Unrisky Business

Megadeals and private equity titans may dominate the headlines, but ARES MANAGEMENT has quietly amassed $341 billion in assets by offering steady returns regardless of what happens in the stock market.

- Hank Tucker

As an enterprising 13-year-old New York Yankees fan in 1986, Michael Arougheti ran a baseball card trading business, setting up tables at collectibles shows on weekends in suburban New York City. He made thousands but learned that flipping hundreds of cards for tiny gains was a better strategy than obsessively pursuing a rare Hank Aaron rookie card-which might be worth tens of thousands but was almost impossible to find. Since 2018, Arougheti has been the CEO of credit-focused alternative asset firm Ares Management. It has quietly become one of the most successful firms on Wall Street, but unlike its more famous private equity peers, Ares is beating the odds with a steady diet of thousands of singles.

The Los Angeles-based firm has grown to $341 billion in assets, more than tripling in size in the last five years, with $204 billion in its credit business, which makes loans to little-known mid-sized companies worldwide. While firms like KKR are known for bold equity bets with unlimited potential gains, Ares' upside is mostly limited to the coupon interest payments-pegged to benchmark rates like LIBOR-on its loans. That's just fine for its 2,000 pension funds, insurance companies and other institutional clients.

"People are gravitating toward durable yield. We were very early proselytizers of the value of compounding yield," says Arougheti, 50, noting a boom in business precipitated by falling equity markets and higher interest rates.