Bank of America 2026 Financial Services Conference: Fireside Chat with ARES CEO on Private Credit, AI, & Strategic Growth

Key Takeaways

TL;DR: ARES is bullish on 2026 deal flow, citing record deployment & pipeline, and expects continued strong growth in FRE, ROA, and div. Strategic focus: digital infra, Japan RE, vertical integration—not PE. Private credit remains robust; ARES leverages scale, origination, and data edge to outperform. AI seen as both risk & major opp.; ARES actively deploying AI to drive margin expansion & productivity. Wealth channel growth is strong & well-managed. ARES sees symbiotic, not competitive, dynamics w/ banks, and expects to benefit from reg. tailwinds. Mgmt reaffirmed all key fin. targets and highlighted a +20% div. hike.

1. Macro & Deal Environment (2026 Outlook)

• Record Cap Deployment & Pipeline:
  • Q4 2025: $46B deployed (record); Jan 2026 pipeline at ATH—strong H1 2026 vol. signal.
  • “Our pipeline…was at a record high in January, which usually is a good predictor for transaction volumes within the first six months.”
• Constructive Backdrop:
  • Pro-biz US admin, deregulatory stance, banks de-risking, RE vol. recovery, and dry powder = robust 2026 deal flow.
  • Expects healthy vols barring macro shocks.

2. Strategic Priorities & Biz Mix

• Top Priorities (PE Not Top 5):
  • Digital Infra Expansion:
    • Acq. of GCP (Japan’s top RE mgr) & ADA Infra (data center dev., 85 FTEs).
    • Closed $2.4B Japan DC fund; $6B+ equity needed for near-term pipeline (Tokyo, Osaka, London, São Paulo, N. Virginia).
    • “Number one priority is just continue to lean into the momentum there and ride the secular tailwinds in that business.”
  • Japan RE & Product Diversification:
    • Strong APAC presence; focus on expanding private credit & infra in Japan.
  • Vertically Integrated RE:
    • Now 3rd largest global warehouse developer/operator; aims to own/manage assets full lifecycle for edge.
    • 90% of exposures in industrials & multifamily; further integration ongoing.
  • Margin Expansion via Tech:
    • Consolidating middle office, driving efficiencies, leveraging AI/tech for margin lift.
    • “We can really accelerate [margin improvement] with some intentional investment in technology and organizational redesign.”
• PE:
  • Not near-term priority due to slower, non-linear growth.
  • Open to expansion if it enables cross-biz synergies/client wallet share, but no urgency.

3. Fin. Targets & Cap Mgmt

• Reaffirmed Guidance (as of Feb 2026):
  • FRE Growth: 16–20%+/yr (organic, excl. M&A).
  • ROA Growth: 20%+/yr.
  • Div.: Q1 2026 div. +20% YoY, in line w/ FRE growth policy.
  • Wealth AUM Target: Raised in 2025 on strong product diversity & fundraising.
  • “Dividend increase of 20% hopefully gives people increased confidence in the guidance.”

4. Private Credit Franchise & Industry Dynamics

• ARES Competitive Edge:
  • Scale & Origination:
    • 30+ yrs in private credit; invests in only 3–5% of opps, high selectivity.
    • 50% of annual deployment to existing borrowers, compounding w/ their ~10% EBITDA growth.
    • “We say no, 95% to 97% of the time.”
  • Info Edge:
    • 30 yrs of data (incl. declined deals) = compounding edge.
    • Public track: 20+ yrs, >12% CAGR, near 0% losses.
  • Dry Powder:
    • $150B+ available, enabling ARES to be liquidity provider in dislocations.
• Industry Narrative & Flows:
  • Negative media on private credit overstated; institutional clients show no anxiety, net retail flows positive.
  • “97% of your investors in wealth not wanting to redeem, that should be the story.”
• Bank Relationships:
  • Banks & private credit are “incredibly symbiotic,” not competitive.
  • Bank risk-on = lower cost of cap & more partnership opps (CLOs, SRTs, flow agreements).
  • “We are a very reliable partner to the banks on the CLO and sales and trading side.”
• BDC/Industry Health:
  • BDCs better managed/diversified vs. 15 yrs ago; top 10 mgrs control 65% of cap.
  • Some return dispersion, but top players remain rational/stable.

5. AI & Tech Implementation

• AI as Risk & Opp.:
  • AI disruption not just a software issue; impacts all sectors (biz svcs, healthcare, tech).
  • Only 6% of ARES exposures to software, mostly enterprise w/ strong data moats.
  • “For every company that gets disrupted, there’s probably a company that’s getting improved.”