Ares Management is highly overrated
The guest argued that Ares Management (ARES) has the widest gap between its premium brand reputation and its underlying asset reality.
The argument
The guest compared Ares' business development company (ARCC) to FS KKR Capital (FSK), noting that while professionals view ARCC as premium and FSK as junk, both hold highly similar portfolios (e.g., 60% software exposure). He argued that ARCC's premium valuation is driven purely by marketing and brand perception rather than superior asset quality.
The thesis, stress-tested
✓ What validates it
- ✓ARCC's premium to net asset value (NAV) narrowing toward its historical peers
- ✓An increase in non-accruals or defaults within the ARCC portfolio
▸ Risks discussed
- ▸Strong brand reputation may continue to drive persistent capital inflows, sustaining the premium valuation
- ▸Subordinated debt in the portfolio could outperform expectations in a stable rate environment
Hear it yourself
"KKR did the same with a company and all the other big alternative asset managers that are publicly traded have a giant arm of managing insurance capital. And I also believe that a lot of this insurance capital is in the health and life space."
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