Ares Management CEO Michael Arougheti breaks down where to find yield in a world of uncertainty
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Inflation, a hawkish Fed, fears of a recession have all made 2022 a tough environment for investing. A traditional portfolio of stocks and bonds is deeply in the red, leaving investors to seek diversity elsewhere.
Ares Management, however, has been a beneficiary of the current environment. With hundreds of billions of dollars' worth of floating rate credit and real assets, the firm's $200B book has surprisingly held up well. CNBC's Delivering Alpha newsletter sat down with Ares CEO Michael Arougheti who says that «when the markets get challenged, that's when our investment opportunity becomes the most attractive.»
(The below has been edited for length and clarity. See above for full video.)
Leslie Picker: How long do you think these tailwinds for your business will last?
Michael Arougheti: I think we have to talk about secular tailwinds in alternatives, and then maybe some of the cyclical tailwinds that we're seeing as well. So if you look over the last 20 years, we're seeing a meaningful increase in allocations on the part of institutional and retail investors to alternatives. And to oversimplify what's a complex series of global flows, it really comes down to a global desire for durable yield. Hence the demand that we see for private credit assets globally, and maybe a dissatisfaction with the performance of traditional 60/40 portfolios and what seems to be more consistent volatility in the traded markets. And so we're also seeing increasing demand for things like real assets and private equity. I don't think that will end anytime soon. If you look at institutional allocations to alternatives, they are predicted to double likely over the next five to 10
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