Ares' $36B Bet: Why AI, Private Credit and Secondaries Matter Now

$36B of fundraising shows demand for Ares' long-dated model

Ares raised $36 billion during the quarter and pointed to AI, private credit, and secondaries as emerging growth drivers. That figure matters because it came alongside growth in assets under management to about $671 billion and fee-paying assets to roughly $410 billion. When fresh capital shows up in fee-paying assets, more of it is landing in the part of the business that can support earnings, not just headline scale.

That fits Ares' platform design. It operates a $644 billion AUM platform with 1,655+ investment professionals, and more than 85% of AUM is in perpetual or long-dated funds. In practical terms, that structure helps keep more capital committed through a cycle.

The bullish view is that this remains a durable fee engine. The cautious view is that fundraising can outrun deployment if new capital sits idle too long. The next few quarters should show whether the recent raise is compounding earnings or mainly expanding the balance sheet.

Private credit is still the main demand story

Pathfinder Fund III shows institutional appetite

Ares' latest credit fund is the clearest proof point. Pathfinder Fund III raised $8.5 billion against a $6.5 billion target and reached its hard cap in one round. Deal activity also looks warmer: confidentiality agreements with sponsors rose roughly 35% quarter over quarter, and new deals entering the pipeline increased about 30%. Management also said direct lending activity is beginning to recover.

That demand fits Ares' broader message that institutional investors remain under-allocated to private credit. When spreads widen and competition eases, experienced lenders may be able to deploy more quickly and seek better risk-adjusted returns.

Better returns now require tighter execution

Demand, however, no longer guarantees easy outcomes. The industry is moving away from the backdrop shaped by low interest rates, rising multiples, and generally benign macroeconomic conditions. The current environment features tighter liquidity, higher interest rates, and softer growth, which puts more emphasis on operational value creation.

For credit, that means harder underwriting, closer monitoring of borrowing costs, and a sharper focus on sponsors that can improve cash flow rather than simply add leverage. In that context, management's comments on using AI to improve investment decisions and operating efficiency make sense as a way to support underwriting and execution as scale increases.

Secondaries are becoming a more important liquidity channel

Secondaries offer options, not just distressed assets

Secondaries are gaining importance because private markets are shifting away from a simple buy-and-hold model. As LPs and GPs focus more on liquidity and portfolio construction, secondaries can give investors earlier liquidity options while allowing high-conviction holdings to remain owned and actively managed.

For Ares, that matters strategically. The firm was the primary capital provider behind StepStone's $3.1 billion structured solutions vehicle, described as the largest transaction of its kind globally. That does not prove secondaries are already a major earnings pillar, but it does show the channel is becoming more funded and more mainstream.

Why secondaries could strengthen the model

If investors have more ways to access liquidity within the private-market ecosystem, they may be less inclined to pull back completely into liquid products. Secondaries can also help keep ownership of selected assets intact while giving sellers an exit path.

That fits Ares' broader structure. The company describes a diversified, management fee-centric model, and secondaries give it another way to keep capital active without relying only on new fundraising. For now, the clearest takeaway is that liquidity recycling is becoming a more important part of the conversation.

AI supports the model, but it is not the core thesis

Ares is still primarily a management-fee business

Ares still earns most of its fees from perpetual or long-dated funds. The main demand signals remain the same ones outlined earlier: record fundraising during the quarter, a credit fund that raised above target, and secondaries that are gaining traction as a liquidity channel. Those are the elements investors are underwriting.

What AI changes

On the earnings call, management said it is using AI to improve investment decisions and operating efficiency. That is useful because it can help the firm process more information, support underwriting, and manage costs as the business grows. But the evidence still points to AI as an efficiency layer rather than the central growth driver.

What to watch next

• Next earnings update: does management show better conversion from pipeline into deployed capital and fee growth?
• New fundraising: another hard-cap credit raise would reinforce demand.
• Secondaries: more vehicles similar to the structured solutions vehicle would suggest liquidity recycling is becoming a more repeatable product line.