Investment Thesis — Ares Management Corporation
The market is mispricing Ares Management by fixating on its trailing P/E and short-term cyclical headwinds in private markets, overlooking the significant forward earnings growth implied by its Fwd P/E and the resilience of its diversified alternative asset platform. Investors are failing to appreciate the sticky nature of its management fees and its ability to capitalize on market dislocations.
Catalysts
- Fed pivot and interest rate cuts, easing credit market concerns
- Strong AUM growth announcements, particularly in private credit strategies
- Better-than-expected earnings driven by carried interest realization and fee income
Risk Factors
- Prolonged high interest rates leading to sustained pressure on asset valuations
- Significant increase in credit defaults and non-performing assets within portfolios
- Inability to raise new funds or investor redemptions impacting fee-related earnings
Key Debates
ARES revenue turns positive H1 2025, beating -9.5% forecast.
ARES P/E hits 25x by Q3 2025, converging to 179.25.
Short float drops to 3% by Q4 2024 on AUM surprise.