Welcome to Ares Management Corporation's First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. As a reminder, this conference call is being recorded on Thursday, April 29th, 2021. I will now turn the call over to Carl Drake, Head of Public Company Investor Relations for Ares Management.

Good afternoon and thank you for joining us today for our first quarter 2021 conference call. We hope everyone is safe and healthy. I'm joined today by Michael Arougheti, our Chief Executive Officer; and Michael McFerran, our Chief Operating Officer and Chief Financial Officer. In addition, Bennett Rosenthal, Co-Chairman of our Private Equity Group; Kipp DeVeer, Head of our Credit Group; and Matt Cwiertnia, Co-Head of our Private Equity Group will be available for the question-and-answer session.

Great. Thank you, Carl. Good afternoon everyone. I hope you are all healthy and wish you well. As the economy recovers on the back of significant fiscal and monetary stimulus as well as progress on the healthcare front, we are off to a strong start this year across our business. Looking back at an unprecedented year of volatility and change, we believe that 2020 validated the resilience and durability of our business, the positive fundamental growth trends for our company, and the strong secular tailwinds driving the alternative asset management industry. As we look forward to the rest of 2021, we see a constructive market backdrop and continued momentum in the four core drivers of our business: strong fundraising, deployment, investment performance, and realizations. I'll speak to each of these specifically, but simply put, as we execute well on each of these fronts, we're confident in our ability to drive continued long-term value for our shareholders and to maintain our guidance of 15%-plus FRE growth for the foreseeable future.

Thank you, Mike. Hello, everyone. I hope all of you are safe and well. I will start with a review of our strong first quarter results and our outlook for 2021. We continue to deliver across our core financial metrics with FRE, management fees, AUM, fee paying AUM, and dry powder, all either at or near firm records. This performance is a testament to the resiliency of our firm despite the challenges presented in the last 12 months. Our fee-related earnings continue to grow quarter-over-quarter and this quarter's comparable FRE growth exceeded our expectations, as we were able to grow sequentially, despite an exceptionally strong fourth quarter of last year. For the first quarter, FRE totaled $128.5 million, an increase of 38% year-over-year compared to the first quarter of 2020. Our quarterly FRE margin reflects a firm record of 38.4%, nearly a 500 basis point improvement year-over-year, as we continue to deploy capital from our Shadow AUM, raise new capital, and further scale our business lines. Of note, for the first quarter, our fee-related earnings comprise more than 90% of our realized income and for the last 12 months, FRE accounted for more than 75% of realized income. FRE for the first quarter was driven by management fees, totaling $327 million, an increase of approximately 20% over the first quarter of 2020. Turning to expenses, our combined compensation and general and administrative expenses grew by approximately 11.5% compared to the first quarter of 2020. Realized income for the first quarter totaled $137 million, up slightly year-over-year as most of our realizations came from a partial secondary sale in one of our private equity portfolio companies, the AZEK Company. After-tax realized income per share of Class A common stock, net of preferred stock distributions, was $0.46 per share for the first quarter, up from $0.45 in the first quarter of 2020.

Thanks, Mike. We believe that Ares is well positioned today to take advantage of our strong competitive position and the favorable tailwinds in the global alternative asset landscape. Investors are allocating more capital into alternative investments while at the same time looking to consolidate relationships with broader scale managers. This plays to our strength as a broad solutions provider having also delivered time-tested and attractive returns to our clients. Over the past five years, we've achieved tremendous growth in the wallet share with our existing clients as they invest larger amounts in subsequent funds and expand their investment exposures across the Ares platform. We believe that these trends will continue. As a result, across the alternative landscape, we'll look to continue growing our products, capabilities, and geographical reach to provide additional differentiated investment solutions for our clients. Mike mentioned with over $40 billion of AUM not yet paying fees, we have strong near-term visibility for earnings growth. When you add in the growth avenues that we have in large and expanding addressable markets, we believe that Ares is well positioned to remain a high-growth firm for many years to come. I want to end our prepared remarks by simply expressing how impressed, grateful, and proud I am of the hard work and dedication of our team. The amazing growth and investment performance that we've delivered is a direct result of our employees' strong commitment to collaborate and work as a team with a shared set of common values. I'm also deeply appreciative of our investors' continued support for our company. And I thank you for your time today. And with that, operator, I think we'll open up the line for questions.

Our first question today comes from Robert Lee with KBW.

Thanks, Mike and Mike. Hope everyone is doing well. I just have a quick question on your initiatives, maybe in the high net worth channel. I mean, obviously, you have ARCC and ACRE. But can you maybe elaborate on how you're thinking about some of your peers and how they've had their marketplace more broadly? And obviously, some peers have brought out their potentially non-traded real estate or credit products. So what are your thoughts on that at this point?

Sure. So we think about it a lot. I think the good news is we have a well-established brand in that channel already through the success of our listed vehicles in the form of ARCC, ACRE, and ARDC. We also have a pretty healthy track record of fundraising success and investment performance in the high net worth and ultra-high net worth segments of those systems as well. If you actually look at private banks over the last five years that's probably grown about 25% compound annual growth rate in terms of AUM in the channel. And high net worth has actually been our fastest-growing end segment with about 42% CAGR over the last five years. We're in that market with new products. I think we've talked about this on prior calls. We have a large and growing credit interval fund that's enjoying good success and performance. And our expectation is that we'll continue to put product through that channel over time.

Great. And then maybe just as a quick follow-up. I guess with AMP on the table at this point, can you touch on how you're currently thinking about your M&A priorities or where size infrastructure may be where you'd seek out opportunities?

Yes. We've talked about this before and maybe just to zoom out quickly. I mentioned this in our prepared remarks, when we think about growth, we think it's important that we are driving high organic growth and supplementing that growth with M&A. You can see how some of the organic growth initiatives in places like alternative credit and special opportunities in European direct lending are all bearing fruit and accelerating. We also continue to drive growth into step-out strategies across the platform and that's the biggest driver of our sustained growth. When we execute on M&A, it typically is going to either tuck in a capability or a set of relationships that we don't currently have, where we feel we can acquire it at an attractive price that's strategic. And when we're talking about larger deals like a Landmark or like an AMP, it's with a view that there is a large addressable market that is growing, where we have maybe a heightened sense of urgency to be in that market in scale. So SSG is a good example of that, where we believe that the long-term growth trends in Asia warranted an acquisition to acquire capability, track record, broad office footprint, multi-asset class capability, investor relationships, etc. Candidly, and I've said this before, now that the firm is a $200 billion of AUM and we're enjoying the success that we are, the product gaps, if you will, are pretty narrow. Secondaries was a big part of it for us and Landmark has filled that gap. We continue to think that the infrastructure market is an area that we should be focusing on both organically and inorganically. We are growing well in our core infrastructure business but feel that we want to globalize and scale that. And then in and around real estate, as we've talked about before, just given the size of those addressable markets globally, we believe that there is an opportunity for us to continue to expand our real estate group through acquisition as well.

Great. Thanks so much.

Thanks, Robert.

Our next question comes from Gerry O'Hara with Jefferies.

Great. Thanks. Good afternoon everybody. I was hoping one maybe for Mike McFerran but perhaps both of you guys can weigh in a little bit, just around the pace of deployment that we might be able to expect as it relates to the $48 billion of incentive eligible AUM that's not yet invested. And then perhaps if there's some color around deployment themes that you might be able to elaborate on a little bit that would be helpful? Thank you.

Sure. I can take a stab on that one. If you look at the composition of our dry powder today, as Mike mentioned, about $57 billion of available capital, if you segment that down to the AUM not yet earning fees, it's $40 billion, $34 billion of which sits within our global credit business. And for those of you who listened to the ARCC call yesterday, I think there was a pretty positive tone on the market backdrop for deployment. Obviously, as the markets recover post-pandemic and liquidity in the markets persist, we just expect transaction activity to remain healthy, if not elevated, throughout the rest of the year. So as we sit here today, we had a very active Q1 on the heels of a very active Q4. And I remind people Q1 tends to be our seasonally slowest quarter for deployment, so to see that deployment in Q1 is a really positive sign. The good news is that we're seeing deployment opportunities across the entirety of the platform. PE is very active. We're seeing transaction flow increasing there, particularly as there's discussion about capital gains rate. So I think you should expect to see transaction activity increase. Real estate is active. So I'd say Gerry, the good news is 15 months removed from the depths of the pandemic, the market's feeling pretty strong from a deployment standpoint. And I think that should translate in terms of the AUM not yet earning fees.

Great. Thanks for taking my questions this morning.

Our next question comes from Craig Siegenthaler with Credit Suisse.

Thanks. I hope you're all doing well and congrats on crossing $200 billion.

Thanks, Craig.

So Mike, after another record-breaking direct lending fund in Europe, could you update us on the competitive landscape in private credit in Europe? We're seeing larger capital raises across the industry. But I wanted to see how this is impacting spreads and credit quality, and maybe you can highlight some of the moats that are in the Ares business?

Sure. And I'll address that, and then Kipp is on the line too, so if he has any color commentary, Kipp feel free to chime in. As we've talked about for now 20-plus years as the private credit markets have developed and we've solidified our leadership position, the moats are simply put: origination advantages, i.e. more people in more offices with more local relationships. That sourcing engine at scale allows you to be much more selective in the deals that you do, which drives outperformance in credit. That shines through when you look at our track record through cycles, both in terms of the IRRs delivered but also the infinitesimal loss rates that we experience. So order of magnitude in private credit, we have a close rate of about 3% to 5% of all the deals that come through the transom. That origination engine drives credit performance. Scale of capital and flexibility of capital is also a pretty big advantage, which is why we're so pleased to see the scaling in Europe the way that we saw it in the U.S. The reason for that is you want to cover the broadest set of available market opportunities, from the small end of the market to the large end of the market. When you go through volatile markets like we went through in 2020, the ability to deliver certainty of close and flexibility of structure at scale is a pretty unique capability. You see us now in Europe doing what we've been doing in the U.S. for years at the large end of the market, which, as Kipp talked about yesterday, is actually offering some pretty compelling risk-adjusted return relative to the core middle market today. Lastly, which is something we're really enjoying and you really see the benefits of in a market like 2020, is just the value of incumbency. Year in and year out, both in Europe and in the U.S., we see that roughly 50% of our transaction flow, in some cases north of that, is coming from our existing portfolio as they're growing, deleveraging and releveraging, making acquisitions, transitioning ownership. Building that big portfolio globally that we have, the embedded value of being able to re-underwrite that portfolio and recommit to it is a pretty big advantage. I think the competition feels more competitive in the sense of the number of folks that have capital to deploy. At the risk of sounding immodest, I don't think we're experiencing that increased liquidity as significantly more competition because of some of these competitive advantages. In the European market in particular, we're not seeing a meaningful impact on spreads and upfront fees from the amount of capital that's in that market, which I think speaks to the resilience of the asset class. I don't know, Kipp, anything you'd add to that?

No, I don't think so. I think that's a really good summary, Mike. I mean, Craig, it's just the banks continue to lose market share and there continues to be increased acceptance, I think, of direct lenders, right? Just our market share in that market continues to go up.

Thanks. No, very comprehensive. My follow-up is on ACOF V. The net IRR continues to rebound. It's in striking distance of the pref rate. Maybe you can remind us how the catch-up math will work as it crosses the pref rate and you could have a real large increase in future realized performances in the fund?

Yes. Matt and Bennett are on. Maybe they want to talk about what we're experiencing in that fund because it's generating some pretty extraordinary performance right now and then maybe Mike can help you out with the math, Craig.

Great. So this is Matt. Thanks for the question. ACOF V is seeing some nice increase in performance. I think we were up about 16% in the first quarter. We are seeing increases really in a few different industries: healthcare, which we have three different health care investments in ACOF V, both are having strong underlying growth as well as good valuations in this market. Services where we have a couple of services investments that are both growing nicely even in the COVID environment as well as valuation. We had some recovery in energy. Prices of energy have increased, and we're seeing some increases in optimism in energy. So we feel good about the ACOF V portfolio. We feel good about the continued increase in IRR in that portfolio as we see the continued underlying growth in each of those companies that we expect.

What's amazing, Craig, too ACOF V is a bright spot, but if you look at some of the older vintages, ACOF I through V in the aggregate even with the energy exposures, that composite was up about 40% over the last 12 months. Mike McFerran, do you want to talk about the catch-up?

Yes. So, Craig, once we clear the prefs, there's a catch-up mechanism on the GPL piece split and then once you get past that, I'm going to call that, let's say it's around a 9.6% IRR, then you just have your 80-20 split. So it's a little disproportionate in between the two, but that's usually a short window.

Mike, is it 20-80, kind of, the inverse in catch-up, or is it 100-0? I just forgot the math on that one.

I don't have it in front of me. I'm going to go off memory, and I think it's 85-15 or 80-20, so the inverse to your point.

Got it. Thank you, guys.

Sure. Thanks, Craig.

Our next question comes from Alex Blostein with Goldman Sachs.

Hi. Good morning or good afternoon actually, guys. A question for you guys on capital management. Given your recent secondary offering and with the AMP deal not happening, should we be thinking about the plans to retire the pref that you talked about earlier with cash on hand or with issuing potentially new pref or new debt? And I guess, bigger picture, as you continue to evaluate acquisition opportunities in the space, how should we think about your ability to sort of fund them with your current resources available as opposed to having to tap the equity markets again?

Do you want me to start with that, Mike?

Yeah, go for it.

Sure. Hey, Alex. We – look I think with this equity raise, we are in a great position from a liquidity standpoint. We were in a strong position before, so it was very opportunistic for us. I think we're set up from a leverage standpoint and from a cash-on-hand standpoint that from a combination of closing Landmark, and as we mentioned on the call taking out the pref are both – we have the capital to do both, as well as support organic opportunities, and as Mike mentioned, potentially inorganic opportunities. If we were to tap any incremental capital, it would be opportunistic in the debt markets and that would just be a function of future opportunities and both from a capital market standpoint as well as things we're looking at. But I did not envision us thinking about being back in the equity markets for any time in the foreseeable future. I think we're well set up.

Great. That's helpful. And then a couple of smaller questions here just around the private equity business. I was hoping you guys could update us on the pace of fundraising for ACOF VI. And ultimately, when do you expect the fees to start coming in and sort of like an implication for private equity management fees on the back of that?

Sure. I'm going to start, and Mike McFerran, you could jump in also on the fees. So with ACOF VI, we stand at $4.3 billion in committed capital today in the fund. We expect in private equity that we think about the business really overall in terms of our fundraising activities. We expect in the private equity business overall to raise about $5 billion of capital over the next 12 months. Specifically for ACOF VI, we turned on fees in the fourth quarter last year, and so that is already starting to flow in 2021 and ultimately will have some increase here in 2021, as we get the final close and have some catch-ups relative to the ultimate funds.

Yeah, I think it's spot on. And as you know, when you have subsequent closes of a committed capital fund, you'd also have a bit of those one-time catch-up fees that you'll benefit from because new LPs will be paying country management fees back to the start date. You can see pops off those, but then you'll just have run rate fees after that uncommitted.

Yeah. This is Bennett. I would also highlight we're off to a really great start with deployment with about $1.7 billion of that amount deployed already and committed.

Got it. Yep, that all makes sense. Thanks very much.

Our next question comes from Mike Carrier with Bank of America.

Great. Thanks for taking the questions. Just on FRE so expenses were on the lighter side this quarter. So Mike, is there anything unusual to note any change to the outlook or timing targets just given that the FRE margin came in already at 38%? Obviously, you probably get some post-COVID expenses in the second half of the year but just any update there?

Mike, just to clarify, I couldn't hear you clearly. The first part of your question – the second part I get it on the margin and the COVID expenses. What was the first part of your question on FRE for the quarter? Did you say you felt lighter or –

I was just saying that the expenses were lighter, I mean, this quarter, if there was anything unusual?

Sorry. FRE is 40% year-over-year. That didn't feel light. G&A. Look, G&A usually – if I look at the average of the last four quarters, it runs on average around $42 million a quarter. This Q1 is a little lighter usually. Q4 usually runs a little heavier. I will say, it's a combination of there are some benefits, and I'd say it's a couple of million from reduced travel related to COVID. But at the same time, we're benefiting from scale. I think our team has done a great job on expense management. I know in the past we've talked about how we opened up kind of an operational center of excellence in Mumbai a year and a half ago. That's given us some great operational synergies and cost leverage. There was nothing unusual this quarter in G&A. It was more a matter of there was no kind of one-time or larger expenses on anything else on the capital raise front or whatever. But this quarter was just kind of a clean run rate G&A number, again with a little bit of benefit from reduced travel.

Okay. Great. And then just as a follow-up, just on performance income realized it's tough to gauge. But just given the strong performance you guys have been seeing and the rising net accrued balance. Maybe if you can just update on like seasoning of the portfolio and the outlook in the current backdrop. And then if I can just squeeze it in. The legacy investments that you guys mentioned that drove the investment loss is that fully out? So should we expect that to kind of normalize going forward?

Sure. Let me start with that one first. So as I mentioned in the prepared remarks, it was an old portfolio related to a small fund that we call an ACOF Asia fund. It's over a decade old. It's really down to its last handful of positions. A realization this quarter, the stuff's already been written down. We took a $12 million hit. As we sit here today or as of March 31, the remaining unrealized losses against that portfolio, if they were to be realized at those prices, would be $19 million that could come in over the next couple of years. I'm optimistic and hopeful, it's less than that. But again, if we were to liquidate the portfolio at marks, that would be the magnitude of what you're talking about. So it's pretty small. On the performance income, the $424.3 million one-third of that is an American-style waterfall funds, of which almost all of it is past its respective investment periods. So that sets up a really nice profile to Mike's comments in his prepared remarks about this is an attractive backdrop for monetizations. When I think about a substantial amount of the carry that's in funds that are, in fact, what you would call harvesting mode, they're past the investment period. The other thing I'd want to highlight, and I think you're aware of this and it's going to become more evident in the years ahead, but I think the ACE-V closing is indicative of how it's going to continue. With over 40% of the carry - our net accrued carry in credit funds. What you're seeing is we have this nice pipeline of accrued carry in funds going back about three, four years, before they were sequentially one after each other, both in the U.S. and Europe, predominantly in direct lending, but then more recently in the special opportunities and alternative credit. What you're going to start seeing is a sequence of once those funds start crossing over, triggering carry from the European waterfall, it’s going to grow because we had all these funds stitched together. Again, with something like an ACE-V, those amounts want to grow. So it's something I think we're looking forward to talking more about and putting some math around in the future. I think what you're going to see with us starting, I think over the next couple of years, is kind of a differentiated carry profile where you'll have a bit of this recurring carry that's not dependent upon actually exit transactions because it's coming off a credit book. Once it starts it should grow. So again, I think it's something that's going to be unique to our model, but I'll say this could be pretty neat and a lot more predictable from the realized income standpoint when it starts triggering on.

Great, thanks a lot.

Hey, Mike, this is Bennett.

Bennett is going to jump in.

Yes. Just to jump in. I think, look, the environment for realizations right now, from a PE perspective, is as good as you can imagine with the financial buyer bid being incredibly strong, the IPO bid being incredibly strong, the SPAC bid, and there's other alternative strategic buyers. So, I do think you're going to see us consider opportunistic chances for realization across the portfolio. They may not necessarily be full sales of monetizations, but we have lots of options in front of us, and we're evaluating them at many of our portfolio companies at the moment.

Great. Thanks a lot.

Our next question comes from Adam Beatty with UBS.

Thanks and good afternoon. Just wanted to ask about sort of the Ares contribution in terms of seed or anchor capital for, particularly I guess, the private equity fund given some of the recent raises. With the offering in the quarter, I wouldn't say you're constrained in any way. But just how much of a consideration is that use of capital for you as you launch new funds? Thanks.

Sure. Adam, it's Mike. I'll take that. I remind everybody that we are committed to running a balance sheet-light model. The uses for our capital are some of the strategic initiatives that we're active on and making commitments in support of existing and new funds. As a general rule, if you look across the portfolio, it tends to shake out to be about 1%. However, as the firm is growing and as folks are here longer, the individuals are actually taking up a more significant portion of what historically would have been the GP commit. That comes with two benefits. One is obviously it reduces requirements for the use of the balance sheet. But two, it actually drives much better alignment with the private institutional or retail LP, which is actually supportive of the fundraising. If you look at the growth of the balance sheet, what you're not seeing is the growth of the individual commitments alongside the balance sheet that is quite substantial at this point. The last thing to remember, when we converted to a corporation and we outlined our capital policy of a dividend pegged to our FRE growth with the reinvestment of our realized income into the balance sheet compounding at a low tax rate, that was with a view that we should be able to support the balance sheet needs of our funds through the continued realization of the historical ones. It gets to a place where it becomes effectively self-financing as we scale.

That's great, Mike. Thank you for walking through those dynamics. And then I just wanted to circle back on SMBC and the partnership there. I mean, it seems like you're broadening and deepening relationships with existing LPs and also bringing on some new ones. And I'm assuming some of that or much of it maybe is product-driven, given some of the launches etc. But wanted to circle back on that relationship and just get your thoughts, commentary or any color on how that's manifesting and just helping drive the business. Thank you.

Sure. I'm glad you asked the question because a lot of times when there's so much going on here we talk about the strategic initiatives and we don't always get to go back and report on how they're going. That partnership over the last 15 years has been fantastic. Over the last 15 months, it has really accelerated. We have found a number of opportunities to collaborate on, where they brought a very differentiated balance sheet to our platform. We are very active, and hopefully we’ll be in a position to talk about some new strategic product launches with them next quarter. But probably the biggest illustration of the type of relationship and value they bring, if you look at the recent equity raise that we did in support of the Landmark acquisition, paydown of the preferred and the strategic pipeline, SMBC stood up with $250 million in a side-by-side private placement in support of the company. I think that was a pretty meaningful demonstration of the strength of the partnership but also how well it's going and how pleased I think we both are with the progress we're making.

That's great. Multifaceted it sounds like. Thanks very much.

Yes. For sure. Thanks.

Our next question comes from Chris Harris with Wells Fargo.

Thanks, guys. Are you able to talk to us about why the AMP deal didn't come together? It seemed like, obviously, the conversations were far enough along and it was an asset you guys were really interested in.

Chris, it's hard for us to really comment in detail. We're subject to a confidentiality agreement. As we've talked about on prior calls, there's kind of a unique set of circumstances just around the ASX disclosure requirements versus our disclosure requirements, Australian media practices versus the US. I only highlight that because we've been pretty consistent in our disclosures. We did confirm and I'll confirm it here again that we were absolutely working in good faith to a potential transaction around all or parts of their private markets business and the AMP Board ultimately decided to go in a different direction. We may all get the benefit over time of increased disclosures from their side as to how they landed in that decision, but beyond that I can't really comment.

Got it. Thank you.

Our next question comes from Robert Lee with KBW.

Great. Thanks for taking my follow up. Mike, I'm just curious. Some of your peers have no capital market-backed businesses. Some more recently have talked about it particularly stemming from their credit businesses and other ways to grow fees. I mean, I know ARCC generates structuring service fees and whatnot. But is that a potential business that you think there's more that you guys can do there or build out to complement your management fees?

Yes. I would say at the margin yes, Rob. We've talked about this before. We are very active in the capital markets, but largely where we are active, we are effectively passing those economics on to the investors supporting those pools of capital. That's just a fundamental philosophical view that we have here. That being said, as our reach expands, as the investor base broadens, we have the capability here to monetize our relationships and our balance sheet differently than we have in the past. I think that it could be an incremental revenue stream for us for sure, but I would not expect to see us with a fully developed capital markets capability. It's just not the way that we're set up or the way that we think about delivering value to our end LPs.

Great. Thanks Mike.

Yeah.

And our last question today comes from Michael Cyprys with Morgan Stanley.

Hey. Thanks for taking my question. I was just hoping you could update us on your middle market cash flow lending business, that is the non-sponsor finance business. Just in terms of where you guys are today and size some of the initiatives you have in place in terms of building out some of the origination efforts there.

Yeah. I'll give you a general view and then I'll let Kipp chime in here. We take a pretty broad view of our private credit business. If we're talking about middle market corporates, we've always had a meaningful business in the non-sponsored part of the market. The reality is the sponsored market is obviously a big driver of that, but we've seen an opportunity over time to create teams that are focused on non-sponsored origination and execution, as well as specific industry verticals. We've had good success and we continue to grow in places like direct-to-company ABL through our commercial finance business. Our life sciences and healthcare industry teams are enjoying a lot of success direct-to-company. We have mentioned on prior calls that we've stood up an effort in COVID around sports media and entertainment assets, that's largely direct-to-company. Our energy and infrastructure teams obviously lend direct to the company, so that is a big part of the growth opportunity. But I would probably say, as big as those get, they're growing at a pace with the sponsor business, not necessarily outpacing. In terms of the percentages, I'm going to throw out, and Kipp, you correct me if I'm wrong, it's probably in any given period 20% to 30% of the business, but obviously on a very large embedded capital base.

Yeah. I think that's right. I mean, Mike, all I'd add is right and you know this as well as I do, but just one other point. We really chose to dedicate resources, so we've been hiring dedicated to do direct-to-company lending. We'll continue to simply, because when you take somebody in a region and they have some amount of throughput to do deals. They have to choose between a $500 million financing with a sponsor or a $30 million direct-to-company loan, they of course tend to prioritize the larger ones. So we finally after a lot of years of not wanting to staff that team differently, we finally chose a couple of years back to staff that team differently. It's actually paying some real dividends for us. So I think we'll continue hiring there. And it will continue growing as a percentage of our mix.

Great. Thank you.

This concludes our question-and-answer session. I'd like to turn the call back over to Mike Arougheti for any closing remarks.

Thank you. Yeah. I would just close maybe with a summary of where I think we are, which is that the fundamentals in the company have never been stronger in terms of the setup of available capital, investment performance, the continued fundraising momentum that we have. So with the market backdrop that we're in, we are very excited about what 2021 holds for us. So we look forward to updating everybody on our progress in a couple of months.

Ladies and gentlemen, this concludes our conference call for today. If you missed any part of today's call, an archived replay of this conference call will be available through May 27, 2021, by dialing 877-344-7529, and to international callers by dialing one 1-412-317-0088. For all replays, please reference conference number 01053153. An archived replay will also be available on a webcast link, located on the home page of the Investor Resources section of our website.