Century City-based asset manager Ares Management Corp. reported a net loss of $31 million, or 33 cents per share, in its first-quarter earnings. Adjusted for nonrecurring costs, however, the company had net earnings of 45 cents per share, beating analyst estimates of 40 cents per share.
Ares announced a dividend of 40 cents per share of common stock to be issued in mid-June.
The asset manager reported record fee-related earnings of $93 million, up 31% over the first quarter of 2019. It was Ares’ 12th consecutive quarter of fee-related earnings growth.
It also broke records for management fees of $264 million and fee-paying assets under management of $102 billion in the first quarter.
The firm raised $6.6 billion in new capital during the first quarter while deploying $6.5 billion.
Ares’ leadership acknowledged that the company’s investments had been impacted by the Covid-driven market downturn.
“Our portfolios were not immune to the broad market dislocation as reduced valuations decreased our net accrued carry from year-end levels and reduced the value of our balance sheet portfolio,” Ares Chief Financial Officer Michael McFerran said on an earnings call.
Despite this, the executive team spoke confidently about the company’s ability to deliver strong results throughout the down markets.
“As we have demonstrated in the past, we have historically grown during past periods of volatility and believe we are well positioned with our flexible strategies and significant available capital of more than $33 billion,” Ares Chief Executive Michael Arougheti said in a statement.
According to the company, Ares experienced faster growth during the financial crisis a decade ago than during any period since. Between 2007 and 2009, the firm’s assets under management and management fees grew at compound annual growth rates of 39% and 28%, respectively.
Ares leadership said the firm’s performance would be supported by both long-term fees as well as its ability to invest effectively in distressed assets.
McFerran said Ares has a total of $25 billion that it can use to invest in distressed assets across eight funds “that are in the market or soon to come to market.”
Analysts generally agreed with the firm’s bullish outlook.
“In an environment characterized by ongoing economic uncertainty, we favor (fee-related earnings)-heavy, credit-focused and capital-light alternative asset managers like Ares,” wrote James Fotheringham of BMO Capital Markets in a report on Ares first quarter earnings.
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