Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Well Arie's unveiling a number of new targets the asset
Speaker 2: management firm, predicting it will booze assets under management to
Speaker 2: seven hundred and fifty billion dollars by twenty twenty eight.
Speaker 2: In a statement posted on the company's website, it said, quote,
Speaker 2: we expect to grow faster than the projected industry average
Speaker 2: over the next five years. For more, I'm pleased to
Speaker 2: say we're joined now by Mike Arraghetti he is ARI CEO,
Speaker 2: and of course Bloomber Zone Shanali Bassk. So Mike, let's start,
Speaker 2: of course with that target. I have to imagine that
Speaker 2: the growth of private credit is an important ingredient.
Speaker 3: It is a big driver, and obviously it's a big
Speaker 3: part of what we do. But if you look over
Speaker 3: the last five years, when we gave our prior guidance,
Speaker 3: we said that we were going to grow twenty percent.
Speaker 1: We grew thirty five.
Speaker 3: Private credit was a big part of that, but we've
Speaker 3: diversified into other big growth areas like real assets, private equity, secondaries, insurance.
Speaker 1: So I think it's a combination of all of the above.
Speaker 4: How do you think about the private credit marketrit large here.
Speaker 4: You've had so many new entrants, you have billions of
Speaker 4: dollars flowing into the industry. A lot of investors are
Speaker 4: looking around now and asking where's the risk.
Speaker 3: Well, you have to everyone defines private credit differently, So
Speaker 3: when we talk about private credit today, I think a
Speaker 3: lot of people are specifically talking about corporate direct lending
Speaker 3: in the US, which is a great market. It's a
Speaker 3: market that we've led for many, many years, and it
Speaker 3: is a market that frankly, in my opinion, is still
Speaker 3: under capitalized, and we.
Speaker 1: Can come back to that maybe.
Speaker 3: But when I think about private credit, we're talking about
Speaker 3: all self originated private credit, rated, non rated, or ratings
Speaker 3: are equivalent in corporate, real estate, infrastructure, asset backed opportunistics.
Speaker 3: So these are huge addressable markets, each of which is
Speaker 3: growing at.
Speaker 1: A very high rate for structural reasons.
Speaker 3: So we're not really experiencing the market as crowded, and
Speaker 3: when you look at the performance in the underlying portfolios,
Speaker 3: we're not actually seeing risk emerging in any of those corners.
Speaker 2: Well, that touches on something that I've been wondering about.
Speaker 2: Of course, with the growth of private credit, like channel
Speaker 2: I mentioned all the new entrants. What does deployment look
Speaker 2: like when it comes to the actual opportunities there to
Speaker 2: throw money at.
Speaker 1: Well, here's something to think about.
Speaker 3: If you look at fundraising in the private credit market,
Speaker 3: over the last five years, the top twenty five managers
Speaker 3: we are at the top of the list, grew the
Speaker 3: fund to fifty six percent market share in capital raised. Okay,
Speaker 3: so sixty percent of the dollars are going to a
Speaker 3: very small handful of people. The five years prior it
Speaker 3: was roughly half that. So these markets are growing, but
Speaker 3: they're also consolidating. And so while you're seeing a proliferation
Speaker 3: of funds, the way that capital is getting raised and deployed,
Speaker 3: it still still sits with a very small handful of people.
Speaker 1: So if you look at our.
Speaker 3: Deployment, we put out about forty billion dollars a year
Speaker 3: in our private credit franchise, and that's been consistent for
Speaker 3: the last three, four or five years, regardless of the
Speaker 3: raid environment, regardless of the competitive environment.
Speaker 2: You know.
Speaker 4: Like, as we sit here with you today, it's interesting
Speaker 4: a lot of investors have a lot of AI on
Speaker 4: their minds with Nvidia after the bell and I've got
Speaker 4: to say, in your investor day, you did say the buzzword,
Speaker 4: how is AI going to drive the future of private credit?
Speaker 3: You know, it's it's still early, and so we've known
Speaker 3: each other a long time, and whenever something as transformational
Speaker 3: as AI comes out, we want to make sure that
Speaker 3: we first understand the opportunity, We want to understand the risk,
Speaker 3: and then deploy in a measured way.
Speaker 1: But we can't ignore it.
Speaker 3: My view is, at least for private markets investors, the
Speaker 3: biggest opportunity in AI will be twofold one supporting the
Speaker 3: digital infrastructure necessary and needed to see the data explosion happen.
Speaker 3: And that's everything from data centers, renewable renewable power, grid,
Speaker 3: grid transmission. So that's one big, big theme that market
Speaker 3: is undercapitalized.
Speaker 1: We're leaning in there.
Speaker 3: And then two is how do we use AI to
Speaker 3: improve the efficiency and the returns in our own company
Speaker 3: and in our investment portfolio. We recently made a small
Speaker 3: acquisition of a team of technologists Bootstrap Labs. We have
Speaker 3: put them into our corporate strategy group and we're now
Speaker 3: deploying them into our portfolio to look for opportunities for efficiency.
Speaker 3: We're deploying them into our middle and back office to
Speaker 3: try to drive margin expansion, and we're eventually going to
Speaker 3: set them free on our portfolio companies and data to
Speaker 3: try to create some underwriting edge. So I think that's
Speaker 3: going to be the long term fully grill.
Speaker 4: To this holy grail. If you look to this kind
Speaker 4: of long term push that you're making here to twenty
Speaker 4: twenty eight adding assets under management, then where do you
Speaker 4: look to deploy your own capital, not the funds, but
Speaker 4: investing in the business. Is it the marginal hire or
Speaker 4: is it the marginal technology expertise here?
Speaker 1: It's both, It's both.
Speaker 3: But we've been very vocal that I think the strategy
Speaker 3: to win long term in private markets is origination and
Speaker 3: investment acumen. Now we're going to be able to use
Speaker 3: technology to support good investment decision making. Any margin enhancement
Speaker 3: that we can generate through technology, we're going to put
Speaker 3: back into the investment engine, right because when you're in
Speaker 3: these large addressable markets, ultimately we win by finding investment
Speaker 3: opportunities that others can't, and at the end of the day,
Speaker 3: technology can't do that alone. So my own way of
Speaker 3: thinking about AI is it is a supplementation of our
Speaker 3: human capital. It's not a replacement of our human capital.
Speaker 2: Well, overall, how are you thinking about your human capital
Speaker 2: when you think about some of your AUM goals? For example,
Speaker 2: do you plan to hire more people to help achieve that?
Speaker 4: And how many?
Speaker 3: I'm going to say yes, plenty, and then I'm going
Speaker 3: to get back in my phone.
Speaker 1: Is going to be ringing up the hook with people
Speaker 1: looking for a job? Yeah, clearly.
Speaker 3: If you look at our headcount, we have three thousand
Speaker 3: employees at areas today, in forty offices in twenty countries.
Speaker 3: They're all growing because, again, our differentiator is our ability
Speaker 3: to be in these local markets developing relationships with companies
Speaker 3: and assets. So by definition, we have to grow our
Speaker 3: headcount in order to support the AUM target. I think
Speaker 3: we'll be doing that all over the globe.
Speaker 4: Now, there are some areas that have gotten really hot
Speaker 4: in private credit. One where you guys have made an
Speaker 4: early splash is sports. Yes, there's a lot of news
Speaker 4: around the market about the NFL looking to be open
Speaker 4: to private equity ownership. How big is that market? Is
Speaker 4: it even attracted to somebody like you?
Speaker 1: Yeah?
Speaker 3: I think the sports media and entertainment as I would
Speaker 3: describe the opportunity as a huge addressable market We formally
Speaker 3: entered the business about four years ago in the middle
Speaker 3: of COVID, identifying that that would be a catalyst for
Speaker 3: what we thought would be transformational change. So when I
Speaker 3: reflect back on our thirty years in private credit, it's
Speaker 3: always been about innovating where there was some form of
Speaker 3: rigidity in the way that things got financed. And if
Speaker 3: you look at sports globally, they've typically been financed with
Speaker 3: bank capital and high net worth investors and nothing in between.
Speaker 3: And what we've learned over thirty years is the markets
Speaker 3: will evolve to value innovation in capital structures, and I
Speaker 3: think that's what's happening in sports.
Speaker 1: So the NFL being one example of many.
Speaker 3: As these leagues are maturing and people are seeing values grow,
Speaker 3: they're bringing institutional capital into a unlock value in the
Speaker 3: capital structure, support growth, bring management expertise to the table
Speaker 3: to help drive continued revenues. So I think we're just
Speaker 3: getting started. And this is a TAM that did not exist.
Speaker 3: So you mentioned the NFL. If you say thirty teams
Speaker 3: times you know, three four or five billion, pick your
Speaker 3: number one league alone, you can see you start to
Speaker 3: create one hundred billion dollar equity TAM.
Speaker 1: And so I think we're just beginning.
Speaker 3: To see the you know, the evolution of this, but
Speaker 3: it's going to open up a whole new market investment
Speaker 3: opportunity for folks like us.
Speaker 2: I also do want to talk about wealth because obviously
Speaker 2: that's a big growth driver for you. How do you
Speaker 2: keep the momentum going, how do you continue to expand
Speaker 2: your business in that business?
Speaker 3: Yeah, I think, Look, there's going to be like all
Speaker 3: things in our business now, it's consolidating and the consolidation
Speaker 3: is accelerating.
Speaker 1: I think in wealthy you win with people.
Speaker 3: Ie you need teams around the globe that are supporting
Speaker 3: the sales and servicing of the wealth investor.
Speaker 1: You need a platform to support it.
Speaker 3: You need product, you need track record, you need relationships
Speaker 3: with the distribution partners.
Speaker 1: And it's a huge investment.
Speaker 3: We have one hundred and twenty five people with six
Speaker 3: products that are actually pushing product into the wealth channel.
Speaker 3: We set it our Investor Day yesterday. We expect our
Speaker 3: twenty five billion today to grow to one hundred billion.
Speaker 3: We expect our hundred and twenty five people to go
Speaker 3: to one hundred and seventy five, and our product set
Speaker 3: will go from six to likely ten. So again you
Speaker 3: have to make investments in each of these areas.
Speaker 1: People, product platform.
Speaker 4: Are long term goals twenty twenty eight, you said these
Speaker 4: goals for but what about the next twelve months. What's
Speaker 4: the biggest opportunity.
Speaker 1: I think we just got to keep doing what we're doing.
Speaker 3: You know, obviously the transaction market is beginning to open up,
Speaker 3: deployment is starting to pick up again. The fundraising machine
Speaker 3: has been working for us, as you've seen in our
Speaker 3: fundraising numbers in what we by all accounts. You know,
Speaker 3: here is a difficult fundraising market. So I think every
Speaker 3: year is about execution. The way that we get to
Speaker 3: our five year goals is just, you know, keep doing
Speaker 3: what we're doing, and I think that's what we're focused on.
Speaker 2: Well, Mike, I think that's a good place to leave it.
Speaker 2: Really appreciates your time today. Out of course, is Mike
Speaker 2: Arraghetty of Areas, and of course Ploomberg's Shanali Basset