Good morning, everyone. Welcome to the Aries Management Corporation's first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. As a reminder, this conference call is being recorded on Friday, May 1, 2026. I would now like to turn the call over to Mr. Greg Mason, co-head of public markets investor relations for Aries Management. Please go ahead, sir. Good morning, and thank you for joining us

today for our first quarter 2026 conference call. I'm joined today by Michael Arragetti, our Chief Executive Officer, and Jared Phillips, our Chief Financial Officer. We also have a number of executives with us today who will be available during Q&A. Before we begin, I want to remind you that comments made during this call contain forward-looking statements and are subject to risks and uncertainties, including those identified in our risk factors in our SEC filings. Our actual results could differ materially, and we undertake no obligation to update any such forward-looking statements. Please also note that past performance is not a guarantee of future results, and nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in ARIES or any ARIES fund. During this call, we will refer to certain non-GAAP financial measures, which should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles. Please refer to our first quarter earnings presentation available on the investor resources section of our website for reconciliations of these non-GAAP measures to the most directly comparable GAAP measures. Note that we plan to file our Form 10-Q later this month. This morning, we announced that we declared a quarterly dividend of $1.35 per share on the company's Class A and non-voting common stock, representing an increase of over 20% over our dividend the same quarter a year ago. The dividend will be paid on June 30, 2026, to holders of record on June 16. Now I'll turn the call over to Mike, who will start with some comments on the current market environment and our first quarter financial results.

Thank you, Greg, and good morning. We hope everybody's doing well. In the first quarter, we continue to generate strong financial results and significant growth across our key financial metrics, and we're excited and confident about the opportunities ahead for our business. Our AUM increased 18% year-over-year to $644 billion, and our fee-paying AUM increased 19% to $400 billion. This is translating into strong top-line growth and profitability as management fees increase 22% year-over-year, FRE grew 26%, and Realized Income increased 24%. We also continue to generate strong fund performance for our investors across an expanding array of investment strategies, which is helping to drive increased and more diversified investor demand across a record year of funding. $30 billion of gross is our highest-ever first 46% compared to last year's record. The decline of new institutional funds remains robust for this year and next year, with three of our largest institutional private credit funds in the market over the next 12 months, two of which have already launched with significant momentum. The franchise remains strong. Quarters of our $644 billion at AUM is comprised of institutional capital, with 14% from publicly traded closed-end funds and other sources, and just over 10% from Evergreen Wealth products. With nearly 1,700 investment professionals across more than 55 global offices, we operate one of the largest and most diversified origination platforms in the private markets. This platform enables us to source differentiated investments throughout market cycles and to capture market share during periods of volatility. Even with the typical seasonal slowdown in the first quarter, which was further amplified by heightened geopolitical issues, $2 billion across the quarter of last year. As sponsors and business owners gain increasing comfort with the market backdrop, we're seeing our forward investment pipeline increase to a new record level with notable strength across European and U.S. direct lending, alternative credit, and infrastructure. The expansion of our platform is also driving new investment opportunities. For example, over the past two years, we've added 14 new investment products and strategies, which now total $68 billion in AUM. These new additions to the platform enable us to continue to expand our global origination capabilities and help us to find supply-demand imbalances and to deploy capital in high-conviction areas. The goal continues to expand on the back of our strong fundraising, and it now stands at over 100. As one of the largest institutionally-backed private credit providers globally, we believe that we have the most credit dry powder of any public player in the market, totaling more than $100 billion. dollars. This sets us up well for continued growth in FPAUM as we invest in today's increasingly attractive market. Let me dive into a few key drivers of our business, starting with fundraising. We continue to see strong demand from institutional investors, as many are seeking to take advantage of improving market conditions across private credit, real assets, and secondaries. Institutional demand is broad-based, and we continue to see investors consolidating relationships with scale platforms like ARIES that can generate consistent performance across cycles we raised over 20 billion dollars in q1 driven by strong demand across across both drawdown funds and perpetual capital vehicles we held the final close for ASOF 3 our latest opportunistic credit fund raising over 8.3 billion of equity commitments and nearly 10 billion including related transaction vehicles a soft 3 significantly exceeded its target and the size of the prior vintage we believe that the timing of this raise is particularly compelling as the team is seeing a large pipeline of investment opportunities in January we launched the third vintage of our alternative credit fund with a target of six and a half billion our alternative credit strategy is where we invest across the multi-trillion dollar addressable market and global asset backed finance totaled 6.6 billion in capital and the current fund is experiencing strong demand from existing and new institutional investors well in excess of the target we expect to complete the fundraise in the second quarter at its hard cap as the fund is already meaningfully over us direct lending we're accelerating the launch of our fourth senior direct lending fund due to improving market conditions which are offering enhanced economics lower leveraged and improved deal terms in u.s direct lending investments and we anticipate a first close late third quarter or early fourth quarter of this year we also have some exciting structural enhancements to our main fund series which we believe will benefit investors and enhance our fundraising capabilities in the strategy in our third u.s senior direct lending fund sdl3 we We raised approximately $15.3 billion in equity commitments across both levered and unlevered sleeves in the fund against a $10 billion cover. Fourth vintage in the series will be a fully levered fund, and we plan to launch a new unlevered evergreen U.S. senior direct lending core product. The two products will continue to invest together, just like previous vintages, but will now provide investors with both a commingled and an evergreen opportunity. Like our third fund, we would expect this fourth fund series to also exceed its 10 billion. In digital infrastructure, we're raising a global data center equity fund to take advantage of the multi-decade supply-demand imbalance as the hyperscalers drive demand for trillions of dollars of cloud and AI computing over the next five years, a significant portion of which will need to be solved by private equity and private credit. Our digital infrastructure group, which includes our own vertically integrated operating platform, Ada Infrastructure, has a differentiated position in the market characterized by longstanding hyperscaler relationships, significant investment and development expertise, and multiple seed projects in the pipeline in top-tier markets. We expect to hold a significant first close for our global data center fund. As many of you know, we operate one of the largest real estate platforms globally. and our scale continues to drive accelerating demand across our real estate funds. The 7th U.S. value-add fund closed at its increased hard cap of $3.1 billion in fund commitments, and approximately $3.5 billion in the 6th development fund is seeing very strong demand following the excellent performance. We expect to hold a first close this spring and ultimately reach the hard cap later this year. And in secondaries, we're back in the market with our third real estate secondaries fund and expect to first close in the back half of the year. Our wealth business, we had another strong quarter driven by accelerating demand in our six products outside of U.S. private. We raised the same amount of gross and net equity capital of $4 billion and $3 billion respectively in the first quarter as we did in the fourth quarter of last year. On a year-over-year basis, our wealth AUM increased 54% to $68 billion. dollars. We believe that our diversified product offering is enabling us to gain market share as advisors broaden their focus away from U.S. private credit toward other alternative products like infrastructure, real estate, and private equity. For example, Infrastructure Fund raised a billion dollars in equity subscriptions and now has over three billion dollars of AUM. And the fund just launched on its first major platform with its first capital raise on that platform closing today. We're also seeing improving flows across our two non-traded REITs with more than $640 million of inflows in the quarter, and our European direct lending wealth products had equity flows of nearly 1.2 billion. Flows into our non-traded BDC have moderated relative to prior periods, while fund performance and underlying credit fundamentals remain strong. The non-traded BDC has generated an annualized return of over 10% for Class I shares. Notably, the majority of repurchase requests during the most recent quarter came from a limited number of family offices and smaller institutions in select regions, and over 95% of our investors did not request redemptions. Remember that these vehicles are specifically designed to align liquidity with the underlying assets. For example, the non-traded VDC's 5% quarterly approximates the natural repayments of a typical U.S. direct lending portfolio. This repurchase framework is intended to provide access to attractively yielding illiquid assets while also mitigating against the risk of forced asset sales. We believe that we're well positioned to continue to drive strong growth regardless of redemption activity in our TUS private credit vehicles. These two private credit wealth products account for approximately 4.5% of our overall fee-paying AUM. While we believe it is a very unlikely scenario, if these two funds were to experience 5% quarterly redemptions for a full year with no gross inflows, we estimate that based on existing fund structures and redemption mechanics, it could impact our FPAUM by approximately 1% annually. Considering that our FPAUM increased by over 19% in the past 12 months and our current AUM not yet paying fees available for deployment represents another 19% of future growth in FPU AUM, we would expect the impact of any redemption activity to be minimal. In reality, any deployment that would have gone to these non-traded vehicles will likely be taken up by other traded and institutional funds and SMAs with limited to no impact. To the investing side, overall deployment activity increased modestly compared to the first quarter of 2025, driven by real estate, alternative credit, European direct lending, and price market environment for U.S. direct lending was slower in the first quarter, as industry-wide deal count and middle market M&A declined by 41% in Q1 26 versus Q1 25, and changing inflation and rate expectations. We often gain considerable market share due to our certainty of capital and broad sourcing capability. In several weeks, we're beginning to see a pickup in new U.S. direct lending transaction activity as market participants adjust to changing market conditions. As Jared will discuss later in the call, our investment portfolios are performing well and credit fundamentals remain positive. We'll see defaults, which will inevitably garner attention, but we are not seeing signs of an impending default cycle, and we believe that private credit players are getting well compensated for the risks with enhanced economics. We have operated our U.S. direct lending strategy for over 20 years, and looking at ARIES's BDC, ARIES Capital Corporation, we've deployed and exited more than $70 billion in capital with an asset-level realized gross IRR of 13% on all exited investments. In our view, the growth of the private credit asset class is part of a multi-decade structural evolution by continued expansion of the private markets relative to the public markets. Secondly, it was driven by bank consolidation, the need for tight bank regulation given the dependence on federally insured deposit liability mismatch and leverage in the banking system. And lastly, the syndicated bank loan and high-yield markets have been focused on larger companies for decades, which has left a growing just-funded 75 percent or more by institutional investors, serves as a stabilizing force in the economy when bank lending contracts. If you look over the last 25 years, U.S. private credit has contracted once, which was over 10 years ago, versus the banking sector, which has contracted eight times over the same period. ARIES has over $100 billion in available capital, and we estimate that the industry has over 500, which is larger than the size of the entire non-traded BDC industry. Credit has expanded at low double-digit rates over the past decade. This growth tracks in line with the growth of the $5 trillion private equity sector and other private market asset classes. Our economy's GDP, funded by corporate credit, including private credit, bank C&I loans, syndicated bank loans, and high-yield bonds, has not changed over the past decade. This indicates that the growth of private credit is not increasing the amount of leverage credit in the economy and is providing more consistent funding throughout business cycles. Every loan funded by private credit with comparatively less fund or balance sheet leverage should reduce risk of volatility. It's rightfully drawing a lot of attention, but there seems to be confusion on how to distinguish between software exposures and different software companies. Senior debt is much more protected from downside risks than equity in the capital structure, and individual software companies have varying degrees of potential AI disruption risks and opportunities. In the traded loan markets, we're seeing a bifurcation in the prices of software loans between the potentially less and more impacted companies. For example, we've tracked a basket of companies focused on core operational software, systems of record, and highly regulated markets to $98.99 versus another basket of software companies primarily focused on content generation, data analysis, and 24% on average year-to-date, and now trade below 65. There's a software exposure, which is 6% of overall AUM and less than 8% of our AUM and private credit. It's focused on senior lending, primarily to software companies in the form of complex businesses in regulated industries with proprietary data. From the Aries Capital call earlier this week, we engaged one of the top three global management consulting firms to supplement our own internal analysis of our software-oriented portfolio. They conducted a nine-week independent and detailed review of the potential forward-looking AI risk in our software-oriented portfolio companies, and the study also included our relatively lower software exposure in our European direct lending portfolio. The study graded each company on a spectrum based of risk characteristics and concluded that our software-oriented portfolio is very well positioned with 86% of the portfolio with low risk of potential AI disruption. Approximately 13% of the portfolio was classified as medium risk. These companies are performing well today but have a greater need and an opportunity to adapt to AI risks in their business and only 1% of the portfolio was categorized as having high risk of AI disruption. If the consultants framework, which aligns with our own rigorous underwriting views, proves directionally correct, the portion of our software exposure that is medium to high risk represents less than 2% of our U.S. and European direct lending AUM and well under 1% of our... And lastly, before turning the call over to Jared, I wanted to highlight the successful IPO last week of Xenergy. which is a small, modular nuclear reactor company. In 2022, we identified X-Energy as a revolutionary company through our first SPAC, Aries Acquisition Corp. 1. As we approached the de-SPAC process in the fall of 23, high inflation and rapidly rising interest rates impacted market conditions for the transaction. We chose to support X-Energy in a private transaction, and the company continued to execute its strategy, including receiving support from strategic investors like Amazon. Last week, X-Energy completed its IPO that was meaningfully oversubscribed, raising over a billion dollars at a 20% premium to the high end of the proposed range and represented the largest equity offering ever. The cost basis of our balance sheet investment is a little over $100 million, and based on the recent trading price of the stock, Our current fair value net of employee compensation is close to $700 million. We're excited to celebrate the significant partners at X-Energy. And with that, I'll turn the call over to Jared to provide additional details on our financial results.

Good morning, everyone. Our financial results in the first quarter demonstrate the strength, durability, diversification of our platform with continued strong growth across our key financial metrics. Importantly, these results reinforce what we believe is one of the defining characteristics of our business model, which is our ability to continue growing, often faster, through periods of market dislocation, given our FRE-rich earnings profile, balance sheet life strategy, the diversity of our AUM and investment strategies, and the scale of our global platform. As we look ahead, we remain confident that we're on track to meet our financial objectives for the year. We continue to benefit from a large base of AUMs that are not yet paying fees, strong fundraising momentum, especially in the institutional channel, and improving conditions for our deployment across a broader set of strategies. We believe the combination of long-duration capital, flexible investment mandates, significant dry powder, an asset-like balance sheet, and a management fee-centric model positions us well to navigate a range of market environments while continuing to drive growth and earnings over time. Turning to our results, quarterly management fees exceeded $1 billion for the first time in our firm's history and increased 22% compared to the prior year period. This growth continues to be driven by expansion in FTA-UM, which increased 19% year over year due to strong underlying fundraising and deployment activity across the platform. Feer-related performance revenues totaled $20 million in the quarter, which were driven by APMF. As a reminder, the timing of FRPR varies by fund and investment strategy. Within credit, we typically recognize FRPR from our alternative credit strategy in the third quarter, with most of the remaining credit strategies recognized in the fourth In real estate, FRPR is concentrated in the fourth quarter, while APMF and certain other perpetual vehicles generate FRPR on a more recurring quarterly basis. fee-related earnings were $464 million in the quarter, increasing 26% year over year. Our FRE margin expanded 90 basis points year over year to 42.4%. These results reflect our ability to drive operating leverage as we scale. We continue to have good visibility in the margin expansion for the full year toward the high end of our targeted range, driven by a number of factors, including continued efficiencies from the GCP integration, the data center business is slipping from a negative to a positive FRE contributor with new Global Digital Infrastructure Fund paying on committed capital, and our expectations for continued strong growth in AUM and FPA-UM from deployment. Turning to performance income, we generated $75 million in realized net performance income, an 84% increase over the year-ago period. Interest expense increased to $51 million due to normal increased Q1 seasonality. Additionally, interest income should remain around the Q1 level going forward. Realized income for the quarter was $503 million, representing growth of 24% year over year. And after-tax, realized income per share was $1.24, up 14% compared to the prior year period. Our tax rate in the quarter totaled 13.5%, Just above the midpoint of our 11% to 15% expected range for the year, in line with where we'd expect the rate to be for the remainder of the year. As Mike stated, our fund performance remains strong across the platform. Over the last 12 months, we generated time-weighted returns of approximately 12% to 15% in our U.S. direct lending strategies, 15% in alternative credit, 12% in opportunistic credit, 9% in European direct lending, and over 20% in APAC credit. We continue to see strong fundamental performance in our funds, and when we look across private and public credit markets, nothing we're observing suggests we are at or near a turn in the credit cycle. Across our direct lending portfolios, we're seeing continued near 10% EBITDA growth, loan-to-value ratios in the mid-40% range as private equity firms continue to fund new transactions with majority in equity, and improving interest coverage ratios of 2.2 times. Non-accrual ratios are well below historical norms, and we're generally financing much larger, more resilient businesses today versus past vintages. The relatively small number of credit issues we see are company-specific rather than indicative of broader trends, and we're not seeing any credit deterioration broadly within software, as we have only one software company on non-accrual. Within real assets, our diversified non-traded REIT has generated total return of approximately 12% over the last 12 months. Our infrastructure debt strategy produced gross returns of approximately 9% in the last 12 months. In secondaries, APMF has generated a since-inception net return of over 14%, while our primary private equity strategies continue to deliver strong performance with net returns of approximately 15% in ACOF 6. Overall, these results reflect the breadth and consistency of our investment performance across strategies and continue to be a key differentiator for ARIES as we look to drive long-term growth in AUM and our names. In conclusion, for the year 2026, we're on track with our longer-term goals of generating compound annual growth of 16% to 20% in FRE, 20% to 25% in realized income, and 20% dividends. We anticipate continued FRE margin expansion, and we expect to be within the upper end of our 0 to 150 basis points annual target this year. We're on track for another record year of fundraising. In our expansive origination platform, record levels of dry powder and flexible capital positions us for strong deployment, even in uncertain markets. I'll now turn the call back over to Mike for his concluding remarks.

Thanks, Jared. As we step back and reflect on the events of the first quarter, we believe one of the most important takeaways is the continued strength and resilience of our institutional fundraising franchise. Last week, we held our global annual meeting for our institutional investors. We welcomed over 1,100 attendees from across the world to both highlight the breadth and depth of ARIES investment platform and deepen relationships with our largest investors. We continue to see enthusiastic engagement from large, sophisticated investors who are allocating capital with a long-term perspective and are increasingly consolidating relationships with scaled managers that can deliver across strategies and cycles. That demand has remained consistent despite the recent market noise, and in many cases, we're seeing investors lean in given the improving opportunity set. I think it's noteworthy that we continue to exceed our fundraising targets in most of our flagship fundraisers, and in many cases, we're getting to the hard cap in a shorter amount of time than in prior vintages. We also believe that the current environment is setting up very well, tend to create more attractive investment terms and risk-adjusted returns, broader set of opportunities across credit, real assets, and secondaries. Given the ongoing impacts from geopolitical issues and certain redemptions in retail-focused funds, the current environment is offering wider spreads, higher fees, and better terms. Certain $50 billion of available capital and a highly diversified automation platform were well-positioned to take advantage of these conditions and deploy capital at more attractive risk-adjusted returns. Importantly, our business model continues to provide us with a high degree of diversification, stability, and flexibility. We operate leading businesses across an array of global credit, real estate, infrastructure, secondaries, and PE strategies, duration capital, and complemented by performance income that we believe will continue to grow over time. This combination enables us to remain patient and opportunistic while continuing to generate durable growth and earnings. We're excited about the many levers that we have for profitable growth and our ability to continue driving long-term shareholder value. I remind everyone that ARIES experienced its two fastest periods of growth during the GFC and COVID, as we're able to leverage our competitive advantages to consolidate share, and as our institutional investors increase their allocations to us to take advantage of improving returns in shoppy markets. As always, I want to thank our employees around the world for their continued hard work and dedication, and I want to thank our investors through ongoing support and confidence in our platform. Could you please open the line for questions?

Certainly, Mr. Eric Getty. Ladies and gentlemen, at this time, if you would like to ask a question, please press star, then 1 on your touchtone telephone. We ask that you please limit yourself to one question to allow as many callers to join the queue as possible. We'll go first today to Craig Siegenthaler with Bank of America.

Good morning, Mike and team. Hope everyone's doing well.

You too, Craig.

So you had a strong fundraising quarter in the credit platform, and that's despite a deceleration in two of your newer retail funds that, as you said, only represent 5% of your AUM. So I'm curious if you can provide some perspective on the evolving demand dynamics between the institutional channel, the insurance channel, and also the retail channel within private credit.

Sure. Thanks for the question, Craig. I'm going to step back and just contextualize the answer with some things that I know I've talked to you about and others on the line, which is when you think about how the private credit market has been evolving and how ARIES has chosen to participate in it, folks, remember, we actually started in private credit with ARIES Capital Corporation, a traded BDC. and as we reference on the call obviously that entity has a substantial public track record through cycles and if you look at the 21 year plus track record there the return coming out of ARC has beaten the S&P 500 the syndicated bank loan market the high yield bond market and probably most anything else that people have invested in it's a wonderful wonderful company and a wonderful structure. But what we learned was that because of the ebbs and flows, particularly within the retail market, it was challenging to take full advantage of cycles when they developed only in that traded BDC fund structure. And so we launched in earnest our institutional fund platform with the sdl and a series which have obviously scaled with similarly strong performance and watching those two work together what you learn is a diversification of funding is critically important to navigate cycles and drive out performance but also the ability to have those funds working hand in hand is performance enhancing for both funds given our ability to continue to invest into the franchise, drive new originations, have the dry powder to support our best performing companies, et cetera, et cetera. So you kind of need both. And then we got into this world where wealth was developing. And we were actually last in our space to come into the market in earnest, just given some of the learnings that we had. And we've talked about this before, of kind of the pro-cyclicality of flows sometimes within that channel, both good and bad. And so we've been very measured as we've thought about how to build the fund complex to capture, you know, the full complement of opportunities across the cycle within traded, non-traded, and institutional. But what we've always tried to articulate is the assets are the same. And I said this in the prepared remarks. So if we originate a senior secured loan and we have availability of capital on each of those three pools, each of those three pools will get to participate. So not surprisingly, if you are beginning to see slowing inflows or increased redemptions in the non-traded part of our business, that does not detract from our global deployment opportunity. and those assets will find their ways into other funds and therefore will not have an impact on our profitability. Insurance is something slightly different. I think it's important that we talk about it separately because 90% plus of an insurance company's balance sheet is investment-grade rated and high-grade. And I do think it is exciting to talk about the growth of the private high-grade market, but it is a different asset class in many respects from the traditional private credit and sub-investment-grade credit market. And so when you think about the demand, I think you have to think about it in terms of not just the channels, Craig, but also high-grade versus sub-investment grade. What I can tell you is if you look at our $20 billion of capital, I think it is absolutely indicative of what's happening in the market. We raised $20 billion of capital in our credit strategies in the quarter, $5 billion of which was in wealth. And if you break down that $5 billion in wealth further, $3 billion was in our two U.S. direct lending funds. And about $2 billion was actually in our European direct lending fund and our sports, media, and entertainment fund, which we would characterize as a quasi-private credit product. Those two, Europe and SME, are actually enjoying very strong gross and net inflows as well, despite the noise in U.S. private credit. And as I referenced on the call, we're seeing our third vintage of opportunistic credit fund ASOF hit its hard cap. We're seeing our third vintage of our ABF fund hit its hard cap and be meaningfully oversubscribed. And we talked about the early momentum that we see in the next vintage of our senior direct lending fund. So everything we're seeing on the ground is that the institutional investor is not anxious. They're not allocating away from private credit. And, in fact, I think they're looking at this as a huge opportunity to take advantage of a bizarre dislocation and bring liquidity into the market to capture excess return. So I apologize for the long answer there, Craig, but i do think it's important that we all get in the the habit of not just talking about private credit as one thing or one channel uh and we've been getting you know get a little bit more granular in terms of what we're seeing and what it's telling us so thanks for the question thank

you mike we'll go next now to alex blostein with goldman sachs hey mike um good morning everybody

i was hoping we can dig a little bit more into your comments around deployment pipelines Increasingly, I think you made a point that they're currently at a record in the credit business. So I was hoping you could expand maybe which parts of the credit business you've seen the biggest incremental pickup in your deployment opportunities, how the market has really evolved

in the last several months, especially considering that the non-trading BDCs and the evergreen vehicles have for the most part been kind of the incremental buyer in the last few years and how that might change their market structure and the spreads you currently see available in states thanks thanks for the pleasure i would just comment alex i don't know that they are the incremental buyer i think if you you know you look at the market structure whether you include certain portions of high grade private credit or exclude what you'll see is that the non-traded bdcs in aggregate just not new flows but aum is somewhere between 15 and 20 percent of the overall private credit market and obviously because they don't operate with a significant amount of dry powder i actually think when you were to look at the net flows into non-traded bdcs relative to aggregate dry powder in the institutional market i don't actually think that they were the incremental buyer um which goes back to our point earlier just about the deployment opportunity that this creates in terms of the pipelines you know but it's it was interesting because the the diversification of the platform really shined through in the quarter. We saw really strong deployment in our infra and real estate businesses, our European direct lending business, very strong deployment, secondaries and structured solutions, very strong. ABF, we saw a little bit of a slowdown in the U.S. direct lending part of the business. I think that's more reflective of what's happening in middle market M&A and the private equity market as they digest the warning, Ron, and, you know, what the implication is for inflation and the rate backdrop. But as Court said on the ARCC call, at least over the last, you know, number of weeks, we've seen people pick their pencils back up and the pipeline is reengaged. And so, as we saw last year, I think there's a strong possibility that the deployment will pick up in that part of the market, you know, pretty aggressively as we head into the back half of the year. It's been pretty broad-based, which is part of the value of having the global diversification that we have. If there was one theme that I would point out that's accelerating, it's this idea of liquidity-generated opportunity, meaning there's a lot of companies in the public and private markets that either because of the rate environment or flows are going to need to seek creative liquidity solutions through opportunistic credit, secondaries, and even direct lending and recap solutions that I think are going to drive some pretty significant deployment. So we're pretty excited about the setup here, Alex, and I'd say that pretty much every investment team is incredibly active right now. Great. Thanks so much. We'll go next now to

Steven Chewbac with Wolf Research. Hi, good morning and thanks for taking my question.

So, was hoping to double click into some of the comments on retail. While non-traded BDC flows have come under pressure, you know, flows in other products, which you alluded to, Mike, such as infrastructure, secondaries, have been much more resilient. Some of the flows are even beginning to

accelerate. And was hoping you could speak to what you're hearing from advisors and gatekeepers as

relates to retail appetite for strategies outside of credit and given the fundraising pressures on the private credit side whether you see a credible path to hitting the recently revised 2018 2028 sorry fundraising target of 125 billion yeah thanks for the question um again zooming out

i think it's important that people appreciate that the development in the wealth channel is about investor access, and it's about bringing differentiated solutions to a part of the market that here before didn't have the opportunity to invest in. And I think for the large wealth platforms and the large RIA and advisory platforms, they would tell you that their clients are meaningfully under-invested to the types of solutions that we and others like us are offering around differentiated equity exposure differentiated yield exposure tax advantaged access to real assets and so there's a major secular trend at play here that will overwhelm in my opinion whatever you know periodic noise we see whether it was the periodic noise we had in the real estate part of the market a couple of years ago or the periodic noise that we're seeing now in u.s direct lending and so you know as i mentioned on our prepared remarks and you've seen the numbers we have eight products in the channel uh you could maybe add two because we have two exchange 1031 exchanges in our read platform that continue to see uh demand pull through and while the u.s private credit funds are seeing slowing demand we're seeing increasing demand elsewhere because of the secular you know secular momentum i talked about um i'd also remind people because we we did put this out when we talked about our redemptions if you were to look at our non-traded bdc which is generating you know top mark top market performance if you were to really see where those redemptions were coming from it was smaller family offices and some smaller institutions in non-us regions it was not what i would call the well-advised you know high net worth investor that tends to be the you know the consumer of this product if you look at from a different angle 95 of our investor base in the bdc did not want to redeem and that was in addition to the, you know, the inflows that we saw that were meaningful in the period. So I'm not even sure that people have the redemption narrative right, because it's not a broad-based refutation of alts in the wealth channel. It seems to be something different. The advisor community, you know, we spend a lot of time on education and support with the individual advisors and their investors. And I think that's why you're not seeing broad-based requests for redemptions. It tends to be a little bit more isolated. And I think once people understand that, hopefully we'll kind of get on with it. And the confidence around the $125 billion? Oh, yeah, we have not changed our guidance. Okay. That's great. Thanks for taking my questions.

We'll connect now to Patrick Davitt with Autonomous Research.

Hey, good morning, everyone. Good to hear the more constructive, of direct lending pipeline commentary, but obviously you can't really see that in the hard numbers that have been put out there yet. So could you maybe put a bit more meat around how that, I guess, shadow pipeline, it sounds like you're talking about, compares to historical periods and or when you think we can expect to start converting into real announcements? Thank

you. Yeah, I think court did a good job talking about this on the call. There's a lag, obviously, So the deals that we're closing now have been in process with visibility here for months. And so, as you would expect, we have a top-down view of all the transaction flow that's working its way through the business, including the direct lending business. And I would say that the aggregate pipeline across the firm is at a record level, and that the direct lending pipeline is increasing in momentum. um you know we would hope that that pulls through a lot of times when you see things like you know the conflict in iran you get a little bit of a pause as everybody just evaluates and then once people understand what it is that we're we're working with the the pipeline will pick up a lot of the longer term you know catalysts are still in place you just have a significant amount of private equity invested that is aging that needs some form of resolution through a you know a transaction sale transaction refinancing or you know other means of dealing with its capital structure that's still in play you still do have an administration that is very pro-business and a regulatory backdrop that is um pro m a and i think that will play through and i think with rates stabilized even if they're not necessarily coming down the way the market anticipated a few months ago i think with a stable rate backdrop that should also continue to be constructive for for transaction activity not to say that's perfectly you know perfect analog but if you looked at last year uh with the tariffs in april you saw a similar pause in the market where you had meaningful pipeline build through January, February. Tariffs hit. There was a pause, and then there was a reacceleration of the pipeline through the back half of the year, and actually turned out to be a record deployment year. So I can't guarantee that that's the case, but you do see these periodic pauses. But I think a lot of the catalysts are still intact, and just the weight of money that needs to get resolved is going to drive people to the deal table. Thank you.

We'll go next now to Bill Katz with TD Cowan.

Shumi, thank you very much for taking the questions. So maybe one for Jarrett. Maybe I missed it. I apologize if you did a lot of things going on this morning. Just on the realization side of the equation, I know the Q1 came out a little bit live and maybe many of us are anticipating. Sounds like there's a ton of momentum, not only for you guys but the industry at large. He gives us just a general sense of how you think about the years playing through a little bit and then just maybe Cheetah's second question given the momentum on the FRE margins for this year how do we think about the I know it's early here but how we should we think about 2027 just given the what seems to be significant scaling across the entire platform thank you yeah thanks Bill great to hear from

you on realizations it's not too different in terms of a pattern of what Mike just said. The more active you have in transactional backdrop, the more you have the ability to pull realizations forward. The less active you may have some extended durations. The nice thing about our European waterfalls that we've talked about in the past is they're predominantly from our credit funds. So that means if the duration is extended, you're actually continuing to earn interest back on those, which actually increases your accrued balance to be recaptured later as part of the European Waterfall. We had just put out an AK when we were explaining what we thought would happen for this quarter and put it we had provided prior for the year in there. And looking into next year, we've talked a little bit about that, and there's really no change there. I think when you think about it, I've told you this before, Bill, that the hardest thing for us is to pick the exact quarter because you don't really control whether a deal is refinanced or whether transaction activity results in a lot of field turnover. But the good thing is, is because of the nature of these assets, you're not dependent on a market price coming to fruition through a transaction. So that's one of our favorite parts about the waterfall, and we're really excited to have our first harvest from our first U.S. Co-Minds of Direct Lending Fund. In terms of margin, look, we go with that zero to 150 basis points every year. Whereas, as you know, our business is built on a natural scale, but what we don't want to do is take away from investment opportunities to do something like invest in the data center business, which we know will be FRE negative for a period of time until we're able to launch a fund. Then it will be very, very accretive to the firm overall and margin accretive. That's the type of thing that we want to keep our flexibility to do. So I'd say that we expect to still be well within that zero to 150 guidance. and what the opportunities present themselves through the current volatility we're in and into the back half of the year.

Thank you. We'll go next now to Bart Duzarski at RBC Capital Markets.

Great, thanks, and good morning, everyone. I just wanted to ask around the secondaries market opportunity. You know, it sounds like we're seeing an acceleration this year compared to last, and you've got secondaries across four asset classes, so pretty built out. and just give us an update on what you're seeing on the ground with regards to the secondary opportunity accelerating. Thanks. Sure. I'm going to give context, as I always do,

so I apologize before I get there. I remind people that we came into the secondaries business, at least in earnest, through the acquisition of Landmark, gosh, almost six years ago. And the working thesis behind that acquisition was that we saw a transformation happening in the secondary space along three critical axes. One was a shift from LP-led to GP-led, meaning not just the sale of portfolios by LPs, but the desire for GPs to use the secondary market for creative liquidity solutions, everything from NAV loans to GP press to minority stake sales. And that was kind of an evolution that was taking place that we felt was going to transform the industry. We also were beginning to see that the installed base or the primary market for other parts of the alternatives landscape, real estate infrastructure and credit, were growing to a level that would also require more robust secondary solutions. And third, we were beginning to see a growth in wealth and retail that we're going to want to access more diversified, broad-based private equity exposures, and we would be able to deliver from our core buyout business. So we made that acquisition. Post that acquisition, we obviously launched into the Wealth Channel, scaled the product set to attack the GP-led market, and then launched, I think, pioneered the credit secondaries business and have now grown that into a meaningful growth engine for the firm. The reason I give you that context is because that's exactly what is happening in the secondary space. The primary markets have grown and evolved. LPs and GPs alike are looking for creative liquidity. The GP-led part of the market represents half, if not more, of the current deployment opportunity. And that market, I think, is here to stay. And the combination of all those trends that we invested behind is why you're just seeing such a significant amount of opportunity there. What's most interesting to me, though, is if you were to look at the annual deployment that happens in secondaries against the industry dry powder, It's about a one-to-one relationship, which probably makes it the least well-capitalized segment of the alternative asset space, which we like because you tend to generate excess return in markets where there's a supply-demand imbalance of capital. So, not only is the market opportunity growing, but the fundraising has not kept pace with the the growth and demand and that's one of the reasons why we're scaling as nicely as we are

very helpful thanks for that mike yeah thanks we'll go next now to ken worthington with jp morgan uh hi uh good morning thanks for taking the question um can you talk about the deployment

opportunity for direct lending in europe um i know the m a backdrop is a little bit different there

than we see in the u.s but you've got a record-sized fund and just curious to better understand what you're seeing there yeah europe europe similar to um you know it has a lot of the same dynamics that the u.s market does um we have fully developed businesses in credit across europe opportunistic direct lending real estate infrastructure and kind of all things in between um and the deployment there has been has been quite robust we actually i was pleasantly surprised with the deployment in q1 in the european market i think that you know going into this year some may have had the view that the transaction activity would be slower but i think that some of the geopolitical you know reorganization that's happening around the world has brought more focus and attention to investing in the eurozone and i think the market opportunity is probably better than we would as we would have expected so I would I you know if the first quarter is an indication the the European direct lending business is in a good spot you know the benefit of the diversification that I keep harping on last year Europe had a slower year than the u.s. as the u.s. accelerated into that back half opportunity that I talked about us direct lending was a little slower this quarter and European direct lending i think you know surprise to the upside so you do have balance when you zoom out and look at the credit business from from the top down but i think we've been pretty pretty happy with the pace of deployment there and again we get a look at the pipelines and the pipelines in europe

are as healthy as as they are here great thank you we go next now to mike brown with ubs hey good

morning almost good afternoon how are you guys good how are you good so so mike i just wanted

to maybe uh ask a question on on the software side so um you emphasize the low ltv the near zero non-accruals it's talked a lot about on the arcc call um but i guess you know much of this is

a little bit backwards looking so maybe give us a little bit of color into the forward look or maybe how you think about um kind of stress testing the portfolio you know what do you kind of see in those underlying fundamentals that really give you confidence that these companies will continue to to operate successfully and then how are you approaching software now are you kind of leaning in leaning back within direct lending and are there any interesting opportunities emerging on like the credit off side or even on the secondary side yeah it's a good question um

um the the the most important thing for people to appreciate at least in terms of our exposure and then i'll try to come at this from one slightly different angle the the software portfolio is incredibly well diversified in terms of the number of names it is sponsor backed and it sits at roughly a 40 percent loan to value and if you were to look at arcc's current quarter as a proxy you will see that we marked down the equity value within the software portfolio commensurate with what we're seeing in the broader markets so the ltv in the in the portfolio actually went up slightly but when you're sitting at the top of the capital structure at 40 with 60 equity value below you, you have to eat through all of that equity before you're taking losses in your credit book. And that is going to be the most significant mitigant to loss as we see all this play out. The weighted average remaining maturity, if you will, in our software portfolio, which is probably you know what the general market is is about three years and so what that means is there is going to be a moment here over the next couple of years where owners of these businesses and lenders to those businesses are going to have to evaluate where that company sits how disrupted it's been whether it's it is going to benefit into the future and how it's going to get resolved And that's either going to be transfer of ownership, a debt paydown, a debt repricing. So this is going to play out slowly over time. What's interesting about what we're seeing in our book now is the contractual revenues at these businesses are actually growing. And we're seeing EBITDA growth in the 10% range, and that's a reflection of new customer ads. And as you're adding new customers, the contract length is probably outside the maturity date. And so in a lot of these businesses, the financial picture will not erode even if there's a view that the business model needs to adapt or has or hasn't adapted. And so this is not a tomorrow thing. We are very confident in the quality of the software book. And we have been since underwriting. We think that we are getting very well paid for the risk that we're taking there. And as a result, when new software deals come in, and Court talked about this, there are deals that are getting done because people understand that there are competitive moats around those businesses and you can get paid incremental return because of the anxiety around software. But we're also using this market opportunity to actually exit some names where maybe we have less conviction. And one of the reasons we saw the gross to net number that we did in the direct lending portfolio this quarter is we actually took the opportunity to get out of a couple of names where maybe we didn't have as much, you know, as much confidence. The way I oversimplify my own brain is I think about as the CEO of ARIES, what are we doing here? and we have over 500 core systems that run our company, everything from our core financial systems in general ledger to our cybersecurity platforms to our order management and trade management systems. We are not ripping those systems out. We are putting an AI layer in at the company and investing in that to make sure that we get the most efficient output from those systems and the data that sits within it, but we're not moving away from those systems. In fact, those system providers are using AI to deliver a better product to us. And so if you just try to personalize it a little bit and think about the use of AI in your own life, you're probably not ripping Excel out of your computer, but you're using AI to supplement a core system in your daily work stream. and so i think you know a lot of the the opportunities that that exist in ai are are you know not going to be displacing core systems are going to be there to enhance them and those are the types of things that we've obviously focused on investing on

well set great caller thanks mike yep thank you we'll go next now to ben budish with barclays

hi uh good afternoon i guess now and uh thanks for taking the question Maybe another one for Jared. Typically, I think you give us a few more guidance tidbits. Just curious if there's anything you can share around your expectations for the European-style realization revenues for the year,

G&A growth, usually, or sometimes you'll give us a little help with expectations for FRPR.

I know that's a two-four thing, maybe a little bit of a ways off, but just anything else you can share to help kind of fine-tune.

It sounds like on the margin expansion, maybe a little bit predicated on the cadence of deployment, just quarter to quarter, but anything else you could share that would be helpful thank you yeah thanks ben i feel like i

covered uh most of the main ones that we've we normally give out through investor day and things of that nature on on gna uh you know that's obviously encompassed within the margin guidance the one thing i'd highlight mike mentioned it uh earlier in the prepared remarks we had an amazing AGM with over 1,100 attendees there. Normally, we have AGMs throughout the year. So in terms of our G&A, you'll probably see a little bit more of an increase in G&A next quarter. But that means that we won't have that travel and AGM expense for all of the different strategies in the third and fourth quarters. So there'll be a little bit of imbalance just in terms of the trending there. You can look back to 2024 is a similar time that we had that somewhere double-digit G&A for the travel. Otherwise, everything's pretty well in line, as we've talked about with all the guidance that we've given prior. So, again, as Mike said and prepared remarks, as I said, we feel really well positioned in the current market environment with the breadth of the platform. I've been active right now. They're going to help drive us towards those goals.

All right. Thank you very much, Jared.

Thank you. We'll go next now to Brendan Hawken with BMO Capital Markets. And, Mr. Hawken, your line is open, sir. You might be on mute.

Yes, I was. Thank you for taking my question. Good afternoon. Sorry about that. So, Mike, you just spoke a bit to credit selection impacting recent gross to net trends. You know, if we think about, based upon your expectations today and we play the tape forward, You know, where do you see those trends shifting and what primary factors are going to drive that?

Yeah, I don't think we're changing anything in the playbook, Brandon. I mean, if you look at the history of our direct lending business, and, you know, we've been doing this for over 30 years, over 20 years here, the the model is the same is that you you know you go out and originate the broadest possible funnel of opportunities and apply rigorous diligence and portfolio management to drive return but you know what what what may be underappreciated are two things that I think are hallmarks of our performance one is our selectivity rate so if you look at our private credit portfolios and this is true across all of the things we do in private credit we typically have a yes rate of about five percent meaning we only do five percent of the deals that we see and that's just a function of you know having some pretty high conviction on the types of things that we like to invest in and the types of things that we don't and then within the core direct lending portfolios roughly half of our deployment tends to come from incumbent relationships within the portfolio, which makes for a much easier high conviction underwriting because these are companies that we've been living with for years and years. We have a deep relationship with the management team, understand the risks and opportunities within the business. We've seen it perform. If you think of those two things, working hand-in-hand, low selectivity rate, and then the compounding effect of those incumbent relationships, I think it's one of the reasons why we've had the performance that we've had. And if you were to look at the loss rates, you know, across the board and private credit, they've all been, you know, trending close to zero. And so that's not the accident. I don't necessarily, I wouldn't say that we're doing anything different now. You know, you're probably being a little bit more selective, just given a lot of the anxieties in the market. You're probably making sure that you're keeping your liquidity a little bit drier because we're heading into a spread-widening environment where we're going to get better economics, in my opinion, next month than this month. And so, you know, that's probably driving some of it. But I think the core tenets of how we underwrite credit and how we think about driving outperformance have not changed regardless of what we're seeing in the broader market.

Great. Thanks for taking my question.

Thank you. We'll go next now to Brian McKenna with Citizens.

Okay, great. Thanks for squeezing me in here. So in the past, you've talked about the benefits of managing flexible pools of capital across both the public and private markets. I'm curious, given the first quarter volatility, did you take advantage of any of this dislocation across your funds? And then can you just remind us why having this type of AUM base is so important in delivering outperformance for your clients through cycles?

Yeah, sure, Brian. That is another hallmark of how we set the business up. Obviously, I talked about the diversification and the value of having these different access points. But within individual fund strategies, we also have flexible mandates. So our opportunistic credit business where we just had that meaningful $10 billion capital raise, that is a pool of capital that can invest private and public. And one of the reasons I said in my prepared remarks that the closing is coming at a very opportune moment is there are dislocations beginning to form in both the public and private market and having the ability to look at the relative value being offered in both of those and drive to the better risk-adjusted return is a good thing in terms of performance. But it's not just the public-private. It could be senior versus junior. It could be debt versus equity. And you're constantly looking at relative value across the markets, across geographies, and at different points of the capital structure. If you are a single asset, single point in the capital structure, everything you look at is going to try to get squeezed into that framework, which by definition means that in certain parts of the cycle, you're going to misprice risk. And I think that because we've developed with a real high conviction around flexibility in asset class position and market, it's created an investment culture here around relative value and risk-adjusted return that I think is pretty unique. Thanks, Mike. And you asked specifically. Yeah, you asked specifically. I think, yes, there are in parts of the public and traded credit markets, there are increasing opportunities to start to pivot. and I wouldn't be surprised if we actually do see that pickup as we get into the next couple of months here.

Got it. Thanks so much.

We'll go next now to Wilma Burtis with Raymond James.

Hey, good afternoon. Could you go into a little bit more detail in your data center business? Do you have data center AUM outside the digital infrastructure business, and what do you think the total market size could be for data centers in the intermediate term? Thanks.

I'm going to let Blair answer that one because that's one of the places where he's spending a significant amount of time, obviously, given the opportunity set there, and I can come back and add some color.

So maybe to give a little bit of background, we've been investing in the digital space broadly for the past 10 or 15 years, broadly defined, and that's everything from towers to networks to data centers themselves. We've been doing it across several different areas within the firm. That includes real estate, infrastructure, special situations, asset-backed, as well as our direct lending business and secondaries, both real estate and infrastructure. So this has been a longstanding investment focus for us. We've over $10 billion historically in the space. One of the exciting developments with the GCP acquisition last year was adding that ADA digital development capability that Mike mentioned, which came already with a very, very attractive seed portfolio for which we raised about $2.5 billion last summer for some of the initial assets in the Japanese market and currently going out with a broader fundraise to address not only the seed assets that we have in-house, but the significant pipeline behind it. So the answer to your question is, yes, we have it elsewhere, but adding this new development capability is just very powerful for us in the future. In terms of the market size, it is absolutely massive. It is a multi-trillion dollar market opportunity. Some of that will be in the domain of the hyperscalers themselves. However, we've sized the third-party market opportunity at around $900 billion, for which when you look at the supply-demand imbalance in terms of capital being raised to address it, it's meaningful. So we are really excited about that market opportunity ahead. Certainly, you know, the interest in what we're doing in the market, very exciting.

I would also add one other overlay here, and I think people are beginning to make this part of the conversation. When you're talking about data centers, it's not just data centers. It's GPUs. It's power and energy. And we are one of the leaders also in the renewable energy and energy transition space. And you saw what we were able to do with our DexEnergy IPO. But the digital infrastructure opportunity here is pulling together all of these different teams at scale to address the market opportunity. We obviously have a large infrastructure debt business as well, where we are one of the larger lenders to other platforms and portfolios in the institutional

market thank you thank you we'll go next now to dan fannin with jeffries uh thanks i just wanted

to follow up on your comments around the strength and institutional market and demand that's continuing i was wondering if there's any differentiation amongst that subset whether that be middle east or sovereign wealth given some of the dynamics happening globally or or if it's truly broad-based in terms of where that's still strong?

It's pretty broad-based.

We're not seeing major shifts by geography or by channel. I do think, consistent with what I said earlier, there's a consolidation theme that is emerging in terms of the larger institutions are doing more with fewer GP partners, and so I think the larger platforms are the net beneficiaries of that. And so when you look at gross dollars that are getting raised in the market, I think you're going to see a disproportionate share of those assets going to the larger incumbent platforms in many of the asset classes that we play in. And that's probably the predominant takeaway. I'm not seeing major shifts in flow. I think it's also important, as we talk about diversification, obviously, that you have businesses in all of these regions, Europe, U.S., Middle East, Asia, because what we do see is from time to time those investors want to increase allocation in their home region and being able to kind of meet them there, not just on the fundraising side but also on the investment side, I think is becoming increasingly differentiated.

Thank you. And, ladies and gentlemen, that is all the time we have for questions today. So this will bring us to the conclusion of the call. If you missed any part of today's call, an archived replay of the conference will be available through June 1, 2026 two domestic callers by dialing 1-800-839-2393, and two international callers by dialing 140.