As an enterprising 13-year-old New York Yankees fan in 1986, Michael Arougheti ran a baseball card trading business, setting up tables at collectibles shows on weekends in suburban New York City. He made thousands but learned that flipping hundreds of cards for tiny gains was a better strategy than obsessively pursuing a rare Hank Aaron rookie card-which might be worth tens of thousands but was almost impossible to find. Since 2018, Arougheti has been the CEO of credit-focused alternative asset firm Ares Management. It has quietly become one of the most successful firms on Wall Street, but unlike its more famous private equity peers, Ares is beating the odds with a steady diet of thousands of singles.
The Los Angeles-based firm has grown to $341 billion in assets, more than tripling in size in the last five years, with $204 billion in its credit business, which makes loans to little-known mid-sized companies worldwide. While firms like KKR are known for bold equity bets with unlimited potential gains, Ares' upside is mostly limited to the coupon interest payments-pegged to benchmark rates like LIBOR-on its loans. That's just fine for its 2,000 pension funds, insurance companies and other institutional clients.
"People are gravitating toward durable yield. We were very early proselytizers of the value of compounding yield," says Arougheti, 50, noting a boom in business precipitated by falling equity markets and higher interest rates.
Ares is a standout on the inaugural Forbes Financial All-Stars list, highlighting 50 global financial companies in seven sectors: banking, insurance, capital markets, consumer finance, mortgages, fintech and business development. According to analysts at KBW, these companies have high risk-adjusted five-year returns, as well as a host of impressive fundamentals including debt to equity and revenue growth. Ares' 316% cumulative total return for the five years ending in September 2022, versus 56% for the S&P 500, tops the list (see sidebar at right).
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Like other successful alternative asset managers, Ares has become a billionaire factory. Arougheti and cofounders Bennett Rosenthal, 59, and David Kaplan, 55, are all billionaires, by Forbes' reckoning. Executive chairman Antony Ressler, majority owner of the NBA's Atlanta Hawks, is now worth an estimated $6.3 billion.
Ressler cofounded Ares in 1997 when he was 37 as the credit arm of Apollo Global Management, which he previously started in 1990 with colleagues from Drexel Burnham Lambert, led by Leon Black. Prior to its collapse in 1990, Drexel, under Michael Milken, pioneered the market for original-issue junk bonds. Ressler's five years at Drexel served as a crash course in credit.
"That asset class forced you to be an analyst, forced you to understand companies, because historically, much of investment banking was to finance companies in the high-grade world, which didn't require enormous analysis," says Ressler, 62. "That has been the foundation of my career and of Ares. Understanding and pricing risk is fundamentally what we do for a living."
Today's incarnation of the firm began to take shape when Arougheti and Kipp de Veer, now the head of Ares Credit Group, arrived in 2004 to build its private credit business. Twent...
The Los Angeles-based firm has grown to $341 billion in assets, more than tripling in size in the last five years, with $204 billion in its credit business, which makes loans to little-known mid-sized companies worldwide. While firms like KKR are known for bold equity bets with unlimited potential gains, Ares' upside is mostly limited to the coupon interest payments-pegged to benchmark rates like LIBOR-on its loans. That's just fine for its 2,000 pension funds, insurance companies and other institutional clients.
"People are gravitating toward durable yield. We were very early proselytizers of the value of compounding yield," says Arougheti, 50, noting a boom in business precipitated by falling equity markets and higher interest rates.
Ares is a standout on the inaugural Forbes Financial All-Stars list, highlighting 50 global financial companies in seven sectors: banking, insurance, capital markets, consumer finance, mortgages, fintech and business development. According to analysts at KBW, these companies have high risk-adjusted five-year returns, as well as a host of impressive fundamentals including debt to equity and revenue growth. Ares' 316% cumulative total return for the five years ending in September 2022, versus 56% for the S&P 500, tops the list (see sidebar at right).
[https://cdn.magzter.com/1369322608/1676974581/articles/Z4oaUQHAM1677062993467/03XeSc2TN1677063199546.jpg]
Like other successful alternative asset managers, Ares has become a billionaire factory. Arougheti and cofounders Bennett Rosenthal, 59, and David Kaplan, 55, are all billionaires, by Forbes' reckoning. Executive chairman Antony Ressler, majority owner of the NBA's Atlanta Hawks, is now worth an estimated $6.3 billion.
Ressler cofounded Ares in 1997 when he was 37 as the credit arm of Apollo Global Management, which he previously started in 1990 with colleagues from Drexel Burnham Lambert, led by Leon Black. Prior to its collapse in 1990, Drexel, under Michael Milken, pioneered the market for original-issue junk bonds. Ressler's five years at Drexel served as a crash course in credit.
"That asset class forced you to be an analyst, forced you to understand companies, because historically, much of investment banking was to finance companies in the high-grade world, which didn't require enormous analysis," says Ressler, 62. "That has been the foundation of my career and of Ares. Understanding and pricing risk is fundamentally what we do for a living."
Today's incarnation of the firm began to take shape when Arougheti and Kipp de Veer, now the head of Ares Credit Group, arrived in 2004 to build its private credit business. Twent...
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Forbes (Digital) - 1 Issue, February - March 2023