Ares Management Is Undervalued

 

Ares Management Corp or shortly Ares, one of the leading global alternative asset managers is undervalued, according to Wolfteam Ltd.'s projections and estimates.

Ares manages a total of 545.9 billion USDs of assets with 335.1 billion USDs in fee paying assets under management. The 545.9 billion USDs of Ares' asset management are distributed in 359.1 billion USDs in credit, 124.2 billion USDs in real estate, 24.7 billion USDs in private equity, 31.3 billion USDs in secondaries and 6.6 billion USDs in other businesses. 

Private credit is in a boom phase globally as many mid sized companies, to a large part from the technology sector are looking to borrow at 7 % to 14 % annual interest rates, loans which are avoided by money center banks and even regional banks, but which are the sweet spot for the largest private credit managers like Ares Management.

The artificial intelligence, AI fourth industrial revolution we are experiencing is in a full swing and lifts the fortunes of most small, medium sized and large, hyperscalers technology companies. These technology companies are in need of large amounts of funds to grow and mid and large private credit asset managers like Ares provide the much needed fuel for these technology companies' growth ambitions.

The global artificial intelligence, AI race is in full motion with USA leading the pack, China as close second and the European Union ramping up its efforts as well.

To produce artificial intelligence, AI companies need access to or to build large data and computational centers, which mostly cost billions of  US dollars. Technology companies are known for their financial leverage. They borrow extensively. Since most mid-sized technology companies are BB or B rated by the leading credit agencies, they tend to borrow at 7 % to 14 % interest rates both on the lending marked and the high yield bonds market. Ares Management and other large alternative asset managers are more than happy to provide the funds these AI companies need.

So long as the global economy is growing and the artificial intelligence, AI wave keep rising and moving along these mid sized technology AI companies will mostly pay off their loans and Ares Management's business will keep booming. Even in a recession however, many companies will enter distress and will need financing at 7 % to even 16 % interest rates per annum. So at first in a recession Ares Management business will encounter difficulties and make losses, but in the long term Ares will continue displacing banks and win lending market share globally, even in an economic downturn. In an economic recession and the following recovery Ares earnings will slowly recover

Ares Management's intrinsic value based on the artificial intelligence, AI and private credit boom is 93 billion USD, according to Wolfteam Ltd.'s projections and estimates,  compared to Ares Management's current market capitalization of 54.05 billion USDs.

 

Ares Management delivered strong 1 Quarter 2025 earnings as shown below:

$ in thousands, except share data 2025 2024
Revenues
Management fees $816,987 $687,692
Carried interest allocation 160,008 (32,478)
Incentive fees 32,048 8,667
Principal investment income 21,998 7,050
Administrative, transaction and other fees 57,764 36,432
Total revenues 1,088,805 707,363
Expenses
Compensation and benefits 657,125 412,951
Performance related compensation 122,633 (50,532)
General, administrative and other expenses 227,914 170,928
Expenses of Consolidated Funds 6,656 5,146
Total expenses 1,014,328 538,493
Other income (expense)
Net realized and unrealized gains on investments 268 10,516
Interest and dividend income 17,656 5,382
Interest expense (36,387) (37,824)
Other income (expense), net (10,714) 270
Net realized and unrealized gains on investments of Consolidated Funds 88,406 34,424
Interest and other income of Consolidated Funds 160,072 257,276
Interest expense of Consolidated Funds (152,740) (207,866)
Total other income, net 66,561 62,178
Income before taxes 141,038 231,048
Income tax expense 17,537 27,233
Net income 123,501 203,815
Less: Net income attributable to non-controlling interests in Consolidated Funds 55,977 66,716
Net income attributable to Ares Operating Group entities 67,524 137,099
Less: Net income attributable to redeemable interest in Ares Operating Group entities 316 73
Less: Net income attributable to non-controlling interests in Ares Operating Group entities 20,038 63,999
Net income attributable to Ares Management Corporation 47,170 73,027
Less: Series B mandatory convertible preferred stock dividends declared 25,313 —
Net income attributable to Ares Management Corporation Class A and non-voting common stockholders $21,857 $73,027
Net income per share of Class A and non-voting common stock:
Basic $0.00 $0.33
Diluted $0.00 $0.33
Weighted-average shares of Class A and non-voting common stock:
Basic 209,350,849 192,622,609
Diluted 209,350,849 192,622,609