Forget AI Stocks: Ares Rides Wave With $174B Armory, Record Deal List

Ares Management Corp. (NYSE:ARES) CEO Michael Arougheti confirmed on a third-quarter earnings call Thursday that the company expects U.S. direct lending activity to pick up in the coming months, even as muted private equity dealmaking weighs on deployment.

"We are going into the fourth quarter, which is our historically seasonally strongest period for deployment, with record pipeline levels," Arougheti said, adding that the pipeline has already begun converting into completed transactions.

The alternative asset manager invested $35 billion across its strategies during the third quarter and raised more than $31 billion in gross capital. Ares ended September with $691 billion in assets under management, up 16% year over year, including $416 billion in fee-paying assets, an increase of 13%.

AI Infrastructure Creates $5 Trillion Opportunity

Ares sees significant opportunities in financing the infrastructure needed to support AI, but Arougheti said the firm is focusing on data centers, power generation and transmission rather than taking on greater exposure to financing graphics processing units (GPUs) and chips.

The company estimates identified AI-related capital expenditure needs will exceed $5 trillion through 2030, including approximately $2 trillion for physical data centers and related power infrastructure and $3 trillion for GPUs and chips.

Arougheti said the physical infrastructure segment offers attractive risk-adjusted opportunities with a more straightforward underwriting process.

Ares is developing data centers in markets including Tokyo, Osaka, London, Atlanta, Amsterdam and São Paulo. The projects are designed to serve cloud computing and AI demand and are pre-leased to large investment-grade hyperscalers under 12- to 15-year contracts with no termination provisions and inflation escalators.

Ares is also seeing volatility in data center financing markets as investors reassess counterparty risks and the cost of capital.

 "We feel like we can generate really attractive returns regardless of the ultimate technology outcomes here," Arougheti said.

Private Credit Faces A Deployment Shift

Arougheti expects deployment opportunities to shift toward alternative credit, secondaries and general partner solutions rather than eliminating opportunities across private markets.

He pointed to approximately 32,000 private equity-owned companies representing more than $3.5 trillion in invested capital, along with more than $1.5 trillion in aging private equity dry powder.

Ares has agreed to acquire a $1.1 billion direct lending portfolio from an institutional investor, with the transaction expected to close throughout the fourth quarter. 

Fundraising Strength Supports 2027 Growth

Ares secured more than $8 billion in initial equity commitments for its latest U.S. senior direct lending institutional funds, representing approximately 80% of their combined target. 

Ares ended the quarter with $174 billion in available capital, including $94 billion available for future deployment. Management said capital not yet paying fees could eventually generate more than $800 million in incremental annual management fees if deployed or stabilized, before accounting for future fundraising.

Arougheti said Ares remains open to acquisitions and partnerships, particularly in infrastructure, private equity and insurance, but emphasized that the firm will remain selective.

He said the company’s investment priorities will continue to focus on opportunities where Ares can deploy capital at the right price while maintaining its underwriting standards.

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