Ares Management CEO & Co-Founder Mike Arougheti Talks Record Earnings

Summary

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Podcast Summary: Bloomberg Talks

Episode: Ares Management CEO & Co-Founder Mike Arougheti Talks Record Earnings

Date: July 31, 2026
Host: Bloomberg Interviewers
Guest: Mike Arougheti (appears as “Mike Howard” in transcript), CEO & Co-Founder, Ares Management

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Episode Overview

This episode features an in-depth interview with Mike Arougheti, CEO and Co-Founder of Ares Management, on the heels of a record quarter for the firm, with over $36 billion in fundraising inflows. The conversation centers on Ares’ multistrategy approach in private markets, the role of AI and digital infrastructure, and private credit’s resilience—offering listeners a firsthand look at how one of the world's largest alternative asset managers is navigating a complex and rapidly shifting financial landscape.

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Key Discussion Points & Insights

1. AI Transformation and Productivity Uplift

[00:54–03:51]

• AI as a Driver Across Ares: Arougheti explains that Ares has been aggressively deploying AI both internally and across its portfolio companies to boost efficiency.
• Impact: The firm achieved a notable 100 basis point margin increase year-over-year, much of which he attributes directly to technology-driven efficiencies.
• Portfolio Productivity: Private equity and private credit portfolios are delivering roughly 10% cash flow growth, consistent with corporate earnings trends.
• Targeted Investments: Ares is focused on data center development deals, particularly large, “hyperscaler adjacent” projects in tier-one markets (e.g., Tokyo, London, Sao Paulo), and avoids riskier secondary/tertiary regions.
• Comprehensive Approach: The firm is active in lending (infrastructure debt), asset-based finance (helping banks with liquidity), and infrastructure equity (investing across the digital ecosystem, including fiber, battery storage, and transmission).

Notable Quote:

“We’re obviously deploying AI across the entire enterprise. We had a 100 basis point margin increase in the quarter year over year...a fair amount of that is technology efficiency.”
— Mike Arougheti, CEO (01:16)

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2. The Power of Diversification

[03:51–05:18]

• Diversification as Risk Management: Arougheti stresses that Ares’ breadth—across asset classes and up and down the capital structure—is key to avoiding crowded trades and overheating in specific sectors.
• Fund Construction: Credit funds may have up to 1,000 line items, ensuring no single exposure can dominate long-term performance.
• Balance: He acknowledges that some might view such broad diversification as “over-diversified,” but credits it with delivering resilience over 30 years.

Notable Quote:

"The way we think about private markets is we want to be up and down the capital structure...and we want to be horizontally diversified across all the different private market asset classes.” — Mike Arougheti, CEO (04:11)

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3. The State and Demand for Private Credit

[05:18–07:14]

• Steady Performance Amid Skepticism: Despite persistent predictions of trouble, private credit continues to grow and perform strongly. Non-accruals in direct lending remain below 2%, better than historical averages.
• Institutional Demand Accelerates: There’s accelerating institutional demand for private credit as spreads widen and other capital exits the market.
• Record Fundraising: Recent funds in both asset-based finance and opportunistic credit hit “hard caps” with excess demand and were raised faster than any prior vintages.

Notable Quote:

“People have been saying [private credit] is a bad place to be for 30 years and it’s grown pretty consistently and compounded at a very attractive rate of return.”
— Mike Arougheti, CEO (05:46)

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4. Economic Cycle and Portfolio Company Health

[07:14–08:07]

• Resilient Growth: Growth is moderating slightly (cash flow growth at 9-10%, down from 11-12% a year ago), but not reversing.
• Strong Fundamentals: Margin improvement, productivity gains, and healthy, de-levered balance sheets are seen both in corporate and real estate assets.
• Positive Outlook: Leasing rates and demand are solid, especially in real estate.

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5. Dry Powder, CapEx, and Market Structure

[08:07–10:00]

• Deployment Keeping Pace: Although Ares has ~$170B in dry powder, it matches current annual deployment rates—significantly faster than in years past.
• Digital CapEx Overwhelm: The demand from hyperscalers for digital infrastructure ($750B+ CapEx needs) is pushing market limits, causing spread widening and naturally slowing build/implementation pace.
• Structural Constraints: Energy and community engagement remain bottlenecks for project delivery, which could constrain capital deployment in the short term.

Notable Quote:

"With regard to the digital CapEx...there’s $750+ billion dollars of CapEx demand coming from the hyperscalers...that is a large amount of capital. It’s beginning to, quote, unquote, overwhelm the markets." — Mike Arougheti, CEO (08:38)

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6. Lessons from Market Stories and Resilience

[10:00–10:57]

• Lessons in Diversification: Asked about market shakeups, Arougheti reiterates that diversification and seasoned experience are critical to surviving cycles.
• Navigating Uncertainty: Over 30 years, adapting, learning, and not letting single exposures dictate outcomes is the key takeaway.

Notable Quote:

“Be diversified...don’t be fully exposed to one factor or single correlation...It might be that experience matters and that...smarts and experience through cycles is ultimately important.” — Mike Arougheti, CEO (10:21)

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Memorable Moments

• The proud emphasis on “100 basis points” in margin improvement due to AI deployments ([01:16]).
• Humor and camaraderie from the interviewers in discussing the oft-predicted doom of private credit ([05:18]), and jokes about “dry powder” and the “grim reaper colleague” ([10:00]), bringing levity to financial discussions.

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Key Timestamps

| Timestamp | Segment Highlights | |-----------|-----------------------------------------------------------| | 00:54–01:15 | Opening question on value creation amidst AI disruption | | 01:15–03:51 | Ares’ AI transformation and digital infrastructure focus | | 03:51–05:18 | Diversification strategy in private markets | | 05:18–07:14 | Private credit resilience and institutional demand | | 07:14–08:07 | Economic cycle update; portfolio strength | | 08:07–10:00 | Dry powder, digital CapEx, and market deployment | | 10:21 | Diversification and experience as moral lessons |

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Conclusion

In this candid and cogent interview, Mike Arougheti (Ares Management CEO) makes clear that the firm’s growth is tied to unwavering focus on technological transformation, broad-based diversification, and dynamically responding to ever-changing market structure and capital needs. For anyone interested in the crossroads of private markets, AI, and infrastructure, this episode provides both concrete data points and timeless advice for maneuvering uncertainty in global finance.

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Transcript

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[Interviewer]

reporting at earnings be highlighting another record quarter of fundraising with over $36 billion of inflows. The CEO Miketti writing our clients continue to reward us due to our strong and consistent fund performance across our strategies. Mike joins us now in the studio for more. Mike, good morning. Good to see you.

[Mike Howard]

Good morning. Good morning.

[Interviewer]

I wanted to start with a quote of yours from earlier this year when things were pretty difficult with the software issue and you said something really important. You said the following. If you're going to underwrite a narrative of AI disruption, you also then have to say, well, what does that mean for the productivity and margin improvement for the rest of your book? I think that's a good place to start. Where are you seeing value being created right now?

[Mike Howard]

It's I'm glad I said that. So if you, if you look at the way that Aries is playing the AI transformation, it's what are we doing within the data center and digital infrastructure space? What are we doing within our portfolio companies and what's that productivity uplift and then what are we doing within Ares proper to either improve our investment outcomes or profitability? So if you start with Ares first, we're obviously deploying AI across the entire enterprise. We're seeing significant efficiency. We had 100 basis point margin increase in the quarter year over year and we've guided the street to expect 0 to 150 basis points per annum. A fair amount of that is technology efficiency that's getting created re underwriting processes, re underwriting systems. And we are seeing uplift that is also translating into increased productivity and margin expansion within the portfolios. So if you were to look across our private equity portfolios, our private credit portfolios, cash flow growth is still plus or minus 10%. If you look at corporate earnings, I think you're going to see that that's generally the theme. And then within the investment space, we are doing our best to stay diversified in the way that we're attack the digital infrastructure opportunity. Big investors in data center development. But I think our approach has tended to be a little bit more targeted. We're doing 150 to 300 megawatt deals, hyperscaler adjacent in large tier one markets like Tokyo, London, Sao Paulo, pre leased, 12 to 15 year terms with escalators. So we have probably shied away from some of the secondary and tertiary markets and stayed away from some of the frontier model type of opportunities. Two, we're a very large lender in the infrastructure debt space and you're seeing that rolling through our earnings as well in terms of the fundraising and deployment momentum there. So we are one of the largest institutional lenders to other developers and that's been a bright spot. Three, we have a large asset based finance business and we're squaring off with a lot of the banks on srts and portfolio purchases where we're helping them free up liquidity on their balance sheet to continue to deploy into the opportunity. And then four, we have a very large infrastructure equity business where we're investing all around the digital ecosystem, transmission, fiber, battery, storage, etc. So we're, we're kind of attacking it from all angles. But our view has been we want to be global, we want to be diversified and we want to have the full capital structure so that we can move around where we see best relevant.

[Interviewer]

Second word, I want to dig into diversified and I'm open to the reality check. I'm just going to say it feels, it feels like a lot of people are in the same trades. They're in asset backed infrastructure debt on the credit side and they're taking direct equity investments into say software and models. How do you avoid all the crowding that we're starting to see in other

[Mike Howard]

places in digital, specifically with your firm? Yeah, I think the key, and this, this goes, if you look at our earnings this quarter and you put the numbers up on the screen, what screams out to me is just the broad nature of the business and the diversification. And so the way that we think about private markets is we want to be up and down the capital structure, debt to equity so that we can move around and find relative value in response to rates or the economic environment. We want to be horizontally diversified across all the different private market asset classes, secondaries, private equity, real estate, infra and you'll see investor appetite and our own view of relative value shift. And then within the funds we want to be highly, highly diversified. So if you look at our credit funds as an example, you may see 900 to 1,000 line items. So we're not going to have any single exposure really drive the long term performance. And I think that's key. There is a risk in any investment business that you're over diversified and I could argue maybe a thousand loans in one fund is over diversified. But it's served us well over the 30 years that we've been doing it.

[Co-Interviewer]

Earlier this year everyone was saying there's going to be a complete collapse, that the private credit space is going to go down in flames because of the retail investors, etc. And your, your compatriots and yourself are coming out and saying whoa, not at all. We're seeing actually performance hang in there and people are still interested. Where are we in that in terms of interest from investors in private credit? How much the pendulum has shifted to the infrastructure and some of the other plays instead.

[Mike Howard]

Look, we've, we've been pioneers in private credit and people have been saying it's, it's a bad place to be for 30 years and it's grown pretty consistently and compounded at a very attractive rate of return. So anytime there's a narrative that's that loud, you've got to at least ask yourself, you know, what is it that they're looking at? We don't see it. If you look at our direct lending business, which is kind of where I think people are focused, our non accruals across the direct lending business right now are inside of 2%. That is well below the historical averages. Our cash flow growth is plus or minus 10% as I said, and that's been consistent. We are seeing healthy interest coverage, very low loans to value. So the fundamental performance is exactly what was underwritten. A lot of the noise, you know, I don't really know where it's coming from. It could be coming from a competitive set of capital that you know, doesn't like to see the flows. It could be, it could be software related. But there's nothing that we see in the portfolios that would indicate that that credit's weakening. And the interesting and your question, and you see it this quarter in earnings, the institutional demand for private credit is probably accelerating right now because they're seeing spreads widening and they're seeing capital leave the market and feel like there's an opportunity to come in and, and take share. So our last two credit funds, both in asset based finance and opportunistic credit, hit their hard caps and we had demand well in excess of the hard caps and we raise those funds quicker than any prior vintage.

[Co-Interviewer]

It's fascinating to hear you talk about the performance of these loans. And it's something that we've seen from the likes of Capital One and some of these other credit card companies. The credit performance is hanging in there. It's actually hanging in there better than people expected. Where are we in this economic cycle based on some of the activity that you're seeing in portfolio companies?

[Mike Howard]

Yeah, it's. If anything you could say growth is moderating slightly. So if we're growing cash flow portfolio wide, 9 to 10% a year ago, that may have been 11 or 12, but it's not negative. So you are slow growth. I mean, where are we? It's still early. And back to the first question from Jonathan. You're seeing margin improvement, productivity gains, balance sheets are healthy, companies are delevered. So it feels pretty good. And it's just not in corporate. We see it in the real estate market too. We're well leased. We're seeing rent increases and strong demand. So everything feels really good.

[Co-Interviewer]

Right now we're talking about leverage coming out of the system. In public markets, there was some concern that maybe leverage was building or there was some frothy types of behavior. In private asset management. You talk about $170 billion of dry powder. I'm just wondering how you see some of these structural dynamics in the market in terms of ability to finance some of the huge bills coming and willingness to do so.

[Mike Howard]

Yeah, Look, I think 170 billion of dry powder feels like a lot, but it's actually kind of in line with our annual deployment. So if you look at the 36 billion that we raised this quarter, we also deployed 36 billion. That's actually a lot quicker than historical used to take us two to three years to deploy our dry powder. We're now almost on an annual raise and deploy. I think with regard to the digital CapEx, obviously there's 750/plus billion dollars of CapEx demand coming from the hyperscalers. That is a large amount of capital. It's beginning to, quote, unquote, overwhelm the markets. And that's showing up in two ways. One, spreads are widening, which is not necessarily a bad thing. And people want to get paid more for the risk that they're taking and it's probably slowing the pace of the build. So you know, when you're thinking about deployment, this is not happening overnight. These are two to four year projects. You've got energy constraints, you've got community engagement and civic discussions that have to go well. So there's a lot that's actually constraining the coming online of some of this Capex. So at least as we're sitting here today those numbers don't concern me. But your point is a good one. And going back to a year ago people were beginning to ask where's all this capital come from. The Capex numbers have doubled and the market is trying to keep pace but it's going to be a little bit of a constraint I think.

[Interviewer]

I thought you were about to ask whether Leopold had given Mike a call when you talked about a dry powder.

[Co-Interviewer]

Maybe, I mean maybe you were the one that was the grim reaper colleague. Did you hear I love those quotes. Did he give you a call?

[Interviewer]

Breaking news and we've got any lessons from that as you see that story and reaction?

[Mike Howard]

No, I don't know enough to know. I think if anything maybe back to your prior question is be diversified number one, which is, you know, don't be fully exposed to one, one factor or single correlation. I think that's, you know, that that might be the lesson. It might be that experience matters and that you know, combination of smarts and experience through cycles is ultimately important. And I think, you know, I think about our own 30 year journey and all the lessons that we've learned navigating cycles and painful ones things and you learn lessons the. And so that that might be the moral of the story too.

[Interviewer]

Mike, appreciate it.

[Mike Howard]

Thank you. Thank you buddy.

[Interviewer]

Thanks for being here. Thank you very much. Mike Howard gets you there. The Aries CEO AI is entering its

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