Ares CEO Signals Strong 2026 Deal Flow, Clarifies AI Playbook at BofA Conference
Ares Management CEO and co-founder Michael Arougheti sees healthy transaction volumes ahead and a clearer lane for execution. The firm ended January with a record-high pipeline across businesses after deploying roughly $46 billion in Q4-both strong short-term indicators for activity over the next six months.
He also laid out a practical view on AI-risk and upside, minus the drama-and reaffirmed growth targets and a disciplined dividend policy, including a 20% increase for Q1. For executives, the message is simple: keep dry powder ready, focus on infrastructure and real asset adjacencies, and use AI where it moves the P&L, not the headlines.
Deal Environment: Constructive, With Multiple Catalysts
Arougheti described the 2026 setup as "very constructive." Pipelines accelerated into year-end, stayed diversified across strategies, and hit a record by late January-what he called a good predictor of transactions in the following half-year.
- Q4 deployment: about $46 billion-record pace.
- Pipeline: record high as of end-January, tracked across all businesses.
- Catalysts: a more favorable rate backdrop, a pro-business and deregulatory stance, banks de-risking, improving real estate volumes after valuation resets, and aging PE portfolios with ample dry powder.
Barring a macro shock, he expects volumes to remain healthy. Translation: sourcing and diligence should be resourced now, not later.
AI: Practical Use, Measured Risk
Arougheti pushed back on panic-driven AI narratives. Software is only around 6% of Ares' exposures, limiting direct concentration risk from rapid tech disruption.
Internally, the firm has evaluated roughly 160 AI use cases and is deploying about 25 across the front, middle, and back office. The focus is on concrete improvements-origination support, underwriting assists, workflow speed, and operational margin-rather than vanity experiments.
- Risk: industry disruption and model risk are real, but scoped.
- Opportunity: efficiency, decision support, and throughput across core processes.
Strategic Priorities to Watch
- Digital infrastructure: expanding exposure, especially data centers and the GCP-related initiative.
- Japan: continued growth push in a market with structural and policy tailwinds.
- Real estate: building a vertically integrated platform to control sourcing, operations, and exits.
- Margin levers: middle-office consolidation and technology to capture operating upside.
- Financial targets: reaffirmed focus on fee-related earnings (FRE) and realized income (RI) growth, plus a consistent dividend framework (Q1 dividend up 20%).
What This Means for Strategy and Corporate Development
- Expect more deal flow: debt solutions, carve-outs, sponsor secondaries, and real asset transactions should pick up as rates settle and banks shed risk.
- Revisit data center and digital infra adjacencies: demand for compute and storage is compounding, and capital is moving there.
- Reprice real estate with discipline: if valuations have troughed, volume returns-focus on segments with operational control and clear cash flow visibility.
- Make AI earnings-accretive: target use cases with measurable throughput or margin impact; skip vanity pilots.
Operating Checklist for the Next Two Quarters
- Pipeline-to-close conversion: track cycle time, approval bottlenecks, and hit rate by strategy.
- AI ROI: set baselines, measure time saved per process, and tie outcomes to P&L lines (origination, diligence, servicing, reporting).
- Capital allocation: bias toward digital infrastructure and high-quality real assets with inflation-linked or contracted cash flows.
- Cost discipline: centralize middle-office functions where possible; standardize data and workflow tooling.
Questions for Your Next Leadership Meeting
- Where do we have high-conviction deployment capacity if volumes rise quickly?
- Which AI use cases can we productize across teams to lift margin within two quarters?
- Do we have a clear view on data center exposure-direct, indirect, or through vendors-and how will that evolve?
- How are we positioning for Japan or similar markets with structural catalysts?
For source materials and company updates, see the Ares Management site: aresmgmt.com.
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