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Ares Management Corp (ARES)·Q4 2024 Earnings Summary

Executive Summary

  • Record Q4 with higher FRE, ATRI and deployment; fee-related earnings were $396.2m (+7% YoY) and FRE margin 40.9% (ahead of 40% target) while After-tax Realized Income reached $434.7m and $1.23 per share; GAAP net income was $177.3m and diluted EPS $0.72 .
  • Fundraising and dry powder set up 2025: AUM rose to $484.4b, FPAUM to $292.6b; available capital hit $133.1b and AUM not yet paying fees reached $95.0b, positioning for embedded management fee growth on deployment .
  • Management guided to 2025 dividend reset at $1.12/quarter (+20% YoY), European-style net realized performance income of $225–$275m, wealth management fees of $500–$550m (+65%+), and FRE margin expansion with an 11–15% effective tax rate .
  • Catalysts: accelerating deployment, the $81b shadow AUM, wealth channel momentum (monthly inflows >$1b in January), and expected Q1 close of GCP International (data centers, logistics) augmenting real assets growth .

What Went Well and What Went Wrong

What Went Well

  • “We set many financial records, including our best year ever in gross fundraising and capital deployed. We raised $93 billion… and ended the year with $484 billion of AUM.” (CEO) .
  • FRE hit a quarterly record ($396.2m); margin of 40.9% exceeded the 40% target due to slightly lower comp and G&A in Q4 (CFO) .
  • Q4 gross capital deployment rose to $32.1b (+34% YoY), with strong activity in U.S. private credit, real estate debt/equity, and secondaries (CEO) .

What Went Wrong

  • Fee Related Performance Revenues were softer YoY ($161.984m vs $173.512m) on lower incentive fees from U.S. direct lending; real estate FRPR not expected in 2025 (CFO) .
  • Supplemental distribution fees in wealth weighed on FRE margin in 2024 (net ~$24m YTD through Q3); Q4 net supplemental distribution fees reduced FRE by ~107 bps (CFO) .
  • Real assets FRE was modestly lower YoY; operating expenses muted segment FRE growth despite rising management fees and catch-up fees (Q4 segment commentary) .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Total Revenues ($USD Millions)$1,053.981 $788.682 N/A$1,258.997
GAAP Net Income ($USD Millions)$173.950 $94.938 $118.5 $177.317
Diluted EPS ($USD)$0.86 $0.43 $0.55 $0.72
Management Fees ($USD Millions)$697.846 $721.681 $757+ implied from commentary $779.156
Fee Related Performance Revenues ($USD Millions)$173.512 $21.567 $44 (Q3 crystallization) $161.984
Fee Related Earnings ($USD Millions)$368.726 $324.516 $339.3 $396.240
FRE Margin (%)41.0% 42.1% 41.1% 40.9%
After-tax Realized Income ($USD Millions)$400.382 $331.987 $316.0 $434.685
ATRI per share ($USD)$1.21 $0.99 $0.95 $1.23

Segment performance (FRE and Realized Income):

SegmentFRE ($USD Millions) Q4 2023FRE ($USD Millions) Q4 2024Realized Income ($USD Millions) Q4 2023Realized Income ($USD Millions) Q4 2024
Credit$406.176 $458.761 $479.577 $529.138
Real Assets$58.091 $57.427 $59.652 $74.211
Private Equity$17.091 $14.181 $13.197 $15.833
Secondaries$33.125 $39.172 $33.829 $39.482

Key KPIs:

KPIQ4 2023Q3 2024Q4 2024
AUM ($USD Billions)$418.8 $463.8 $484.4
FPAUM ($USD Billions)$262.4 $286.8 $292.6
Available Capital ($USD Billions)$111.4 $125.3 $133.1
AUM Not Yet Paying Fees ($USD Billions)$74.3 $85.2 $95.0

Deployment trend:

Gross Capital Deployment ($USD Billions)Q4 2023Q2 2024Q4 2024
Firmwide$24.0 $26.4 $32.1

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per share (Class A)2025 quarterly$0.93 (Q4 2024 dividend) $1.12/quarter (set for 2025; +20% YoY) Raised
European-style Net Realized Performance IncomeFY 2025$225–$275m (Investor Day/Nov call) $225–$275m (unchanged) Maintained
FRE Margin expansionFY 20250–150 bps (Investor Day) 0–150 bps (target reiterated) Maintained
Wealth management products mgmt feesFY 2025Not quantified$500–$550m (+65%+ YoY) New/raised
FRPR outlookFY 2025Not quantifiedAdditional growth; modest given lower base rates in SMAs Directional (moderate)
Real Assets FRPRFY 2025Not specifiedNo FRPR expected in 2025; 2026 “could be in play” Lower/none in 2025
Effective tax rate on realized incomeFY 202512–15% (prior framework) 11–15% Lower low-end
GCP International contribution (FRE)First 12 months post-close~$200m; 2026 ~$245m (prior) ~$200m first 12 months; ~$245m in 2026; ~$10m synergies later; ~$10m one-time costs Maintained detail

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 and Q3)Current Period (Q4)Trend
Wealth channel momentumSemi-liquid products AUM $32b; October was largest month ($1.2b equity flows) Over $10b equity in 2024; $39b AUM; January inflows >$1b; fees to rise to $500–$550m Accelerating
Supplemental distribution feesNet reduction of FRE margin (~102 bps YTD through Q3) Q4 net fee reduced FRE by ~107 bps; mix shifting to lower rev-share channels Becoming less impactful as scale grows
Private credit deployment/gross-to-netQ3 gross-to-net 42%; Q1 22%; annual 37% vs 46% in 2023 Expect improvement in 2025 with M&A and real estate recovery Improving into 2025
Banks vs private credit competitivenessCLO issuance hedges competition; banks more partner than competitor Symbiotic relationship; more SRT/CRT and portfolio activity post-election; CLOs benefit when banks are risk-on Constructive
Real assets/data centersGCP pipeline (~$7b near-term) highlighted in Q3 Data center thesis intact despite efficiency; focus on powered/entitled metro sites; LOIs in place Positive outlook
European direct lendingACE VI fundraising strong; fund expects ~€30b total capital (with leverage) Portfolio resilient; limited tariff exposure; deployment looks good into ’25 (Blair Jacobson) Healthy
FRPR cadenceQ4 Credit FRPR guided $160–$170m in Q3 call 2025 FRPR “additional growth yet modest” given lower base rates Moderate
Tax rate12–15% framework (2024/forward) 11–15% for 2025; GCP tax amortization lowers rate Slightly lower
Dividend policy$0.93 in Q3 Fixed quarterly $1.12 for 2025 (20% YoY increase) Raised
Insurance (Aspida)Strong Q3 flows; growing TAM $2.3b equity raised; path to $50b assets by 2028 Building

Management Commentary

  • CEO: “We raised $93 billion of new funds in 2024 and ended the year with $484 billion of AUM… We are optimistic that we are entering into a more active transaction environment” .
  • CEO: “We’re entering 2025… with a record $133 billion of dry powder and… $81 billion of AUM raised but not yet paying fees provides us with approximately 30% embedded gross base management fee growth upon deployment” .
  • CFO: “FRE margin of 40.9% was ahead of our 40% target… We expect total management fees from [wealth] funds to increase more than 65% year-over-year to a range of $500 million to $550 million” .
  • CFO: “For 2025, we continue to expect our European style net realized performance income to more than double to a range of $225 million to $275 million” .

Q&A Highlights

  • Expenses: G&A growth driven by supplemental distribution fees (~50 bps of capital raised); occupancy to balance as LA rolls off and NY expands; GCP adds G&A with ~$20m FRE drag for data centers until funds launch .
  • Strategy focus: Co-Presidents to help integrate GCP, scale real estate/infrastructure lending, and develop next-generation leaders; focus remains on highest impact growth .
  • M&A appetite: Bar raised post-GCP; focus on organic growth; most capability “game board” already filled across asset classes and regions .
  • Deployment outlook: Expect gross-to-net to improve in 2025 with M&A normalization and real estate rebound; Q4 gross-to-net 42%, annual 2024 37% vs 46% in 2023 .
  • Banks/private credit: Banks are partners; increased SRT/CRT and portfolio activity; CLO engine benefits when banks are active .
  • Wealth distribution economics: Fees uniform industry-wide; absorption improves with scale; international mix reduces rev-share burden .
  • GCP detail: First 12 months post-close ~$200m FRE (ex synergies/costs); 2026 ~$245m; retail J-REIT capital raising tied to rate environment .
  • Tax outlook: 2025 effective rate 11–15%; AMT considerations; GCP tax amortization supportive .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for Q4 2024 were unavailable at time of request due to provider limits; therefore, we cannot assess beat/miss vs Wall Street consensus. Values could not be retrieved from S&P Global (API daily limit exceeded).

Key Takeaways for Investors

  • FRE and ATRI strength plus a 20% dividend increase support near-term sentiment; dividend visibility derives from fee-centric model and European waterfall realizations .
  • Deployment tailwinds: $133b dry powder and $95b shadow AUM provide embedded fee growth as transaction activity normalizes; monitoring gross-to-net improvement across 2025 is key .
  • Wealth channel is a structural growth lever (fees guided to $500–$550m in 2025); watch platform expansion and mix shifts reducing distribution fee drag .
  • Real assets optionality: Near-term data center pipeline and GCP close in Q1 could accelerate fundraising and FRE in 2026; expect limited FRPR from real assets in 2025 .
  • Credit platform breadth (CLO, middle market, asset-backed) mitigates bank/BHY competition; incumbency and multi-strategy origination underpin deployment resilience .
  • Tax rate and margin: 2025 effective tax rate 11–15% and reiterated 0–150 bps FRE margin expansion provide earnings leverage sensitivity to deployment pace .
  • Near-term trading: Focus on deployment updates, GCP closing, wealth inflow cadence, and any signs of real estate FRPR recovery (potentially 2026) as stock catalysts .