Ares Rides Record Fundraising and Digital Infrastructure to a New Cycle
A Record Quarter, a Different Set of Questions
When Ares Management reported its second quarter on July 31, the headline was unambiguous: “Our strong second quarter results highlight the growing diversity and durability of our global platform.” — Michael Arougheti, Chief Executive Officer · 2026-07-31 The numbers backed it up – record gross fundraising of roughly $36 billion, $671 billion in AUM, and a 17% year-over-year jump in fee-paying AUM to ~$410 billion. But the more interesting shift is in the problem set. For the past several quarters, the market fixated on software-driven credit losses and the redemption queue in the non-traded BDC. This quarter, the narrative flipped: management spent most of the call arguing that institutional demand for private credit is accelerating, that the individual investor is “early innings” (Mike's words), and that the redemption wave from Asia is already halving. The top keyword for ARES this quarter is “individual investor,” reflecting how central the wealth channel has become to the growth story.That said, the redemption issue is not fully resolved. As CEO Mike Arougheti explained, roughly 95% of the BDC's investor base chose to stay, and redemptions from core U.S. investors fell ~35% sequentially. But the remaining ~$600 million of APAC-family-office redemptions is still working through the system.
he said – a cautious but constructive note.So assuming that those two trends hold, and I have no reason to believe that they won't, that would probably mean that you get back to stasis in the next 2 to 3 quarters,
Institutional Demand is Accelerating; Wealth is Holding
The centerpiece of the Q&A was the contrast between institutional and wealth appetite. On the prior call in May, Mike had already framed the divergence: “Everything we are seeing on the ground is that the institutional investor is not anxious, they are not allocating away from private credit, and in fact, they are looking at this as a huge opportunity to take advantage of a dislocation and bring liquidity into the market to capture excess return.” — Michael J. Arougheti, Chief Executive Officer · 2026-05-01 This quarter he sharpened that: “the evidence for the acceleration is just based on what we're seeing in the field.” — Michael Arougheti, Chief Executive Officer · 2026-07-31 The proof points included Pathfinder III closing at a hard cap of $8.5 billion (against a $6.5B target) and the opportunistic credit fund hitting its cap. With institutions still “under-allocated” to private credit, Ares sees a multi-year runway. Meanwhile, individual investor flows remain resilient – July equity inflows were ~$1.5B, and the wealth channel added ~$8B in the first half.But the real growth engine is infrastructure, especially digital. The prepared remarks highlighted “the number of power and digital infrastructure assets coming to market across a diverse set of subsectors is as high as we've seen.” Ares is in the market with a global digital infrastructure fund, and its Ada development platform now spans 22 data-center projects with ~1 gigawatt of compute. The company's Core infrastructure fund raised $1.9B in the quarter, and infrastructure debt is on track to exceed the prior vintage. Blair Jacobson reiterated the FRE forecast of $50–100M from the digital business by 2027, a testament to the strategic relevance of the GCP acquisition. The prior call had already noted the real-estate rebound: “if you were to look at our real estate deployment quarter-over-quarter, Q3 versus Q2, we deployed about 51% more than we did last quarter.” — Michael Arougheti, Chief Executive Officer · 2025-11-03 That momentum has carried into 2026.
The Numbers Back It Up
Ares’ fundamentals confirm the story. Revenue reached $1.4B, up 28% yoy, and operating income jumped 122% to $313M, lifting the operating margin to 22.4% (from ~13% a year ago). Net income more than tripled. The balance sheet remains asset-light, with liabilities-to-assets at 70.5% and interest coverage recovering to 8.7x. The market has noticed: the stock is up ~41% in the last 90 days, recovering from a -28.7% drawdown off its January 2025 peak. Yet valuation is still discounted – price-to-revenue has compressed to 1.9x from a 4.6x high, and price-to-net-income to ~11.5x, making Ares one of the cheaper large-cap alternative asset managers despite a growing franchise.The key structural change is the diversification of earnings sources. As Jarrod Phillips put it, “We ended the quarter with approximately $170 billion of available capital, representing an increase of 13% year-over-year.” — Jarrod Phillips, Chief Financial Officer · 2026-07-31 That dry powder, combined with a record $114B of AUM not yet paying fees, underpins the 16–20% long-term FRE growth target. The company is increasingly a multi-asset platform – credit, real estate, infrastructure, secondaries – rather than a single-product lender. With data center demand intersecting with its alternative credit and real-asset capabilities, Ares appears positioned to ride the global infrastructure wave, even as it manages the tail end of wealth redemptions.