Ares Management Raises Fundraising Targets Amid Retail Surge
At its recent analyst day, Ares Management announced a 25% increase in its three-year fundraising goals. CEO Michael Arougheti attributed this uplift to unexpectedly strong engagement from individual wealthy investors, signaling a notable shift in private market capital flows. This surge aligns with findings from a State Street survey predicting that retail investors will account for over half of private market inflows in the coming years, a significant departure from the traditional dominance of institutional investors.The Retail Revolution in Alternative Assets
Ares has positioned itself at the forefront of this transformation, having offered retail-targeted investment vehicles for more than two decades. The firm now manages over $50 billion in semi-liquid products accessible to individual investors, capturing close to 10% of this growing market segment. “What has changed is the quality and scale of our products, alongside significant investments in servicing and client education,” Arougheti explained. Ares currently employs 185 professionals across 10 global offices dedicated to product development and investor engagement.Addressing Concerns Over Retail Product Quality
Some industry observers caution that retail investors may be offered lower-quality deals compared to institutional clients. A Harvard University study highlighted potential performance disadvantages in broadly marketed funds, suggesting retail investors might face inferior investment products.“This narrative of weaker products being reserved for retail is just not true,” Arougheti asserted. “Only the largest managers with the highest quality deals have the scale to build wealth platforms. Our investment allocations are based on available capital, with many deals accessible to both institutional and retail clients.”
Contents
Ares Management Raises Fundraising Targets Amid Retail SurgeThe Retail Revolution in Alternative AssetsAddressing Concerns Over Retail Product QualityAres’ Expansive Asset Base and Market PresenceWhy Retail Investors Are Turning to AlternativesThe 401(k) Opportunity and Regulatory ChallengesReframing the Concept of ‘Alternative’ InvestmentsFinOracleAI — Market View
Ares’ Expansive Asset Base and Market Presence
As of June, Ares held approximately $572 billion in assets under management, with two-thirds allocated to credit strategies. The firm’s portfolio spans over 3,000 middle-market companies, underscoring its broad market footprint.Why Retail Investors Are Turning to Alternatives
Despite strong returns in public equities, Arougheti identified growing concentration in liquid securities as a driver for retail demand in alternatives. Investors seek diversified, non-correlated exposures through private equity and real estate to balance their portfolios.“Navigating diversified portfolios in public markets is increasingly challenging,” Arougheti noted. “Alternatives offer non-correlated equity exposure, appealing to retail investors looking for diversification beyond traditional stocks.”
The 401(k) Opportunity and Regulatory Challenges
A potential expansion allowing greater allocation of 401(k) retirement funds into alternatives could substantially increase Ares’ assets under management. However, Arougheti expressed skepticism about the speed of such changes without regulatory reform. He emphasized the current fee-sensitive nature of the retirement sector and the narrow fiduciary duty definition focused on cost rather than net returns, which constrains alternative investments’ growth in these vehicles.“Until plan sponsors gain confidence that pursuing alternatives does not expose them to litigation risk, widespread adoption in 401(k)s will remain limited,” Arougheti explained.
Reframing the Concept of ‘Alternative’ Investments
Arougheti urged a reconsideration of the term “alternative,” noting that private markets are no longer niche but represent a natural evolution and innovation within capital markets.“There’s nothing ‘alternative’ about what we do anymore,” he stated. “Private markets are not creating artificial demand but are part of the ongoing evolution in capital markets seen over generations.”
FinOracleAI — Market View
Ares Management’s strategic emphasis on retail investors reflects a broader shift in alternative asset fundraising. The firm’s deep experience and significant scale position it well to capitalize on evolving investor preferences seeking diversified, non-correlated returns.- Opportunities: Expanding retail investor base, potential 401(k) inclusion, diversification demand amid public market concentration.
- Risks: Regulatory hurdles in retirement accounts, fee sensitivity in retail segments, potential market volatility impacting fundraising momentum.
