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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: I'm Shanali bask I'm sitting here at the Goldman Sachs

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Speaker 2: Financial Services Conference. Welcome to our Bloomberg television and radio audiences.

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Speaker 2: I'm standing by now with Michael Araghetti, the CEO of

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Speaker 2: Aris Management, and you broke records, record after record, really

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Speaker 2: nothing for record, nothing but records. So how do you

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Speaker 2: even begin to set up for twenty twenty five when

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Speaker 2: it was a record breaking fundraising year for you.

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Speaker 1: In many ways?

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Speaker 3: Yeah, well, the year's not over, so hopefully we'll have

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Speaker 3: a good, good push to the end of the year.

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Speaker 1: This will be a record fundraising year.

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Speaker 3: But what's nice about the way that our business has

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Speaker 3: evolved and developed Ten fifteen years ago, we and others

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Speaker 3: like us were very dependent on the traditional institutional market

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Speaker 3: for fundraising. If you look at twenty twenty four, about

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Speaker 3: thirty percent of our capital raising is actually coming from

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Speaker 3: that traditional institutional part of the market.

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Speaker 1: The other two thirds.

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Speaker 3: Just coming from places like wealth and retail, our publicly

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Speaker 3: traded permanent capital vehicles, our insurance business, our COLO franchise.

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Speaker 3: So there's been a broadening out and deepening of our

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Speaker 3: products set and our fundraising capability, which means that when

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Speaker 3: we're going into a new year, we're doing it from

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Speaker 3: a much higher base, so we're equally as optimistic for

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Speaker 3: what next year.

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Speaker 1: Holds as well.

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Speaker 2: Fascinating, what is the look on the other side.

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Speaker 1: If you're raising all that.

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Speaker 2: Money, you need to put it somewhere. Are you finding

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Speaker 2: enough investment opportunities? You know, even with the record breaking

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Speaker 2: fund that you just had, did you find a way

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Speaker 2: to put a lot of that to work yet?

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Speaker 1: Yeah?

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Speaker 3: It's actually it's the as we grow, we keep investing

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Speaker 3: in our deployment, which is the big driver of our business.

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Speaker 3: If you look at the last couple of years, as

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Speaker 3: our dry powder has grown, so has our deployment, almost

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Speaker 3: one for one. So we need to keep investing in

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Speaker 3: new products, new markets, people, et cetera, which we're doing

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Speaker 3: organically and inorganically. So my expectation is deployment will pick

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Speaker 3: up in twenty twenty five m and a market feels

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Speaker 3: like it's picking back up. Transaction volumes are accelerating. So

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Speaker 3: we had a really good year, but I think twenty

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Speaker 3: twenty five is setting up to be another big.

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Speaker 1: What role is em and A going to play?

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Speaker 2: There's an expectation of this big return, but of course

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Speaker 2: you have a lot of concerns from private acute sponsors

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Speaker 2: still out there. There's also a lot of uncertainty around

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Speaker 2: interest rates, particularly if those Trump tariffs come to play.

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Speaker 3: I think that is the big question in my mind

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Speaker 3: for twenty five is the trajectory for rates and the

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Speaker 3: impact of tariffs. We have believed and now continue believe

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Speaker 3: that rates will stay higher for longer. That's actually really

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Speaker 3: good for our private credit businesses just because we capture

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Speaker 3: all of that excess return. It's not so good for

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Speaker 3: the M and A market, and so I think twenty

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Speaker 3: twenty five will have to strike that balance. That said,

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Speaker 3: there's a lot of pent up demand to transact, right.

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Speaker 3: You have people that have largely been sitting on the

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Speaker 3: sidelines for twenty four months plus. The capital that they

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Speaker 3: manage has you know, a timestamp on it. It needs

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Speaker 3: to get invested, It needs to get returned to their investors.

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Speaker 3: So I think it's more important that we have rate

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Speaker 3: stability at this point as opposed to needing to see

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Speaker 3: rates come down dramatically in order to see the transaction values.

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Speaker 2: But do investors have it totally wrong? You look at

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Speaker 2: the expectations for rate cuts.

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Speaker 1: You get to as low as.

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Speaker 2: Three point five percent, and do we get there or

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Speaker 2: do you think that there's actually a risk that rates

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Speaker 2: go higher next year.

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Speaker 3: I don't know if there's a risk that they go higher.

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Speaker 3: I think that there's a real possibility that they stay high.

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Speaker 3: A lot needs to go right or wrong, depending on

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Speaker 3: which side of the market you're in to see them

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Speaker 3: actually move back up. But I think that there's a

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Speaker 3: real strong case roumit that they will stay higher for longer,

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Speaker 3: and probably higher than the forward curve is predicting. But again,

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Speaker 3: we've lived in a three and a half and four

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Speaker 3: percent based rate environment before, and so it's not as

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Speaker 3: though the markets can't function well there. The key is

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Speaker 3: how do we transition, And we're already beginning to see

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Speaker 3: the markets transitioning to the new cost of But that's

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Speaker 3: really all you need to see volumes.

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Speaker 1: Pick up now.

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Speaker 2: Mike, a week ago, the big elephant in the room,

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Speaker 2: HPS sells to Blackrock, huge, huge deal.

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Speaker 1: In the industry. What did you make of it? From

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Speaker 1: where you're sitting.

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Speaker 2: Do you think that it changes the competitive landscape in

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Speaker 2: a significant way?

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Speaker 3: Yeah, So, first, I'm super happy for all of them.

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Speaker 3: I think it's a great partnership, two great companies coming together.

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Speaker 3: I don't know if it necessarily changes the competitive landscape.

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Speaker 3: Right If I look at we've been in this business

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Speaker 3: for thirty years, and we've seen our competitors get bought before.

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Speaker 3: We've seen Okill get bought by TIRA, we saw an

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Speaker 3: Terry's get bought by CPP, we saw Churchill get bought

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Speaker 3: by Neuvene. Right, that doesn't necessarily change the competitive dynamic.

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Speaker 1: I think the.

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Speaker 3: Competitors are the competitors more importantly. From my lens, and

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Speaker 3: maybe it's self serving, I view it as a real

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Speaker 3: validation of the competitive advantages that you create through scale

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Speaker 3: in private credit. Right, So when a company as well

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Speaker 3: positioned as black Rock chooses to buy HPS for thirty times,

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Speaker 3: it's really for me a validation of the private credit

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Speaker 3: investment thesis. And so, viewed through that lens, I think

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Speaker 3: it's a great thing.

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Speaker 2: What does this make of consolidation across the industry? You

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Speaker 2: yourself have been a significant consolidator, but you have looked

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Speaker 2: really outside that traditional private credit business of late. You

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Speaker 2: went into real estate in a much bigger way.

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Speaker 1: For example.

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Speaker 2: Does that mean that the direct lending businesses as we

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Speaker 2: know it is kind of at its peak and you

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Speaker 2: need to look elsewhere to consolidate in order for the

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Speaker 2: real growth in private market.

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Speaker 1: So from the areas perspective, I don't think so.

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Speaker 3: We are capturing a growing share of a growing market

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Speaker 3: in the core corporate lending business, but we're also seeing

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Speaker 3: the opening up of new markets real estate lending, asset

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Speaker 3: based lending, infrastructure lending. We're globalizing the business, so we

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Speaker 3: have a significant runway in Europe and Asia. So even

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Speaker 3: if people believe that there's a maturation in the core

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Speaker 3: US direct lending business, that's really just a small fraction

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Speaker 3: of the investable market and we've already set ourselves up

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Speaker 3: to grow in other parts of the world. I do

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Speaker 3: think though, that consolidation in asset management will continue. We

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Speaker 3: have learned over the last ten or twenty years.

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Speaker 1: Size matters in this business.

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Speaker 3: You need to be able to invest in growth, origination,

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Speaker 3: portfolio management, technology, fundraising, and that's a sizable investment, and.

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Speaker 1: So the big will get bigger.

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Speaker 3: They'll do it organically, but they'll also fill in gaps

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Speaker 3: in their products, set in capability by making.

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Speaker 1: Acquisitions as well well.

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Speaker 2: Speaking of those other capabilities, you're talking about real estate

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Speaker 2: for a moment here. I mean, what is the biggest opportunity,

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Speaker 2: particularly when people are looking around some of the parts

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Speaker 2: of the industry and still seeing some pain, either pain

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Speaker 2: on the office side or maybe you could argue over

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Speaker 2: exuberance on the AI data center side in some ways,

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Speaker 2: how do you feel about the opportunity?

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Speaker 3: Real estate is always talked about as a hyper local market,

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Speaker 3: we would agree, and it matters not just what market

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Speaker 3: you're in, but what street in what street corner you're on.

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Speaker 3: And so I think in order to be great at

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Speaker 3: real estate, you have to be broad in your footprint

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Speaker 3: and broad in your capability. You're right, there's distressed opportunity

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Speaker 3: or transitional opportunities in office, there's growing opportunities in data centers.

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Speaker 3: We're making significant investments in industrial real estate to take

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Speaker 3: advantage of what we perceive to be a realignment of

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Speaker 3: global supply chain. So there's a lot of different ways

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Speaker 3: to play real estate. I will say, though, the things

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Speaker 3: that drive value in real estate going forward are going

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Speaker 3: to be rates again, whether.

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Speaker 1: They come down fast or not.

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Speaker 3: Stability and rates is a positive for real estate growth,

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Speaker 3: economic growth, and.

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Speaker 1: We're continuing to see strengthen the.

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Speaker 3: US economy that will drive transaction volumes and then supply.

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Speaker 1: And I think one of the things that people don't.

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Speaker 3: Fully appreciate is because of the headwinds that the real

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Speaker 3: estate market has had over the last couple of years,

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Speaker 3: the market is fundamentally undersupplied.

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Speaker 1: Which does two things.

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Speaker 3: It supports the value of the existing assets of people,

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Speaker 3: and it's going to create demand for new development and

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Speaker 3: new capital coming into the market.

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Speaker 1: So you've got to pick your spots.

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Speaker 3: But I think generally when you view it through the

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Speaker 3: lens of rates and supply, there's a tail when going

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Speaker 3: into twenty twenty five.

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Speaker 2: Five rates are staying higher for longer. Then you also

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Speaker 2: set a potential distressed opportunity in real estate. How big

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Speaker 2: is that distressed opportunity and would you play in it?

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Speaker 2: Would you want to.

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Speaker 1: Invest in it? Yeah?

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Speaker 3: We cover the waterfront in terms of our real estate positioning.

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Speaker 3: Multifamily and industrial have been our two largest exposures, but

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Speaker 3: we also play to an increasing extent in data centers,

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Speaker 3: student housing, self storage, so other growth markets. We have

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Speaker 3: largely avoided office in the primary market. We have large

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Speaker 3: pools of capital that are geared to invest in opportunistic

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Speaker 3: real estate equity and opportunistic.

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Speaker 1: Real estate debt.

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Speaker 3: So what we've learned in past cycles is the way

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Speaker 3: that distress plays out is sometimes it's a secondary market.

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Speaker 1: Opportunity where you're buying good assets at good basis.

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Speaker 3: Sometimes it's just to shift in the competitive dynamic in

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Speaker 3: the primary market.

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Speaker 1: So you have to be prepared for both.

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Speaker 3: Right, if banks who are over exposed to commercial real

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Speaker 3: estate office don't sell those assets, that probably means they're

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Speaker 3: going to be less competitive in the primary market. So

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Speaker 3: you have to be prepared for either outcome.

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Speaker 2: Mike, we're running out of time. We have to leave

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Speaker 2: it there. Of course, a big setup for twenty twenty five.

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Speaker 2: That is Mike Arrogetty of Areas Management