Ares Management (NYSE:ARES) sees three major themes shaping the next phase of alternative investing: growing institutional demand for private credit, a rapidly expanding market for private equity secondaries, and artificial intelligence becoming a competitive advantage across investing and operations.
The comments came during the firm’s second-quarter earnings call, where Ares reported record fundraising and said it is seeing improving deployment opportunities across credit, infrastructure and secondaries while increasingly using AI to improve investment decisions and operating efficiency.
Ares raised a record $36 billion during the quarter, pushing assets under management to approximately $671 billion, up 17% from a year earlier, while fee-paying assets climbed 17% to roughly $410 billion.
CEO Michael Arougheti said institutional investors remain significantly under-allocated to private credit despite years of growth in the asset class.
He pointed to Ares’ latest Pathfinder Fund III, which raised $8.5 billion against a $6.5 billion target and reached its hard cap in a single fundraising round, as evidence that institutional appetite continues to accelerate.
“I think at this moment in time… people perceive an opportunity to capture excess return given a shift in the competitive set, meaning spreads have widened, less competition, and therefore an ability to deploy maybe quicker at better returns,” Arougheti told analysts.
The firm also said direct lending activity is beginning to recover. Ares reported that confidentiality agreements with sponsors increased roughly 35% quarter over quarter while new deals entering its pipeline climbed about 30%, suggesting M&A-backed lending could strengthen during the second half of 2026.
Secondaries Market Continues To Gain Momentum
Beyond direct lending, Arougheti highlighted the rapidly expanding secondary market as another long-term growth opportunity.
“Within secondaries, market volumes continue to grow as the need for distributions and enhanced liquidity remains a central theme across private markets,” he said.
He noted that credit secondaries volumes during the first six months of 2026 had already matched all of 2025, as institutional investors increasingly look to sell limited partner interests while general partners pursue continuation vehicles to return capital without exiting high-quality assets.
During the Q&A, Arougheti also said secondaries remain attractive because they offer investors diversified exposure with lower volatility than traditional buyout funds.
“If you were to look at PE secondary returns, first quartile to fourth quartile, the dispersion of returns is much tighter than you see in the primary market,” he said, adding that investors are effectively buying diversified private equity exposure while reducing volatility through discounts to net asset value.
AI Is Becoming A Competitive Advantage
Alongside private credit and secondaries, Arougheti said AI is already improving productivity across the firm.
Ares is using AI to automate repetitive tasks including request-for-proposal responses, due diligence questionnaires, anti-money laundering reviews, know-your-customer compliance and legal document analysis. Investment teams are also applying AI to proprietary deal and portfolio data to improve sourcing, underwriting and portfolio management.
“We’re already seeing the benefits in terms of capacity increasing and margin improvement,” Arougheti said.
He added that the next phase will be using decades of proprietary investment data—including transactions Ares completed as well as those it passed on—to improve future investment decisions.
Artificial intelligence is also creating new investment opportunities for the firm. Executives pointed to surging demand for AI infrastructure as a key growth driver for Ares’ digital infrastructure platform, which finances and develops data centers and related power assets for hyperscale customers. Management said fundraising remains strong as demand for computing continues to accelerate.
Taken together, Ares suggested the convergence of institutional private credit demand, expanding secondary markets and AI adoption is creating multiple avenues for growth, both by improving how the firm invests and by generating new opportunities to deploy capital.
Photo: Shutterstock
Login to comment