Mike Brown

Mike Brown asked about the implications of the ARI transaction on Apollo's spread-related earnings (SRE), specifically how the 7.7% yield loans contribute to spread or growth for Athene, and any potential offsets to consider for SRE.

Answer

CEO Marc Rowan explained that the ARI transaction transfers assets from a public company trading at a discount to NAV to Athene, providing durable spread and safe yield. He noted it would displace other SRE lending, and the 10% SRE growth target for the year already embeds this portfolio, rather than being additive. President Jim Zelter emphasized the philosophical alignment of getting the right capital to the right assets. CFO Martin Kelly confirmed the transaction helps de-risk the 10% SRE growth objective for the year.

Mike Brown asked about the implications of the ARI transaction on Apollo's Spread-Related Earnings (SRE), specifically how the high-yield loans could impact spread and overall growth for Athene, and any potential offsets to consider for SRE.

Answer

CEO Marc Rowan explained that transferring the ARI portfolio at fair market value to Athene and other third-party buyers, while offering excess spreads, is embedded in the 10% SRE growth target and displaces other SRE lending rather than being purely additive. President Jim Zelter reinforced the principal mindset and alignment in optimizing capital allocation. CFO Martin Kelly confirmed the transaction helps de-risk the 10% SRE growth target for the year.

Mike Brown questioned Carlyle's fee-related earnings (FRE) margin expansion, specifically asking which segments (AlpInvest, Global Credit, Global Private Equity) are expected to drive the most margin expansion in 2026 and contribute to longer-term growth.

Answer

CFO Justin Plouffe deferred detailed forward-looking margin guidance to the upcoming shareholder update. He noted the team's remarkable achievement in expanding margins by 1,000 basis points over the past three years while investing in the business and growing headcount.

Mike Brown asked about the drivers of Carlyle's FRE margin reaching 47% in 2025, specifically inquiring which segments (AlpInvest, Global Credit, GPE) contributed most to expansion and which are expected to drive margin higher in 2026 and longer-term.

Answer

CEO Harvey Schwartz deferred detailed forward-looking margin expectations to the upcoming shareholder update. He highlighted the team's remarkable achievement of driving margins up 1,000 basis points over the past three years while simultaneously investing in the business.

Mike Brown inquired about the vintage mix of TPG's software investments, particularly the exposure from the 2021 cohort, and TPG's perspective on the timing and manifestation of AI-driven disruption within the broader software industry.

Answer

Jon Winkelried, CEO and Director at TPG, stated that TPG was a net seller of software in 2020-2022, exiting all software companies in TPG VII and earlier funds. Most current software investment activity resides in Funds VIII, IX, and X. He noted that AI disruption is already evident in CIO budgets, creating winners and losers, and TPG's control investments provide deep insight into these trends.

Mike Brown asked for a breakdown of the vintage mix of TPG's software investments, specifically the exposure from the 2021 cohort, and TPG's perspective on the timing and impact of AI disruption in the broader software industry.

Answer

Co-Managing Partner of TPG Capital, Nehal Raj, stated that TPG was a net seller in its software portfolio from 2020-2022, exiting all software companies in funds TPG 7 and before. Most current software investments reside in funds 8, 9, and 10, allowing underwriting with knowledge of generative AI. He noted that AI disruption is already becoming evident in results, as CIO budgets shift towards AI, creating winners and losers, and TPG's control investor status provides early insight into leading indicators like retention rates.

Mike Brown asked about Ares Management's strategy for potentially getting bigger in private equity, including the strategic benefits of increased scale, and the criteria for assessing the right fit in terms of style, size, or AUM relative to Ares' total AUM.

Answer

CEO Michael Arougheti outlined a framework for inorganic growth based on cultural, strategic, and financial accretion. He highlighted benefits of larger PE scale, including meeting client demand, nurturing equity ownership skills, leveraging management/board relationships, enhancing leverage finance business, and preparing for structural changes in defined contribution and wealth. Arougheti emphasized that PE is not a linear growth business, and any acquisition would need to reflect this growth differential and align with Ares' management fee-centric model.

Mike Brown inquired about Ares' strategic interest in expanding its private equity business, referencing a recent FT interview, and asked about the strategic benefits of greater scale in PE and the criteria for assessing potential acquisition fits.

Answer

Michael Arougheti, CEO of Ares Management Corporation, clarified that no deal is imminent but outlined Ares' framework for inorganic growth: cultural fit, strategic accretion (enhancing capabilities), and meaningful financial accretion. He detailed strategic benefits of larger PE scale, including meeting client demand, nurturing equity ownership skills across the platform, leveraging management/board relationships, strengthening ties with financial counterparties, and preparing for structural changes in defined contribution and wealth channels requiring diverse PE exposure. He stressed that financial accretion is critical, as private equity is not a linear growth business.

Mike Brown inquired about Blue Owl's capital allocation strategy, specifically regarding the declared $0.92 dividend for 2026, future dividend growth, payout ratios, and overall capital flexibility.

Answer

CFO Alan Kirshenbaum stated that Blue Owl aims for modest dividend growth while gradually reducing the payout ratio from 107-108% in 2025 to a target of approximately 85% over the next few years.

Mike Brown asked about Blue Owl's capital allocation strategy, specifically regarding the declared $0.92 dividend for 2026, future dividend growth, payout ratios, and overall capital flexibility.

Answer

CFO Alan Kirshenbaum stated that Blue Owl expects modest dividend growth and aims to reduce the payout ratio from 107%-108% in 2025 to approximately 85% over the next few years. He indicated that this reduction would occur in a few steps while maintaining some level of modest dividend growth.

Mike Brown asked about the potential for KKR's realized investment income line, noting record years in 2021 and 2022, and whether balance sheet exits could drive this line higher in the future.

Answer

CFO Rob Lewin stated an expectation for an increase in realized investment income through the current year and an upward trajectory over the next couple of years. However, he clarified that KKR's strategy involves reinvesting marginal free cash flow into growth areas like M&A, insurance, strategic holdings, and share buybacks to boost recurring earnings per share, implying that realized investment income, while growing, should decrease in relative importance to recurring earnings over the long term.

Mike Brown inquired about the potential for KKR's investment income line to increase, referencing record years in 2021 and 2022, and whether balance sheet exits are expected to drive this higher.

Answer

CFO Rob Lewin stated an expectation for increased realized investment income through 2026 and an upward trajectory over the next few years. However, he clarified that KKR's long-term strategy involves reinvesting marginal free cash flow into growth initiatives like M&A, Insurance, Strategic Holdings, and share buybacks to boost recurring earnings per share, implying a relative decrease in the investment income line over time.

Mike Brown inquired about the potential for both restructuring and M&A businesses to remain elevated in 2026, asking if restructuring revenue could grow and Evercore's capacity to gain additional market share in liability management and restructuring.

Answer

CEO John Weinberg affirmed that a strong coexistence of restructuring and M&A is highly likely, citing record-level backlogs in both areas. He expressed confidence in continued market share gains in liability management and restructuring due to diversified activity and strong client coverage.

Mike Brown inquired whether the 'Goldilocks environment' of strong restructuring and M&A performance in 2025 could continue into 2026, asking if restructuring revenue could grow and how much additional market share Evercore could gain in liability management and restructuring.

Answer

CEO John Weinberg affirmed that the coexistence of strong restructuring and M&A markets is highly likely to persist, citing record-level backlogs in both areas. He highlighted a diversified restructuring backlog including liability management, restructurings, and bankruptcies. Weinberg also expressed confidence in continuing to gain market share in liability management and restructuring due to strong client coverage and diversified new activity.

Mike Brown followed up on the software exposure discussion, seeking Erik Hirsch's view on how AI disruption could impact the software landscape, identifying more and less insulated market segments.

Answer

Erik Hirsch, Co-Chief Executive Officer, cautioned against broad generalizations, stating that while some pre-COVID software businesses might struggle due to AI's impact on their valuations, many others continue to grow. He suggested potential M&A between 'new tech' and 'old tech' and emphasized Hamilton Lane's granular, bottoms-up diligence approach over thematic macro strategies for investment decisions.

Mike Brown first asked about the secondary market, specifically Hamilton Lane's upcoming seventh secondary fund, inquiring about its potential size relative to the $5.6 billion sixth fund, given the asset class's growth and investor sentiment. He then followed up on the earlier software question, seeking Erik Hirsch's view on how AI disruption could impact the software landscape, identifying more vulnerable and insulated areas.

Answer

Erik Hirsch, Co-Chief Executive Officer, highlighted the secondary market's health, its undercapitalized nature, and the increasing scale of the industry. He stated Hamilton Lane, as a mid-market player, has significant runway to grow and move up-market, with encouraging investor sentiment for Fund 7. On AI and software, he cautioned against broad generalizations, acknowledging some pre-COVID software businesses might struggle but not all. He suggested potential M&A between 'new tech' and 'old tech' and emphasized granular, bottoms-up diligence over macro thematic investment decisions.

Mike Brown asked about the Private Capital Solutions opportunity, specifically the expected mix of GP and LP secondaries in 2026 versus 2025, PJT's market share opportunity, and when primary fundraising might strengthen due to picking up realizations. He also inquired about competition for talent in the restructuring business, noting a recent partner spin-out.

Answer

Paul Taubman, Chairman and CEO, discussed challenges in primary fundraising but highlighted immense interest in credit/structured credit and real estate. He sees increasing attractiveness in the secondary market, inviting more capital and competitive processes, and expects PJT to gain share due to its unique capabilities. Regarding restructuring talent, Mr. Taubman affirmed PJT's focus on talent and culture, believing it remains a highly attractive destination with significant growth opportunities.

Mike Brown asked about the impact of the DOL's proposed rules facilitating alternatives in 401(k) plans, expectations for market opening in 2026, and any new developments regarding the alliance with Vanguard and Wellington.

Answer

Jon Gray, President and COO, stated that 2026 is expected to be a year of building for 401(k) rules, with capital raising likely starting in 2027, and sees significant long-term potential if private assets are allowed. Regarding Vanguard and Wellington, he indicated product launches are hoped for in the first half of the year, aiming to reach a broader audience beyond top-tier clients and wealth advisors, leveraging Blackstone's brand and performance.

Mike Brown asked for an updated view on the potential market opening for alternatives in 401(k) plans following the DOL's proposed rules, including expectations for 2026. He also inquired about the current status and any new developments regarding the alliance with Vanguard and Wellington.

Answer

Chairman and CEO Steve Schwarzman indicated that 2026 is expected to be a foundational year for 401(k) rules, with capital raising likely to begin more significantly in 2027, noting the significant long-term potential if private assets are allowed into American workers' savings programs. Regarding the Vanguard and Wellington alliance, he stated that products are hoped to launch in the first half of the year, aiming to reach a broader audience beyond top-tier clients and advisors, emphasizing the firm's brand strength and performance in the wealth channel, with new products like those in the hedge fund area also in development.

Mike Brown asked about the broadening of private equity activity, its expected ramp-up in 2026, and potential risks of M&A exits disappointing expectations, particularly concerning continuation vehicles. He also inquired about the Asset Management fee rate exit rate, the asset mix of the $13 billion unfunded mandates, and its fee rate.

Answer

CEO and Chairman Peter Orszag indicated 2026 is expected to be a strong year for PE activity due to LP demand and narrowing bid-ask spreads, viewing secondaries as a permanent and growing feature. CEO of Asset Management Chris Hogbin noted the Q4 exit fee rate was modestly higher than the quarter average, and the $13 billion unfunded mandates are predominantly high-fee emerging markets and listed infrastructure, broadly in line with the Q4 fee rate.

Mike Brown asked about the sponsor-side M&A market, the need for LPs to return capital, and the outlook for private equity activity, including potential risks for M&A exits and the role of continuation vehicles. He also questioned Asset Management's fee rate trends and the asset mix of unfunded mandates.

Answer

CEO and Chairman Peter Orszag expressed optimism for increased private equity activity in 2026, driven by LP demand for cash returns and narrowing bid-ask spreads. He views continuation funds and secondaries as a permanent feature of the private equity landscape. CEO of Asset Management Chris Hogbin noted that the Q4 exit fee rate was modestly higher than the quarter average due to a specific sub-advised relationship closure. He described the $13 billion in unfunded mandates as predominantly emerging market equities, listed infrastructure, and systematic services, with fee rates broadly in line with the Q4 average.

Mike Brown asked about the longer-term potential and ceiling for margin expansion, and for measurable revenue lifts from AI, including key performance indicators (KPIs) to track and Schwab's proprietary data advantage over new fintech entrants.

Answer

CFO Mike Verdeschi stated that margin expansion is a result of balanced financial management, revenue diversification, and expense discipline, with no arbitrary target or ceiling. He expects continued expansion. President and CEO Rick Wurster highlighted existing AI efficiencies, such as moderating growth in client-facing reps while growing accounts and assets. He indicated that key KPIs to track for AI's impact will continue to be Expense on Client Assets (EOCA) and cost per account, aiming to maintain a low cost to serve.

Mike Brown asked about the longer-term potential and ceiling for Schwab's pre-tax profit margin, and inquired about measurable revenue lifts, key performance indicators (KPIs), and the advantage of proprietary data from AI investments in areas like conversions, retention, advisor productivity, and service triage.

Answer

CFO Mike Verdeschi stated that margin expansion is a result of balanced financial management, revenue diversification, and expense discipline, with no arbitrary ceiling, and further expansion is possible. President and CEO Rick Wurster added that AI is already yielding efficiencies, moderating growth in client-facing reps while growing accounts and assets. He highlighted EOCA (expense on client assets) and cost per account as key metrics to track, aiming to maintain a low cost to serve.

Mike Brown asked about BlackRock's strategy in the insurance channel, its differentiated offering spanning cash to private credit, and the demand outlook for 2026 amidst rising competition in the space.

Answer

CFO Martin Small detailed BlackRock's position as the largest insurance general account manager with $700 billion in assets and HPS's contribution of over $60 billion in credit assets. He highlighted the combined platform's ability to provide high-grade solutions, integrate Aladdin, and offer middle-office services. Martin noted over 20 ongoing conversations to migrate public fixed income to private high-grade and pursue strategic partnerships, emphasizing BlackRock's full-service partner approach.