ARES (ARES) Q4 2025: Fundraising Surges 37%, Secondaries and Real Assets Drive Diversification Tailwind

2026-02-05 | By EarningsIQ Research

ARES capped 2025 with record fundraising and accelerated deployment, signaling a business model shift toward greater diversification and scale. Real assets and secondaries outpaced expectations, while robust fee growth and margin expansion set the stage for 2026. Management projects continued fundraising strength and margin tailwinds as new strategies gain traction and dry powder is deployed.

Summary

• Secondaries and Real Assets Momentum: Non-credit strategies are scaling rapidly, providing resilience and new growth vectors.
• Fee-Centric Model Expands Margins: Operating leverage, GCP integration, and AI-driven efficiencies support higher FRE margins.
• Deployment and Fundraising Visibility: Record dry powder and pipeline position ARES for continued AUM and earnings expansion.

Business Overview

ARES Management is a leading global alternative asset manager operating across credit, private equity, real assets, and secondaries. The firm earns revenues primarily from management and performance fees on its funds and investment vehicles, targeting both institutional and wealth clients. Its business model is balance-sheet light, meaning earnings are insulated from direct investment losses and are anchored in recurring fee streams. Major segments include credit (direct lending, liquid credit, alternative credit), real assets (real estate, infrastructure), private equity, and secondaries.

Performance Analysis

ARES delivered all-time highs in fundraising, deployment, and fee-related earnings (FRE) for 2025, underpinned by a 29% surge in AUM to $622 billion. Fundraising reached $113 billion, with a step-change in Q4 driven by real assets and secondaries, notably without the two largest private credit funds in market. Deployment accelerated sharply in the back half, totaling $146 billion for the year, up 37% from 2024, as capital markets normalized after mid-year volatility.

Fee-related earnings and management fees both grew more than 20% year-over-year, with FRE margins expanding despite the dilutive impact of the GCP real estate acquisition. Net realized performance income also hit a record, and the firm’s robust pipeline and $156 billion in dry powder support ongoing growth. Non-traded REITs and BDCs outperformed peers, while real estate and infrastructure funds posted double-digit net returns, further differentiating ARES's platform.

• Non-Credit Segments Accelerate: Real assets AUM grew 69% and secondaries AUM rose 45%, nearly doubling since the Landmark acquisition.
• Margin Expansion Despite M&A Drag: GCP integration and internal AI initiatives drove full-year FRE margin to 41.7%, up from 41.5%.
• Wealth Channel Resilience: Wealth AUM surpassed $66 billion, with net inflows even during sector volatility, and 30% of new capital sourced outside the U.S.

ARES’s diversified fundraising and deployment engine is now less reliant on private credit cycles, with real assets, infrastructure, and secondaries increasingly material to both topline and future margin expansion.

Executive Commentary

Strategic Positioning

1. Diversification Beyond Private Credit

ARES’s expansion into real assets, secondaries, and infrastructure is shifting the business mix. Real assets AUM grew 69%, and secondaries nearly doubled since 2021, reducing reliance on direct lending and broadening the firm’s fee base. Management highlighted real estate and secondaries as breakout growth areas for 2026 and beyond.

2. Fee-Centric, Balance-Sheet Light Model

The firm’s focus on recurring management and performance fees, rather than balance sheet investing, insulates earnings from market losses. This model underpins margin expansion, even as ARES ramps new products and integrates acquisitions like GCP. AI-driven back office and investment process efficiencies are expected to further boost margins in 2026.

3. Product Innovation and Distribution Expansion

ARES is leveraging its global origination and distribution network, with 80 partner platforms and new products for the wealth and retirement channels. The firm’s semi-liquid wealth products now span eight strategies, and management expects to launch more flagship funds in credit and real estate, including new U.S. and European direct lending vehicles.

4. Capitalizing on Market Cycles

ARES’s dry powder and origination capacity position it to deploy into cyclical and secular opportunities, such as digital infrastructure, logistics real estate, and credit secondaries. Management sees a super-cycle in infrastructure and energy, and expects further consolidation and scale benefits in asset-backed finance (ABF) and direct lending.

5. Performance Leadership and Risk Discipline

ARES’s funds consistently outperform peers, with top-quartile returns in direct lending, real estate, and secondaries. The firm’s underwriting discipline—evidenced by a 3-5% approval rate—has kept credit losses near zero and positioned ARES to benefit from both risk-off and risk-on environments.

Key Considerations

This quarter’s results highlight ARES’s transformation into a multi-engine alternative asset manager with broad-based growth drivers. The business is now positioned to benefit from multiple secular trends—private market allocations, digital infrastructure, and global wealth democratization—while maintaining risk controls and capital flexibility.

Key Considerations:

• Real Assets and Secondaries as Growth Vectors: These segments are scaling rapidly, with secondaries AUM nearly doubling in four years.
• Fee-Related Earnings Drive Valuation: FRE growth and margin expansion are increasingly central to the investment case.
• Wealth and Institutional Channel Balance: Intentional pacing of wealth product growth reduces pro-cyclical risk and supports deployment discipline.
• AI and Technology Investments: Over 25 AI projects are underway to enhance investment processes and back office productivity, supporting future margin gains.
• Dry Powder and Deployment Optionality: $156 billion in uninvested capital gives ARES flexibility to capitalize on market dislocations and new opportunities.

Risks

ARES faces risks from market volatility, potential credit cycle turns, and sector-specific disruptions (such as AI’s impact on software lending). While the firm’s balance-sheet light model limits direct loss impacts, fundraising and deployment could slow if macro or rate conditions deteriorate. Integration of acquisitions like GCP and execution in new products or geographies may also challenge margin and growth targets. Management acknowledges cyclicality in wealth flows and the need for ongoing underwriting discipline.

Forward Outlook

For Q1 2026, ARES guided to:

• Dividend of $1.35 per share, up 20% YoY
• Net realized performance income of $52 million in the upcoming week, with ~$50 million additional visibility from European-style funds

For full-year 2026, management maintained guidance:

• Realized net performance income of approximately $350 million, more than double 2025
• FRE margin expected at the high end of the annual 0-150 bps target range

Management highlighted several factors that support the outlook:

• Record fundraising and deployment pipeline, with $100 billion AUM not yet earning fees
• Continued strong demand from institutional and wealth channels, with new flagship fund launches expected

Takeaways

ARES enters 2026 with multiple tailwinds—diversification, fee growth, and capital deployment capacity—while maintaining discipline and risk controls.

• Business Model Evolution: Diversification into real assets and secondaries is reducing reliance on private credit cycles and broadening ARES’s fee base.
• Margin and Earnings Visibility: Operating leverage, AI-driven efficiencies, and integration synergies are supporting margin expansion and robust earnings growth.
• Watch for Deployment and Fundraising Execution: The pace of deployment and success in flagship fund launches will be key to sustaining AUM and earnings momentum in 2026.

Conclusion

ARES’s record fundraising, expanding margins, and multi-segment momentum mark a strategic inflection point for the platform. The firm’s diversified growth engines and disciplined risk management position it for continued outperformance, but execution in deploying dry powder and scaling new strategies will be critical in 2026.

Industry Read-Through

ARES’s results signal a broadening of growth drivers across the alternative asset management industry. The surge in secondaries and real assets AUM, as well as resilient wealth inflows, highlight investor appetite for diversified private market exposure. Margin expansion through technology and operating leverage is increasingly a differentiator, as is the ability to scale across geographies and channels. The shift from private credit dominance to multi-engine growth is likely to pressure peers that remain concentrated or lack fee-centric models. Digital infrastructure and secondaries are poised to be industry-wide secular tailwinds, while disciplined underwriting and balance-sheet light strategies are being rewarded in volatile markets.

ARES Financials Asset management Secondaries Real assets Fee income Wealth management Digital infrastructure