changes in interest rates, changes in interest rates won't affect spread earnings that we have. They will be much more minimal compared to what they would be if we had a more balance sheet intensive approach. Now taking a step from our balance sheet light model into our margins. You'll see here that along with that growth that I highlighted in the first slides, we've continued to expand our margins. So in that 25% to 35% growth time frame, you've seen that we've expanded our margins from slightly below 30% to slightly above 41%. We believe that we'll continue to expand our margins with growth but very important to us, we won't sacrifice growth in order to expand our margins. And you can see here just a little bit of the scale that we've driven, as you see our AUM per professional or management fees per investment professional, that's allowed us to grow our scale over time. Now when I say that we're going to prioritize growth and we're going to look at that first, I want to show a couple of examples of how we've done that in the past, and then I'll show a couple of examples of what we're doing right now, but our opportunistic credit business and our Alt credit business. They both -- if you had looked at them 5 years ago where they were compressing our margin, and in fact, if you add them together, they were a little 0 to negative FRE, but we believe and had a lot of conviction in the growth of those strategies. And you can see today, they are highly accretive to our margin. They have helped us grow our FRE significantly, and they are some of our best performing overall investment classes. This is what we look for when we're investing. If we had sacrificed these businesses for the expansion of margin, then we would be a lot less successful in the long run. So our goal, again, is to look for those areas where we can grow and invest in them wisely. So if you take a look at this next slide here, it highlights for you 3 areas that we're focused on now. And if you take these 3 areas, our real estate, multifamily vertical integration or European real estate debt and our credit Secondaries business. If you look at what their economics were to the firm in 2023, they were a drag on FRE and they compressed our margins. And if you look at what we believe will build over the next 5 years in these businesses, as we see acceleration across all of them, we believe that they'll be accretive to FRE, and they're going to add 115 basis points to our margin. So again, focusing on how can we build businesses with high-quality fees, long-term growth and doing that even though it may compress margins in the short term. This shows you some of the businesses that are more mature on the platform and the margins that we can use to support some of that growth over the long run. It also gives you an idea of where we believe we can get to with a lot of our businesses that are low margin right now and growing. But I know everyone is interested in where do I think we can go with margins in the long run. And that's what's highlighted here. When I think about our margins, if I just said today, we'll tamp down growth activities, and all we'll do is focus on that AUM not yet deploying fees that I talked about earlier. That would add $620 million of management fees. That would then added to what we already have, would put us at a margin well over 50%. So I think we can get to that margin over 50%. We're marching there. I would expect every year, you'll see margin expansion very likely somewhere between 0 and 150 basis points, but it's going to depend on our deployment. As I highlighted earlier, the faster we deploy, the faster management fees grow; the faster management fees grow, the faster you generally see our margin expand. So it's going to depend on that deployment environment and what other opportunities may be present in the market at that time that we may look to invest in. But overall, we have a lot of runway with margin, and we're very excited about the potential that we have there. When it comes time for it, there will be significant tailwinds in using margin for additional growth. Now it wouldn't be a presentation in mind if I didn't talk a little bit about the European-style waterfall. For those of you who are just joining us, the European-style waterfall, represents performance fee income that you receive once an investors original investment has been returned and their preferred return has been reached. So it's generally late in the life of the fund. What is unique about our European style waterfalls, is it predominantly comes from our credit business. Over 77% of our incentive eligible AUM that's European waterfall is coming from credit funds. Now why that's a little different than people may be used to is your American style waterfall is the more traditional equity style where when an asset appreciates and I sell it, I harvest, but that was very much reliant on a mark-to-market that was there and actually being able to harvest at that mark-to-market. In a credit fund, you have a loan that you've made at or near par. You know a maturity date of that loan, so there's not a guess as to when it may be sold. You know what the outer bound is, then that loan is going to mature at par and it's going to have a stated interest rate or, stated yield that's associated with it. So you're able with much more conviction to predict the amount of performance fee that you're going to generate from this because it isn't dependent on as many variables. The primary variable you have really is the duration of the asset because most of these assets don't actually go to that final maturity. They go somewhere earlier than that. Now where are we right now? You can see the slope of where we're at right now. We're at the very beginning stages. So what we're harvesting today is this far side, this $27 billion and $31 billion of incentive eligible AUM, that's what's just entering the harvest stage. You can see that this has grown 36% over the last 5 years, up to $134 billion of incentive eligible AUM that will earn these European style waterfalls. But right now, we're just seeing the performance coming through on a much smaller amount on that $27 billion and $31 billion. And how is that ultimately going to come through? Well, that's going to come through over the next 10-or-so years in the following manner. As we see that first batch come in, that's what we're seeing that's going to be paid towards the end of this year, into 2025 and 2026. Now as I mentioned, duration is the one variable. So we ultimately are able to calculate what we expect to get and what we use is what are the dollars in the ground, what's the forward curve look like for those dollars. What's my expected then incentive fee that I'll earn and for those dollars that are not yet invested, what's the ultimate target return for those. And that's what leads you to the $3.6 billion that you see up there, and that is $3.6 billion of net. So that's the bottom line amount that will be coming to Ares management. And you could see because we're at the early stages, the strength of that $134 billion as it's there and earning, that's going to drive a significant amount of cash flows into that 2028 to 2030 period. So it's something that we're excited about, and we're looking forward to. Now what are we going to do with that cash is another question I get every time I talk about this. Well, it's going to provide flexibility, first and foremost. And it's going to depend on the year that it comes in and what opportunities present themselves in that year. But ultimately, we're going to follow the same thing that we do now with our free cash. We're going to look to see new growth strategies. In other words, look for areas where we can generate more management fee. We'll look to fund accretive acquisitions, as Mike discussed. We look to enhance our dividend distributions. And if the timing is right, we'll look for share repurchases or debt pay downs. So it is flexibility. I think that's very valuable, and it's something that we're very, very excited about. Now we'll take a look at what our forecast looks like over the next 5 years. So our AUM, as Mike highlighted, of over $750 billion. It's key to see that this is growing at 50% faster than the projected industry rates. And as Mike also mentioned, the goal is to grow quality AUM. We want AUM that is going to be high fee and is going to allow us to continue to grow with margin. We would much rather raise $50 billion at a 100 basis point management fee than $100 billion at 30 basis points. We're looking to grow with quality and use that quality to then build on our FRE and RI. You can see from this that quality AUM will enable us to over double our RI and our FRE. And here, you can see the strength of the European waterfalls coming in with the outsized growth of our RI over FRE. And lastly, how does that impact our dividend? Because of the conviction of the cash flows that we have coming in, we're targeting over 20% growth of our dividend for the next 5 years. So continuing to return with the dividend. What have we gone over here? We're well positioned with our model to continue the growth trajectory that we've been on. We're going to continue to invest in growth opportunities. We're going to generate over $3.6 billion of European waterfall performance fees. We're expected to grow faster than the industry average in our AUM, and importantly, we're going to more than double our FRE and RI and have a 20%-plus CAGR on our dividends. With that, I'm going to turn it over to my friends and partners, Ryan, Tony and Ed to talk a little bit about business development. Thanks, everyone. Have a great rest of your day.

Thank you, Jarrod. Hi, everyone. It's such a pleasure to be here with my partners, Ed and Tony, but to be more formal and to really test my pronunciation Edward Polonsky and Anthony Pawlowski.

Even though we've worked together for over 10 years, I'm still really impressed we're going to get both of our names out.

This is my big moderator test, So Ed, Tony, along with [ Sando ] oversee our global relationship management and they've been outstanding business builders for our firm. And I think we're really proud to be coming to speak with you here today. Our teams have had some very strong performance for an extended period, and that really went into this past week where we were just fresh off of our first firm-wide AGM. It was in Scottsdale. We affectionately called it [indiscernible]. And we brought together around 900 travelers from about 150 destinations, and we're just so pleased what it says about the strength of our partnership and positioning with our incredible investors.

That was great, but a lot of investors that don't normally get to see certain parts of our platform got exposed to the entire platform for the first time.

Yes. Really pleased. Also pleased with the 3 of us made it here today was a big week. So I think what we're going to focus on this panel is really around our business development capabilities across the firm. And then I'll ask Ed and Tony to do a deeper dive on their institutional investor perspectives. So Ed, why don't you kick it off? I think we have a familiar slide I've seen before, but maybe to kind of set the stage, please.

Sure. It's interesting to note that this is the same Three themes that Ryan presented in 2021 at our last Investor Day, and they are entirely consistent with the key takeaways from today. So the first one is we built a powerful network of client service teams working in partnership to develop solutions for our clients. The second is the ongoing growth and diversification of our AUM highlights and really validates the merits of our approach. And third, we have a tremendous opportunity to broaden and deepen our investor relationships and continue to grow.

Great. Thank you. So to put more specifics around the significant investment that we've made in these functions that we refer to as GCS IR or global client solutions. We have gone from about 80 to approximately 400 professionals. We are large, global, and we're highly collaborative. And it's really this development and this federation of teams that I think has enabled us to really go deeper and broader with our clients and become that much more relevant and important to them. We look at GCS IR as really having 4 main segments. We'll hear from Raj, our partner shortly on the wealth segment, but maybe each of us can kind of speak to the other 3 with a couple of highlights of what we've seen over the past handful of years. Tony?

Sure. Thanks, Ryan. With respect to relationship management, we've got over 80 RMs based globally in a variety of regions. [ Sando ], Ed and I, as Ryan said, lead those teams. We're based locally and placed to be as close to the client as possible. We're a generalist. We cover every product that Ares sells, which allows us to listen to clients actively and create solutions for them, help driving growth for the firm, but also ensuring that the clients are connected with us.

We've also meaningfully grown our product management and investor relations team as we've expanded our product range. These individuals are product specialists that sit firmly within the business groups and represent the LP voice in the room and service the global client base for those products. They're responsible for all the fund documents, the structure, the data room, reporting and really drive the fundraise from within the business, working very closely with relationship managers to make sure we have the right products and the right structures in the market. So for example, our European direct lending franchise, which we call ACE, was initially a European-denominated levered fund. That has evolved into today where we now offer 4 different currency share classes, euros, dollars, yen and sterling. We offer levered and unlevered share classes. We offer rated note feeders to really meet the appetite and demand that we're seeing from our clients.

Most of our flagships have those [indiscernible] what baked in now.

Fantastic colleagues here, really quarterbacking all of the resources as they look to drive their respective fundraises. And this fourth segment, which we call Investor Strategy and GCS operations, we take a lot of pride here. This is a more recent initiative where we've looked to really take a handful of teams and develop real centers of excellence to really enhance the client experience. . These teams range all the way from our amazing events team as we increase the number of regional events that we're taking around the world really looking to get in front of our investors, showing our different strategies and our culture. And they go all the way to our quant team, really developing research and analytical differentiated insights that help our investors think about their portfolio in different asset classes. And I think I'll just conclude this page why we're very proud of how significant we've grown to about 400 dedicated GCS IR team members. We really view a competitive advantage of Ares is just how involved our entire organization is in client service and really creating solutions. And you certainly see all of our senior investment leadership and business colleagues really get involved in our clients and form really long-lasting partnerships. So that's a little bit how we're set up. Maybe, Tony, starting with you as we think about kind of performance over the past few years.

Yes. Thanks, Ryan. I think we're all really proud of this slide at Ares. Everyone involved in marketing. We're proud because of the growth, the expansion as well of the relationships. On the left hand center chart, you can see the number of direct investors we have at the firm has grown since 2018. The center where we've grown our larger relationships, the $1 billion-plus accounts over 3x, but the AUM in that cohort is over 5x. So we're extremely proud of that. But the story doesn't end there, right? When you look at the right, you'll see almost 2/3 of our direct relationships now invest in 2 or more of our business groups, private equity, real estate, credit, secondary. So as we look to grow the relationships and clients entrust more capital with us, they're doing it across the platform.

Ed, maybe you can share some observations that we have really by our direct investors. So investors not through an intermediate channel, how those inflows have come really shaped by the relationship status that we have with these direct investors.

Sure. I think this is a very important slide. If you look at the dark blue segments, you can see that since 2019 approximately 85% of our inflows have come through existing relationships as we've been able to deliver on performance and deployment and realizations. We've developed a very loyal LP base that have ultimately cross-pollinated our platform and importantly, helped support us in building new strategies. So our relatively recent European real estate debt and credit secondaries strategies were effectively put in business by large anchor commitments from long-standing strategic partners. And at the same time, we've added a lot of new investors onto the platform. So you look at 2023 on the slide, we've onboarded 300 new LP relationships last year, which, over time, we expect to grow and also invest across multiple strategies and expand across the platform.

I think it's a key highlight. It really reflects the great investment teams that we have, that the investors who know us the best are really accounting for the significant majority of our inflows, while still we're adding a lot of new investors that we think we can really kind of grow over time. Maybe to both of you guys want to speak about how we've kind of diversified by strategy and product type, please?

Sure. If you look at the left side of the page, I think this goes back to the overarching theme of Ares as a solutions provider. Increasingly, our clients are very focused on the format of their investments. And I know Raj will speak soon to the exciting vehicles we're creating for the retail channel. But similarly, evergreen structures, open-ended funds, separate managed accounts are in demand by institutional investors who consider alternatives, especially private debt, core long-term holdings for their portfolio, and they're not set up well to process re-ups or re-underwrite closed-end campaign funds every 3 years. So we're creating a wider range of formats to service our investors.

And on the right side, you can see our flagship private credit funds continue to be the major contributors to our AUM. But what's happened and as Mike referenced earlier, these newer strategies we've developed, these new business lines are not only contributing today but are engines of growth for the future as we look at Secondaries, insurance, infra, real estate, we're starting to create new funds and new products, which help us provide more solutions.

Yes. We keep using client solutions, so important we put it in our group name, but it's a big focus for us, just really the whole mindset of trying to match up our external and internal clients. But if we go to the next slide, I think this really helps us be able to really go in and sit with our investors, think about what they're looking to achieve. So over the past 5 years, we have tripled the number of fund families that we have that has at least $1 billion fund or greater. And so when you add in what Ed has shared that even ACE an existing vehicle has more access points for some of the structuring we've done, there's just so much more opportunity for us to really go out and tailor our approach to these different clients around the world and really look to solve their specific objectives. So I think we've covered a little bit where we've been, where we are today, maybe, I guess, to each of you as we think about the outlook and how we feel we're very well positioned today. Ed, do you want to start?

Sure. So I think the first point I'd make on this slide is that alternatives have now been tested through multiple market cycles and have behaved as they were supposed to in terms of performance and mark-to-market volatility. So a lot of our institutional clients continue to increase their allocation to alternatives. The second point is in this prolonged high interest rate environment. Institutional investors recognize that there's a value transfer from equity to debt, in particular, floating rate private debt and continue to increase their share, which Ares has been a big beneficiary of. Just in the U.K. and Europe, we see insurance companies really proactively trying to ramp up private credit on their balance sheet and capital efficient format. The third point is that the largest sophisticated investors in the world are seeking a few partners that can deliver holistic, diversified private market solutions and deploy in scale. So again, Ares has been a big beneficiary of this theme. And as our relationship managers are all product generalists, they're well positioned to have these types of strategic conversations rather than just pitching individual strategies.

And finally, in this world today, it's not enough just to originate and deploy capital. Our clients really want to see money coming back. That's critical today, and we keep hearing from our investors that DPI is the new IRR. Tony?

Yes. The next slide will just go through some of the key growth drivers. Mike mentioned some of these earlier, and we thought we would dive in a bit. So we expect the institutional alternatives bucket to increase significantly in the next 8 years, and Ares is well positioned given our product set. The tailwinds of that movement, since I just mentioned, from equities and traditional fixed income into private credit, we, again, are well positioned to take advantage of that with our product set. When we map out our clients, where we should be, who should be our clients and what they should be engaging with us, we have a lot of white space. When Mike talked about wallet share and market penetration, we see tremendous areas of growth coming in the years ahead. As ED just said, there's a consolidation going on right now where the biggest, and not only the biggest, but most of the largest LPs are looking to consolidate with the major GPs. And then our product set. As Ryan showed on the last slide, our 30-plus large fund families allow us to deliver the proper solutions and deliver growth for Ares.

Great. Well, to close, I'd just say it's a real pleasure to partner with each of you and our wonderful colleagues across GCS IR. We're very proud of what we've built, the culture and the mindset of the whole organization to really be client-oriented and creating solutions. And we feel very excited for the outlook. So with that, we'll pass it on to our dear partner, Raj Dhanda, Global Head of Wealth, to talk about all the accomplishments and the opportunity in that channel. Thank you so much for your time.

Good morning. Great to see some familiar faces. Those of you that I haven't met before, I joined Ares in 2021 as part of the acquisition of Black Creek Group. Prior to that, on building that distribution channel, I was at Morgan Stanley for 25 years in various roles, including, among other things, I was responsible for all the investment products and research in the wealth channel. I share that because it forms just how excited I am, not only about being at Ares, but being at the intersection of alternatives and wealth management. As Mike outlined, it's a secular trend, and I've been in financial services long enough to know that you don't always get to be at the forefront of some really powerful tailwinds at a firm with an incredibly great culture. So I want to focus on really 3 key themes. They're quite simple. You're going to hear them come out throughout the conversation. The first is we're in the early innings of these secular tailwinds, not only is the firm doing well, but the opportunity will grow in the wealth channel for alternatives. The second theme is, and it's an important one, there's a competitive moat around what I believe are 5 or 6 firms -- around the industry that will lead to 5 or 6 firms being the winners. People, products, a track record, they're all critical to be successful. And then the third key theme is economies of scale are starting to emerge. We've made a significant investment. We'll continue to invest, but our fundraising results will far outpace our future investment. So I mentioned the opportunity. The future is bright and the growth of the pie and the allocation to it is quite clear to me and others in our industry. Because of the aging population, because of the shift towards a defined contribution marketplace, you will see the pie grow from $80 trillion today to close to $100 trillion. The allocation to alternatives remains massively under any target, and there's tremendous support for that, not only from the financial adviser but also from the banks they work for. And so you should also see the allocation grow materially in the coming years. So as I said, the future is incredibly bright. I'm very proud of the last 3 years. We've been busy. Our future will also be something I'll get to, but let me just step back and talk about where we've come from. It was only 3 years ago, we had one product to offer perpetually and that was targeted to the retail client. It was only a few years ago, we didn't have the scale and the footprint to service these products and to distribute them in a highly fragmented channel. It was only 3 years ago that we were 12th ranked. Today, we're 4th. Only 3 years ago, we had a 2% share. Today, we have an 8% share. The results are clear. Our AUM has grown to approximately $25 billion, excluding ARCC, which as you know, is largely held in the retail channel. And our management fees are paid day 1, which is an important balance to the financial results of the firm. Our strategy is quite simple. In this industry today, you need to have a global brand, a 20-year track record, relationships. Ares has all of those today. We leverage them every day in the retail channel. You need products that are targeted for the investor. These strategies allow you to work with large distribution platforms each day. We are one of the few firms, the only firm today -- we believe, I have to remember [indiscernible] Carl Drake qualifiers. We believe we're the only firm today that has 6 semi-liquid strategy is all over $1 billion. The sixth will be $1 billion by June 1. That's unique and important because diversity of offerings is crucial. We work with over 50 partners globally. They know Ares. They like to partner with us, and those partnerships are critical to our strategy. We think about all parts of the retail channel and have the resources to execute with wirehouses, RIAs, family offices, private banks. And then we're focused on thought leadership. We're focused on education, and we use data where we can to make this channel less fragmented. We're trying to drive demand to our sales team, and it's key to our strategy going forward. As I mentioned, we're pleased with our results, but it's just the beginning. We've taken our quarterly flows to 2, 3x what they were just 3 years ago, we've broadened our product suite, and we've grown globally. Over 1/4 of the flows recently have come from Europe and Asia, where we've built out teams and we'll continue to invest. And as you can see, we've steadily added strategies that give us one of the most diverse and complete offerings in the industry. After product development, you need to broaden your partnerships. As I mentioned, we work with about 50 firms globally, but there are 7 or 8 that represent over $1 trillion in client assets that help you anchor a product. CADEX was an offering that we worked on from 2018 to 2021 and quickly, we're able to put together 3 of the leading platforms to offer the product. While there have been headwinds for real estate strategies, we have still put together 3 new partners for our non-traded REITs importantly during this period. And we raised over $2.25 billion for ASIF, APMF and AESIF really with just the support of one key anchor. The future is incredibly bright as we grow our partnerships. It's also an exciting time because our penetration will grow. We have yet to do business with 95% of our addressable market. In fact, 90% of our business -- 90% of the advisers we work with have only done 1 product with us. With our diversity of offerings, with our strategy to be product agnostic, all of that will change. It's not enough in today's retail channel to simply have products. They need to be differentiated, and they need to span the full spectrum of core to opportunistic, open-ended and closed-ended. And in each asset class, you need to be a leader, you need to have something to win across the many offerings. No doubt you're well aware our credit platform is highly differentiated. Again, I'm reminded about the things I'm not supposed to say. But we might have the #1 platform as the retail channel thinks about our credit group. And we can offer strategies in different form, and that's quite crucial. I believe that in private equity over time, Secondaries will be the preferred method of investment. The level of diversification without sacrificing return is actually a remarkable and very relevant for the individual investor. As I said last night, over cocktails, my personal experience investing poorly in vintages would have been certainly much better had I had the opportunity for the Secondary strategy across the different private equity opportunities. And then in real estate, tax is a key differentiator. Everyone has seen how we grew the REITs with the ability to offer a 1031 solution side by side. It allows you to bring net new assets into an adviser's book, offer a tax solution and create really sticky shareholder base, which the latter was quite useful to us in the last couple of years. In the 1031 exchange market, we have an 18% share. The next closest competitor has a 9% share. So as you go across working backwards, we are differentiated in real estate. We are differentiated in private equity with the only pure-play secondary strategy. And of course, we have the preeminent credit platform. As I mentioned, upfront economies of scale are emerging. We will still invest Europe and Asia are key areas for that growth. However, this is a scalable platform today. Our fundraising should double, while the CAGR for our investment will grow at roughly 10%. This still is a highly fragmented channel. It's a big part of why I say there's a competitive moat. It's key to why we are thinking about how to drive the financial adviser and their clients to our team, core to that strategy is access to Ares, core to that is leveraging content that we already have, leadership that we already have that can use our platform to reach the audience much more efficiently. So let me just end with where I started. This is an exciting opportunity. There's a true competitive moat and economies of scale are emerging. If you just think about where we will be or what our goals are, we certainly have a product suite that is quite diverse and amongst the leaders in the industry. I mentioned the sixth of our new semi-liquid strategies will cross $1 billion on June 1. It's not just one thing to have a product, but you need to get to that first $1 billion. It's the most crucial start you need for any fund. Our team will continue to grow. Our rank should improve to the top 2 or 3. And that rank in wealth management is really the equivalent of #1, I believe. The financial adviser offers 2 to 3 solutions when they pitch a strategy, and as long as you're in the top 3, you're going to be one of the leaders and winners. And then a much debated AUM target of $100 billion. We have clear line of sight to that. We feel really comfortable that with our solutions in place, with our team and with all of our capabilities, the associated management fees as well from day 1 will be a big part of our future. So I just want to thank everyone for giving me the time to be with you. I've been here 3 years. I feel like I've been at Ares 30 years. I'm going to introduce my partners who lead our global credit group, and I look forward to seeing you again in the near future. So thank you very much.

Hello, everybody. The three of us are delighted to be here. It was fun hearing Tony and Mike's opening remarks, talking about anniversaries and Investor Days and all of that. The 3 of us have been together for 25 years. We've had some interesting times, but it's always been a pleasure, guys. So listen, I feel that we have a pretty easy [ remit ] this morning. We're here just to provide a quick overview of where we stand in credit, which, of course, is our largest business, but we're getting a little bit off the hook with only 10 minutes because we really want to feature some of our strongest players. We have Kort Schnabel, Blair Jacobson, Joel Holsinger, Aaron Rosen and Edwin Wong all coming up to do distinct segments on some of the verticals that we're managing today. And a big part of our job as we think about it, 20 years into coming to Ares, it's really about getting the right players in the right position on the field, and that's something that we spend a tremendous amount of time on, invest in our people, invest in the types of people who work with and for us, empower them to run their businesses and achieve success. We can't do it by ourselves. We don't do it by ourselves. So I'm thrilled that you'll get deep sessions on really each of the 5 verticals, which you'll see here in the middle of this slide, Direct Lending in the U.S. with Kort, Alternative Credit with Joel. We're not featuring liquid credit today. We want to put a little bit more focus on Opportunistic Credit with Aaron and then have Edwin come up and talk about APAC. But all in all, today, we manage a little bit north of $300 billion in credit. We have 500 people. It's obviously a global business, leading with North America, but Mike mentioned our expansion into Europe in 2006. That's become a very large business today, and we're very focused on growth in APAC credit. But again, one of the few platforms that's truly global that I think has a 25-year investment track record. Mike and Tony stole some of our thunder. We say this over and over again, our business and credit leads by bringing origination and bringing unique differentiated deal flow to our investors. That's why they come to Ares. We've got a great liquid credit business. It provides the foundation for deep credit research and industry analysis. But again, it's really all about deploying people into these local markets in geography, and you'll see how the growth in our investment professionals has grown. I know Mike talks about this a fair amount. We have the highest investment professional account, I think, amongst any alternatives firm, particularly in credit, and I think we'll continue to. It's all about investing in those people. So over to Mitch here for a moment.

Thanks, Kipp. You keep hearing us talk about the many advantages we go to market with in our Direct Lending group. You heard Tony talk about it. You heard Mike talk about it. I'm going to focus on three: scale, origination and incumbency, and I promise I'll do it quickly. As you can see with scale, we go to market with among the largest balance sheets in the industry, $190 billion and growing. So what does that mean? It means we can typically can commit and hold more than our competition. But what's wonderful about the fund platform that we've created at Ares, no individual fund ever takes undue risk. The average position size at ARCC is 0.2%, and that is not uncommon across our funds. Now we have the luxury of running really diverse funds because of our origination. Our scale allows us to continually invest in origination. As Kipp just mentioned, we go to market with the largest Direct Lending team in more offices around the globe. Simply put, we out-originate our competition. And when you see more, you can be more selective. It is not uncommon in a given year for our Direct Lending teams have gross originations north of $40 billion. And what's amazing, and you heard Mike talk about this, we say no 95% of the time. So when you reverse engineer that number, you can get a sense of how much information, how much flow the volume that comes through this system year in and year out. Most of our competition can't begin to process even a sliver of that deal flow. And finally, incumbency. Most years, 50% of our gross originations comes from our existing book of business. And so when you marry the largest origination team by far with the largest book of business, you get a sense of why our market share continues to grow year in and year out. So what does this mean in practice? How do these advantages help our investors? Well, on the right side of this page, I want to focus your attention on that chart. And what it simply shows you is that irrespective of what's going on in the liquid loan market, the new volume market, our teams continually find unique assets for our investors, and they do it in scale. There's a $40 billion number I referenced. And before I leave and turn it over to Smithy, Kipp mentioned, we're going to spend a lot of time on our Liquid Credit group. But a big part of our credit business is that Liquid Credit team. Our first fund at Ares in 1997 was a CLO, and we've grown that business tremendously over the past 27 years. Today, it's $46-plus billion, and our teams constantly rank in the top quartile of performance. And what's wonderful for the firm is not only is this a very large growing business, but as Kipp talked about, our traders and our research analysts in this group constantly provide information and new deal idea generation across our platform, and not just to our Direct Lending businesses, but to our private equity groups, our Alt groups and our Opportunistic Credit groups. So with that, I'll turn it over to Smith.

Great. Thanks, Mitch. Brevity was never your strength, and that was pretty good for you. I think as we think about the Credit Group, I think one thing we wanted to highlight was kind of the growth in the platform and the different asset classes, but also the size and scale, Mitch mentioned about how Direct Lending was the first business kind of that we started and how we really focused on size and scale of the assets and the team. And what this chart is trying to depict here is if you go back 5 years, we basically had 5 funds or series of funds, that public company, a series of funds that had $1 billion of aggregated assets. Fast forward today, and there are 15 family of funds that have over $1 billion of capital. And that's -- what's great about is the diversity of it. So you have alternative credit, a new silo within credit. You have special opportunities, a new silo, but then you have tangential silos within the Direct Lending business, sports, media and entertainment, health care and then globally, a business in Australia, which is now doing Direct Lending. So you could see the halo effect of having these large pools of capital in order to invest in different asset classes in different parts of the world. And I would say that the 3 of us are incredibly focused on two things here. One is continuing to add to the resources. So we want these funds to continue to grow, continue to prosper, continue to keep those competitive advantages, and we're dedicated to hiring more people, opening new offices and expanding the footprint. And then second of all, we cross-pollinate on different investment committees throughout the firm. So if I think about Patrick Trears and our Infra Debt business helping him solidify his sponsor relationships, working with Bryan Donohoe and the debt team on the real estate side to build size and scale, learn from the blueprint that we've created. And then I look at what Dave Schwartz is building, a partner who helped us build the Direct Lending business and what he's doing on the Credit Secondary business, we can help with that infrastructure. We can help with that blueprint and help them guide the way. A couple of examples here. I look on the upper left-hand part of this. The European business, I look what Blair and [ Mike Dennis ] have built, and I wonder, they must think how easy it was. They just copied everything that we did in the U.S. But I joke, they've built a phenomenal business. They had a first-mover advantage, but they didn't rest on their laurels. They opened offices across Europe. They build size and scale and their capital base and now they have a dominant market share in Europe and have built a phenomenal business. We want to do that across Alternative Credit. It was a business that was kind of focused on separate asset classes with Joel and Keith now building that business to really take advantage of what is probably, as you'll see on the next slide, one of the largest addressable markets. And if you look at Europe going from $10 billion to $50 billion and really kind of dominating the market. Alternative Credit is on the way there. And I think that could be a $300 billion business over the years. And then opportunistic credit. As we think about evolving, we've now repositioned that business within the credit group more closely aligned with the private equity and sponsors and direct lending business to take advantage of a changing market environment and a great opportunity for that asset class. And then finally, I'll just kind of hammer home the point. This is a Carl Drake slide, so it's complicated. It used to have 5 axises. It only has 2 here. But I think what it does show is obviously a very, very large addressable market, a $40 trillion market, where, as Mike mentioned earlier, we have about a 1% market share. So lots of opportunity for these funds to grow and to expand.

Yes. We had a slide that was significantly less complicated at the Investor Day in 2021 that we premiered there. But the question that I'll leave you with that we get asked a lot just in closing is, you guys have built this great market-leading credit business. It's so big, aren't I just buying the index. And the simple answer, and Mike put the easier to read slide up is no. We're playing in a huge addressable market across corporate credit, asset-based finance, opportunistic credit in multiple geographies. And while we've shown tremendous growth in this business, we think the best is yet to come, and there's a lot of great stuff ahead. So with that, I think we'll exit stage left and ask Kort to come up.

All right. Hello, everyone. I'm Kort Schnabel. Excited to talk about our U.S. Direct Lending business today. As I think everyone knows, we have been in the direct lending business in the United States here at Ares for a very long time, longer than almost all of our competitors and peers in the marketplace that we see every day. We've invested through all different market environments over that 20-year period and generated industry-leading results for our investors, which has allowed us to amass more and more capital and allows us to stand here today and present the largest Direct Lending platform in the United States. You can see in the pie chart there on the right, we manage $129 billion of AUM today. It's relatively diversified in terms of the types of funds that we manage. We manage over 50 different funds now in our U.S. Direct Lending business. The largest is $43.9 billion. You see there is ARCC. We have a whole afternoon dedicated to ARCC, our publicly traded business development company, but relatively diversified by fund after that. We've invested $142 billion since our inception 20 years ago, and we have a 2 basis point annualized loss ratio. There are so many things that go into that. I don't have time to get into it here in this 5 minutes, obviously starts with the broad origination, the same, no 95% of the time. And then so importantly, our portfolio management team, the actions that we take when a portfolio company's performance is not going according to plan. Our ability to work through that, get our money back, sometimes even get gains to offset our losses, all goes into that 2 basis point annualized loss ratio. We've transacted with 450 different financial sponsors. I think most people know, the source of our deal flow is primarily financial sponsors, but we are not dependent on any one sponsor for our deal flow. That diversification is very important for so many different reasons. We've invested in the largest team now we believe, in the industry, 200 investment professionals just in the United States just focused on U.S. Direct Lending. We have so much more room to grow. It has already been hit on earlier a few different times, but in our U.S. Direct Lending business, we've sized the market about $5.4 trillion, $3 trillion the traditional middle market where banks have largely kind of been pushed out, mainly served by private credit providers, a whole another $2.4 trillion market that the banks are still very active in syndicating leveraged loans and high-yield bonds. We're obviously just starting to chip away at that market. We have what we estimate is a 2.4% market share position today, so still a huge amount of runway going forward. This slide outlines our depiction of the market, where we sit relative to our competitors. You can see, as I already said, we are the largest the Y-axis, by the way, a size of managers, so we sit there at the top. But maybe even more importantly, we are the only direct lender in the U.S. that competes across all 3 size ranges of companies, lower middle market, middle market and upper middle market. Some of our competitors straddle a few of those, but no one goes across all 3. This is really, really important, it gives us the ability to get in early with our portfolio companies when they're small, gain incumbency, grow with them as they grow. As you can see, lots of different competitors, but we stand at the top. A little bit of backup data on the point I just made. You can see on the left-hand side, this is our origination over the last 5 years. The distribution of different company sizes. About 50% of what we are originating is less than $50 million of EBITDA. It allows us to move up and down depending on what the market is giving us, right? Last 18 months, the banks were kind of on the sidelines. You can see we skewed a little bit more toward larger companies. Obviously, now as banks are coming back, that origination in the lower and middle market is going to help us continue to find the best companies. And the beautiful thing is on the right-hand side, you can see there is a premium for being able to invest in some of these smaller and midsized companies. Spreads are higher, leverage levels are lower. Talking about the sponsor relationships there on the left-hand side. It's grown nicely over our history. But maybe even more importantly, a new area that we are focused on is nonsponsored. We are trying to really make sure that we're penetrating more and more on nonsponsored companies, staying a step ahead of our competition. We've put in place several different industry verticals with people that are just focused on those industries, which allows us to go out into the market and build relationships directly with management teams. You can see the increase over the last 6 or 7 years now in our nonsponsored deal flow. It's grown from 11% of what we see to now 25% of what we see. A lot of stuff going on in this slide. We'll spend a lot more time on this afternoon, but you can see the broad funnel that we've talked about. In 2023, we saw about $0.5 trillion of deal flow come into our platform. That allows us to be super selective, as we've already talked about several times. You can see on the bottom left, 4% to 5% selectivity rate remaining very, very consistent over time. And then my last slide hits on our yields, our overall performance going back to 2004. Everybody always asked us what's happening with private credit yields? Are they up? Are they going down? The answer is yes, all the above. They go up, they go down, they change a lot based on what's going on in the market. But what's more important than absolute yields is relative yield, the yield that we're generating relative to the broadly syndicated market. Left-hand side is first-lien yields. Right-hand side is junior debt yields relative to the leverage loan index and the high-yield index. We generate a 200 to 300 basis point premium over a 20-year period to the first-lien index at a 400 to 500 basis point premium to the high-yield index. And maybe even most importantly, at the bottom, much, much lower loss rates at the same time. I'll end it there, and now I'm going to have Blair come up to the stage.

Great. Thanks, Kort. Hello, everyone. I'm Blair Jacobson, I'm responsible for European Credit business at Ares. So I'd like to rewind to the mid-2000s, when our U.S. direct lending team asked a very simple question, which was where else can this strategy, this blueprint that they've developed work in other markets across the globe. Well, at the time, Europe was an obvious answer. A lot of great middle market companies, a lot of private equity firms that are consumers of leveraged finance. However, what was not obvious was, frankly, there was nobody doing it. At that point in time, pre-GFC, banks had 100% market share for European Direct Lending of senior secured assets. But Ares said, we can do this. So we entered the market. We lifted a team out of Barclays Bank. And as you can see here, the rest is history. And I'm really excited to share with you the business that we've built in Europe. We strongly believe that we are the #1 ranked manager by many different metrics. You'll see here, we manage about $70 billion of assets. That's grown almost 25% per year over the last 5, 6 years. We've invested more than EUR 60 billion in more than 350 different companies. That's supported by what we think is the largest investment team in the market. Again, nearly 90 dedicated investment professionals across 6 offices. We came to London in 2007. In 2009, we opened up Paris, Frankfurt and Stockholm. And 5 years ago, we opened up Amsterdam and Madrid. And all of that has been backed by very strong investment performance in true Ares style, backed by a very, very low loss rate. Now why are we so excited about the European market? And I'll contrast it a little bit in a few moments to the U.S. But suffice it to say, it is a very large market, about $1.5 trillion, with upside from there based on liquid loans and issuers that we think we're relevant to. And contrast that to our $70 billion of assets under management. We strongly believe there is a lot left for us to go for. Now contrasted a little bit to what we see in the U.S. The European market structure quite simplistic. At this point, it's really just banks, and alternative managers with banks steadily losing market share in groups like Ares gaining market share. We do not have a BDC market in Europe. The retail high net worth market is nascent. As you heard Raj say earlier, we have some really exciting developments on the Ares side there. There's no middle market CLO business. So from that perspective, again, it's quite simplistic, but in that way, it's very attractive because I'll get to in a few minutes. It's very inefficient. So the risk-adjusted returns we can generate in Europe and have done are very exciting on an absolute and relative basis. But we don't think it ends here. There's a lot left to go for. European Direct Lending market really started in the U.K., which was the hardest hit in the financial crisis. It's now spread to Continental Europe. We're spending time now on Southern Europe and Eastern Europe. As our fund sizes grow, and it was a nice slide that was put up earlier showing that we're more relevant to bigger companies. So again, larger funds were more relevant to bigger issuers. And further, regulation has actually been a positive for us. The implementation of the Basel regime in Europe and Basel IV on the horizon means it's less efficient for banks to hold these loans on our balance sheet. So more of that is coming to groups like Ares, and also things like the nonsponsored opportunity, 25%, you heard Kort say in the U.S., Europe probably 5%, 10% and growing rapidly. So let me put some of this into some data and numbers for all of you. Starting on the left. Again, when we started in 2007 bank market share, 100%. That has steadily been decreasing 10 years ago about 85%. Now it's below 50%. And again, that's all been for the benefit of alternative direct lenders like Ares. Now that might be a little bit higher in the continent, a little bit lower bank market share in the U.K., but the trend line, we think, is very, very clear. And that's also demonstrated by what you see in the middle, which is the number of deals done every year by alternative fund-based lenders like Ares. And that's grown 6x in the last 10 years. Again, run rate 600, 700, 800 deals done each and every year by fund-based lenders. Now similar to what you heard Kort say, a lot of our companies are owned by private equity firms. The private equity business in Europe is highly developed, over $250 billion of dry powder left to invest. Now that will need something like $250 billion of credit. Well, look at where European Direct Lending, dry powder is under $70 billion, and we simply think banks cannot fill the difference, again, creating a very nice supply-demand imbalance for us. Now spending another moment on our business. We talked to something like 1,300 European companies each and every year, and that's grown significantly over the last few years. But we're still selective. Again, you'll hear this a lot today. We only complete with 3%, 4%, 5% of the companies that we see and choose the very best. Now another difference between the U.S. market and Europe. Europe tends to be more of a sole lender market. We don't have many club deals. And what this helps us do is control the return, the terms, the documentation on the way in. And if the companies have any issues, we're in control of the outcome there. But again, the indicators are flashing green. We're seeing a 14% yearly growth in our number of introductions. And just last year, $25 billion of early read volume. So how has that translated into returns? Well, we've been able to convince investors around the globe that the relative value available in Europe is very, very attractive as illustrated here. Most recently, again, our upfront fees in our deals, we charge on every single one has never been below 3%. Currently, it's a little bit higher. Compare that to other markets, it can be 50, 75 basis points more. Our loans also float. So again, Euribor just over 4%, and U.K. [indiscernible] just over 5%. That implies with an 11% yield. We're making LIBOR plus 6 or 7. Add the fees to that 3-year expected underwritten returns around 12%. Now the risk we are taking to achieve those returns actually has been going down. That's why spreads, leverage has been going up. But again, over time, when rates go up, that means companies can absorb less leverage. The leverage in our new deals peaked in 2020 has been coming down ever since, currently below 5x. And further, when you look at loan to value, again, that risk has actually shifted towards the equity. It's our loan to value for the past 2 years has been below 40%. So to wrap things up on the direct lending side on behalf of myself and Kort, we're really excited about the market opportunity ahead. After these sessions in the break, you'll have a panel on the next frontier. Well, actually, we think we still have a lot left to go for as well in a $7 trillion market where we believe we are the best resourced manager with nearly 300 dedicated investment professionals and over 700 underlying businesses through incumbency that we continue to lend to. We'll continue to raise funds to address these markets in the future and believe that we have a really, really nice road ahead of us. So with that, I'll hand it over to my partner, Joel. Thank you.

It can be a little intimidating to come after behemoths and market leaders of European and U.S. Direct Lending. What's a lot more intimidating is when you're standing off stage and your target goes from $70 billion to $100 billion to Mike Smith's $300 billion. So with that, we'll begin on a little overview of Alternative Credit. Ares Alternative Credit, it's called many things by others. It's called Asset-Based Finance or ABF, it's called Asset-Based Credit or ABC. We look at it as every investment we make is a credit-related investment. We're not doing just financing assets. We're making credit-related underlying assets. Everything is a portfolio. It's a portfolio of loans, leases and receivables. It's also a portfolio of contractual cash flows. We are investing with a particular view in mind. We are generally looking across those from a relative value lens and as we continue to invest. At its simplest basis, we lend, we own, we invest in liquids. And as we'll go through this and we talk through our different pools of capital, we've built our capital to be balanced. We built our capital to grow with balance, both across the liquid or the rated part of our markets, both public and private rated, as well as across the illiquid or direct originated similar to what you see across other parts of Direct Lending and Opportunistic Credit. And so as you look at our team, we have a large established team, one of the largest teams in the space, over 70 investment professionals. But just as importantly, we have a very senior team. We've been doing this for an average of over 20 years for half of us. My partner, Keith Ashton and myself have been doing this for over 25 years. We have a long track record in this space. This is not an area that's newly discovered for us. This is an area where we have this established track record at Ares alone since 2011. And the thing we're most proud of, as you can see on stage over $45 billion of invested capital, just barely a hair over 1 basis point of annualized loss rate. That is what attracts capital. That is what attracts scale. That is what continues to grow the flywheel that Mike talked about earlier. So as we grow -- as we've grown from 2018 to 2024, we've remained balanced and will remain balanced from here. You touch our markets every day. We talk about these portfolios, we talk about loans, leases and receivables. When you leave your house, drive your car, stop at Starbucks, go to work, you're creating contractual cash flows with the residential mortgage. You're driving your car with an auto lease or an auto loan. You're using unsecured consumer loans, you're using credit cards, you're streaming Netflix, you're streaming Spotify and others. All of those create those contractual cash flows. All of those create those portfolios of assets. That is why our world is so big. $28 trillion, and we're just starting to scratch the surface. This is a market that was consolidated in the pre-GFC days with your GE, CITs, capital sources and some of the banks. It became more fragmented. We've been since 2011, the largest consolidator in this market, and we continue to press our advantage with regards to that scale. Our biggest advantage we have is sitting on this platform. If you think of our platform we sit on today, we have partnered with everybody you'll see on stage today. We have partnered with them, and it's this collaboration that really drives not just our business but drives all of Ares. Because when you think of our partnership with real estate against diversified portfolios of net lease or single-family rental, when you think of our partnership with infra debt and infra equity across digital, fiber -- what are digital assets such as fiber and cell towers and data centers, that ability to bring flexible capital and scale, whether it be in the rated part of our markets, whether it be in the unrated part of our market is directly sourced, that is what allows us to stand on the shoulders of giants and do what we do. And so what we've done is we've raised capital that meets the opportunity set. When you think of the opportunity set, that $28 trillion that sits out there, the key is having balanced capital. The key is not being overweighted to just insurance solutions. The key is sitting there and being able to drive something where you'll have returns across the return spectrum. As you can see on the screen, we have capital that's raised in scale across insurance solutions. About half of that is in partnership with Aspida, and we will continue to grow with Aspida, but we'll also continue to grow with our third-party insurance clients. We have capital on the other end of the spectrum with Pathfinder. And as we sit there with Pathfinder, we have the ability of relative value to rotate across these asset classes of lending, owning and also playing in liquids, but with that relative value lens. And in the middle, maybe one of the biggest opportunities is the core strategy because if you look at the core strategy with similar return spectrums of what you see across the Direct Lending or other assets, it's a massive world. That ability to bring that capital and bring capital that's also unique from the standpoint of being open-ended versus Pathfinder being close ended. That entire thing, the opportunity set meets the capital that we've raised and continue to grow. Why? Why do we raise that type of capital? Why have we raised the capital we have? We've talked about quality AUM. At its simplest, Keith Ashton, who you'll hear from later on the panel, always says I can never finish an example or a speech without talking about food in some form or fashion. So the recipe, as you've heard here today, for alpha is simple: origination plus relative value. That's alpha. And so the more we originate, the more that we bring relative value to the table with a little bit of sprinkle of information edge, that flywheel as we've talked about earlier, that alpha creates that growth. That alpha brings quality AUM. So as much as we will scale our insurance solutions, and that's a massive opportunity, as much as we will scale Core, we will also scale Pathfinder. So that ability to bring that capital is the key to our thing -- is the key to our business. If you look at relative value, it's interesting because a lot of people will look at this slide and they'll say, look at all of the different categories of assets from real assets to transportation to consumer and other. It actually is even larger than that. Because if you look at any individual asset on here, if you think of residential mortgage, we do residential transition lending. We do whole loans in the non-QM space. We invest in mortgage REITs with regards to preferred equity and convertibles. We have the ability to acquire assets. We have the ability to invest in assets. We have the ability to lend against those assets. So that ability to rotate in net lease where we're doing lending as well as [indiscernible] strategies as well as the deal we did 2 years ago with Capital Automotive for $3 billion, that brings that scale. And so we continue to press our advantage. We continue to have that competitive advantage as we grow. And it's showing in the numbers. As you can see the growth we've already had to this period and the 6.3x growth we've had through 2023, we expect to grow from here. We'll put $70 billion on the page. I will not go to Mike Smith's number, but we also do it with purpose. 6 years ago, I went to Michael Arougheti back in the hair gel days with an ask, which was we want to be able to tie what we do in with purpose. And when you think of that purpose, we were almost been Pathfinders with regards to combining not just alpha, combining not just relative value, combining not just great results for our investors, but doing it with a charitable tie-in where at least 10% of our flagship fund with Pathfinder and Pathfinder II we just raised as well as our core strategy with 5%, having that go to global health and global education charities and inspiring the broader Ares foundation that we have today. It's one of the best things that I've ever been involved with. It's the reason, as I've held Mike all the time, I will never retire. But it also drives the culture of what we have, and it continues to make us a preferred counterparty. So in closing, a long track record of 1 basis point annualized loss rate, scaled capital across the opportunity set, a balanced approach with our partners and with our capital, a huge tailwinds across what we have in asset-based credit from banks and insurance as will be covered later today, all while investing with purpose. The future is bright.

Good morning, everyone. I'm Aaron Rosen. I am the Co-head of Opportunistic credit with my partner, Craig Snyder. Really excited to be with you here today. This is a very exciting time for the opportunistic credit business. I'll spend a few minutes talking about where we are today, the market environment, why we think it sets up so well for the product and the platform that we've created and then where we're headed. The origins of our business really started back in 2018. It's a special -- it was a special situations business. And I'll talk in a moment about how the markets have evolved as you think about stress and distressed product and market dislocations. When we first started, we effectively inherited a public market trading business that sought to capitalize on market dislocations by buying distressed securities. And what we've done over the last 6 years has really evolve that product to one that has become a true all-weather strategy capable of deployment in both good times and in times of dislocation. Today, we manage $14.6 billion across the opportunistic credit funds. We've deployed $12 billion in Funds 1 and 2. We have 30 investment professionals in New York, London and Los Angeles. And our returns here, 22% gross and 17% net, we believe are amongst the best out there in our industry. We also have a quite low loss ratio of 0.1%. I was quite proud of that until I heard some of my partners speak before me. And -- but 0.1% will take with the relative risk return that we think we're delivering. So what we've done here over the last 6 years is really create, again, a scaled platform capable of deploying in both dislocated and healthy markets. We performed deep private equity due diligence. We identify themes in the marketplace. We go and attack those themes, and we deploy effectively through the very strong sourcing engine that Ares has. Here, I'll talk a little bit about what the legacy stress, distressed special situations funds look like versus the Ares opportunistic credit business that we've created. Again, legacy public market deployment focus, confined yourself adversarial to a sponsor and to companies, difficult to execute at scale, the illiquidity in the public markets is -- has gotten a lot of attention, dealer desks are not carrying a lot of inventory. The Street research coverage isn't there. And that lack of liquidity has further exacerbated the volatility in those markets. And finally, you hear a lot about creditor dynamics in the current market, negotiations where liability management and debt discount is around the corner and putting creditors in tough positions. The product we've created, we believe, is simply a better way of pursuing the stressed and distressed markets and also lending into over-levered, healthy companies that just need more time to execute in a higher for longer interest rate environment. We can deploy consistently across market cycles. We're in control of our destiny. And we have a partnership orientation with the firm sponsor clients. So this is what it means by the numbers. The top part shows our deployment across the last 6 years. So importantly, again, consistency. This enables us to achieve what we call vintage diversification. You've heard these themes about sourcing funnel, relative value. What we try and do is simply identify the best relative value in any of these market periods. Healthy prior to the pandemic, the dislocation during the pandemic. Obviously, we were healthy again, then we have the bout of inflation, and the interest rate hikes and now we're healthy again. The healthy market we're in today, I would argue, is a lot easier for us than with a healthy environment back in 2019. The economy is strong, but obviously, the higher base rate is a big tailwind for our business. The profits that we've generated, you'll also see are evenly distributed between dislocated and healthy environments. So again, this is a strategy that's generating the types of returns that our LPs expect of us and not relying on a market dislocation to do so. So what is our addressable market? It's quite large. I would actually argue that this page doesn't even do a justice because some of the opportunities we're actually financing today are for companies that are just looking for growth capital. When you think about the problems, many companies in the middle market face is the ones we've been speaking about. Too much debt, higher interest rates cause problems with interest coverage. Sponsors are having trouble returning capital to their LPs. And growth is more expensive to fund, again, because cost of capital is higher. So when you put all that together, the opportunity for us with a scaled platform to provide credit instruments with equity upside into those companies today is very, very large, and we are scaling rapidly. So in terms of where we go from here? Again, the opportunity ahead is very significant in this particular current market. We see very distinct competitive advantages as a function of being on this platform. We have the sponsor relationships. We have the team. We have the track record. We are focusing on attractive risk return in any market environment and deploying consistently, again, giving investors that vintage diversification and the stability of the higher return product without relying on a market cycle. And again, we're participating in a very large and growing opportunity set. And with the current market environment of where rates are, with maturities and the need for capital to be returned, we're incredibly well positioned going forward. So you'll hear from my partner, Craig, on a panel going forward, but we're very excited here for our opportunistic credit business. And I will turn it over to my partner, Edwin.

Hi, good morning. I'm Edwin Wong. I joined the firm in 2020 as part of the acquisition of SSG, a firm I cofounded over 15 years ago. Today, I have the honor of sharing with you the size of the opportunity set in Asia, how we're positioned around it and the outlook going forward. As all of you would know, Asia represents a large part of the global economy. If you just look at the top 5 countries in the world by the size of the GDP, 3 of them actually resides in Asia. Equally important is the growth that lies ahead. In fact, just this year alone, the estimate for 2024 is that Asia Pacific region will contribute to over 60% of the global growth. And by definition, growth is going to be largely funded by debt. So what we're seeing is a significant tailwind supporting the asset class in our region. If history is any guidance to us, what I've shown here is obviously, the significant growth that we've seen in the development of the private credit market, starting with the U.S., significant CAGR over the last 20 years. A lot of people said, Europe, it's roughly 10 years behind, fantastic growth. If Asia is to follow that pattern, the outlook is somewhere in the next 5 to 10 years, we will get to the scale of the European private credit business. So how are we positioned around it? We believe today, we have established a leading credit platform in the Asia Pacific region. We currently manage close to $12 billion. Hopefully, the map will give you a good sense of the scale -- the breadth and depth of the platform that we have created already today. Close to 230 employees across the region, over 12 offices. What that represents is having senior people on the ground to originate, structure and manage risk on behalf of our clients. Significant track record, histories, relationships, take India, for example, a country that many people are excited about, and we are as well about the outlook. We've been in that country for close to 20 years, where most of our peers it's really 2 to 5 years max. On the right, the strategy that we focus on specialists. Our version of the opportunistic credit, something that is psycho tested dating back to the Asian financial crisis in the '90s. Our senior lending flagship what we call ACAP or Ares Credit Asia Pacific, focuses on direct lending and asset-backed opportunities in the region. And we also have a direct lending strategy that is focused on Australia and New Zealand. Direct lending is something that is a core product of the firm. Happy to inform that the sponsors are very, very active in Asia Pacific. Over 600 active sponsors to date. We cover the top tier of that market, 125 of them. Many of them in partnership with our colleagues in Europe and U.S. So it's really a collaborative effort. We believe we have a market-leading position in the market already, having done close to $2 billion of transactions just in the last 18 months alone. Similarly, asset back. You just heard Joel talk about the opportunity set. We are very focused on developing that market in the Asia Pacific region as well. Anchoring that off by a team sitting in Sydney, Australia, we expect the market to grow to other countries in the region. So what's the outlook? Number one, continue scaling the existing strategies that we have. We think there's a lot of growth left. Again, we talk about the tailwind. We talk about the sharp CAGR. In fact, as a market leader in the region right now, we expect the CAGR to be much better than the market average. Permanent capital, you've seen the development of BDCs, both in the U.S. and Europe. I think it's a matter of time that we will create our Asia version of that in the region. Local currency. So far to date, what we have been investing is really taking U.S. dollars from our LPs and investing in our region. There is actually a very significant opportunity to manage local currency for many of our investors in the region. Take insurance company, for example, they earn significant premiums in local currency. So the opportunity set to create a private credit solution for that client set to invest a local currency back into those countries, it's a very, very significant opportunity that we're looking to capitalize on. And again, if you look at the map that we've shown before, we want really the only house that have capabilities in all those different countries. So I hope you are as excited as we are about the outlook going forward. And with that, I think with you for a 10-minute break. Thank you. [Break]

All came back? Thank you. My name is Keith Ashton, the Co-Head of alternative credit with my partner, Joel, you just met. We're talking in this session about frontiers of private credit. And we don't mean by that, this is new things. As you'll quickly surmise these are asset classes that have been around a long time. The frontier element, however, is because in each case, which you'll hear about we've hit something of an inflection point in both the market opportunity and growth opportunity for Ares. So that's what you should be listening for. I'll start and then I'll pass the the clicker over to my partner, Craig, and then Patrick, and then Brian, I guess you'll bring us home.

Sounds good. All right.

As you heard my partner, Joel discussed alternative credit is a very large market that has a host of credit products that are used every day and underpin a lot of activity in the economy. One of the things that you should really understand is that the foundation of this market, a capital foundation of this market is consists of 3 main pillars. The first of these is banks. Banks are by far the dominant pillar of capital in this market. And then there is the asset-backed securities or securitization market, which transforms these asset portfolios into rated securities for institutional investors primarily and specialty insurance. And then private capital, which is a complementary pillar of capital that provides capital solutions that the other 2 pillars either can't or can't easily provide. But these pillars of capital are highly symbiotic. We all need each other, and the asset markets themselves need all 3 pillars to function properly. There's a long history in these markets. And that history is defined a little bit by how these 3 pillars shift in terms of their relevance and activity relative to one another. And without going into the whole history here, you can think about the last 5 to 10 years where the private capital pillar has played a much more significant role than in the past because banks and securitization markets emerged out of the GFC feeling more constrained. What's interesting is that the markets find these new balances are new equilibrium. And as we look at the market today, there's been some recent events that run with banks that have created again another situation where these markets are going to find a new equilibrium among the 3 pillars. And we refer to this as the $12 trillion question. As we know and won't belabor, banks are facing two distinct challenges today in the market. One relates to their liabilities. Their liabilities are more expensive today, especially for their deposits. And those deposits tenor in particular, is less certain, I say, and I think everyone agrees is a little shorter than it used to be. And then on top of that, bank regulators are increasing the amount of capital that banks have to hold against these same kinds of assets. The $12 trillion number comes from the fact that if you look inside of bank balance sheets today, $12 trillion is the amount of assets that they have on those balance sheets. The same assets that are financed, owned and invested in by the securitization market and private capital every day. So while banks will continue to play a very important role in this market, what's interesting that we see is that as these constraints and challenges are facing banks, the banks have to respond. They really don't have a choice in the matter. They have to recalibrate their balance sheet. So the $12 trillion question ultimately is what percentage of that $12 trillion worth of assets is going to need to find a new home in non-bank capital and particularly private capital. And this is why we think that for now for the next 5 to 10 years, there's a bigger role for private capital to play in these markets. And the good news is that Ares is really well positioned and well resourced as an ability to participate in that growth. And what we think will be the driver of alternative credit growth at Ares for the next 5 to 10 years. So with that, I'll pass the baton to Craig.