AR ARES Ares Management Corporation Loading... : Bullish and Bearish Analyst Opinions

Refi risk hits KKR, APO, ARES.

Watch these financial services beneficiaries of the GAI buildout; no author position disclosed, treat as research basket.

Watch as beneficiaries of AI infrastructure financing. The author maps direct and fee-pool exposure across alternative managers, banks, boutiques, and ratings firms. No ownership stated.

Large alternative asset managers will keep winning

Long ARES gaining from the shift of AI compute contracts into a new collateral category similar to aircraft leasing or project finance.

Long alternative asset managers as AI infrastructure financing emerges as a new institutional credit product, with investment-grade structures and large deployment potential. | Timeframe: long-term

Reports Ares raised a record $30B in Q1, dismissing private-credit and AI disruption concerns; factual fundraising milestone, no directional view.

Long alternative asset managers as behind-the-meter AI power becomes a new private infrastructure finance vertical with long-term contracted cash flows.

Speaker explicitly stated a preference to "lean" into StepStone and Ares due to their "faster growth" and "growth and value driven" models. These alternative asset managers have less reliance on the challenged wealth channel for private credit and are better positioned in institutional or other faster-growing market segments. Long due to superior growth prospects and business model differentiation within the asset manager space. A broader downturn in private market activity or spread widening that impacts all asset managers uniformly.

Whalen describes private credit as a "slow-motion trainwreck" with redemptions, reputation damage, and a potential "Lehman moment" for firms like Apollo, Ares, and Blue Owl. These firms face liquidity issues due to illiquid strategies, public scrutiny, and reliance on bank credit lines; Washington regulators are ignoring the problem, exacerbating risks. Avoid due to high redemption pressures, liquidity risks, and regulatory neglect, which could lead to defaults or severe losses. If regulators intervene or market conditions stabilize, the situation might improve.

Ares Capital limiting investor withdrawals, cited as evidence of spreading stress in private credit markets.

Leyla states she is "watching the equity of the asset managers" like Blackstone, Ares, and Apollo, noting that sentiment is very negative and fee revenue is likely to decline as assets under management in their semi-liquid funds shrink due to outflows. These alternative asset managers' revenues are tied to fees from capital managed. The current redemption crisis in their semi-liquid private credit funds threatens to shrink that asset base. Extreme negative sentiment may have created a potential opportunity. WATCH because the negative catalyst (fee pressure) is clear and present, but extreme pessimism may have created a future entry point. It is not yet a buy signal. Outflows could be more severe and prolonged than expected, leading to greater fee erosion. The equity may not be cheap enough to compensate for the fundamental pressure.

The speaker explicitly states that firms like Blackstone, KKR, and Ares have grown from managing $40 million to nearly a trillion dollars, a result of structural change in the marketplace that is continuing. This structural change (growth in private markets, capital formation, consolidation) rewards good work with more work—specifically, managing more money. Size in private markets is not the enemy of performance but enhances it through greater resources and relevance. The firms at the center of this secular trend are positioned for continued disproportionate growth and success. A severe, prolonged market downturn that disrupts the ability to originate good investments and manage risk effectively.

Speaker discusses Apollo (APO), Blackstone (BX), and Ares (ARES) as potential bottom-fishing candidates in the beaten-down private capital space. Notes they were top gainers in the S&P on the day of recording. These stocks are down significantly (e.g., BX down ~40%) despite forward EPS estimates near all-time highs, creating a disconnect. The core business issue is an expected terrible fundraising environment in 2026, not necessarily widespread defaults in current holdings. The group is worth monitoring for a potential bounce if the private credit panic subsides and the feared systemic spillover does not materialize. Apollo is highlighted as potentially being more cautious and better positioned. The private credit/equity marks are indeed wrong, leading to significant NAV declines and sustained investor outflows, creating a vicious cycle.

Highlights unexplained valuation gain in Ares Commercial Finance, no directional commitment from speaker.

"You see the big private credit sponsors. Their stock prices have declined significantly right look at companies like Aries and you also hear all sorts of headlines about investors in private credited funds trying to withdraw." AI is rapidly disrupting the middle-market software businesses that many private credit funds and Business Development Companies (BDCs) lend to. This fundamental deterioration is sparking investor panic and redemption requests, which will continue to pressure the equity valuations of publicly traded private credit sponsors. AVOID because even though the structure prevents a systemic bank run, the equity tranches of these BDCs will absorb the loan losses and suffer from negative sentiment. The disruption to software companies is overstated, and the high dividend yields of BDCs attract aggressive dip-buying from retail investors.

Buy ARES as a contrarian dislocation play; author initiates a 1% position at current levels, viewing the risk/reward as potentially brilliant despite acknowledged uncertainty, and preferring it over peers with deeper structural challenges.

"Aries fell today by 4.8%. KKR fell by 3.2%. This as Jp morgan Chase is said to be restricting some lending to private credit funds." Major prime brokers restricting lending to private credit funds chokes off their leverage and liquidity, severely impacting the business models and return profiles of alternative asset managers. AVOID ARES, KKR, and OWL due to tightening credit conditions from major Wall Street banks. JPMorgan reverses its policy, or alternative asset managers successfully secure alternative sources of leverage.

Things like Owl and Ares and KKR and all these big private credit names really selling off... I'm looking at some of this selloff as being a little overdone. The market is mispricing private credit risk by incorrectly comparing it to the 2008 bank leverage cycle. Without a broad economic recession or surging corporate defaults, the massive 40-50% selloff in these alternative asset managers presents a deep-value entry point. Go long top-tier private credit and alternative asset managers that have been unfairly punished by macro fears. If the US economy enters a severe recession, corporate defaults will spike, leading to actual structural losses and liquidity gates in private credit funds.

The author identifies two dividend stocks, ARES and WES, as undervalued bargains.

"Private equity firms are stuck with assets that are now going on kind of seven years... Secondary funds have the ability to step in and really capitalize on this current dynamic." The "Liquidity Crunch" in private equity forces GPs and LPs to sell stakes at discounts. The largest players in the Secondaries market (Blackstone's Strategic Partners, Carlyle's AlpInvest, Ares' Landmark, KKR) are the buyers of choice. They get assets at a discount and are the solution to the industry's liquidity problem. Long the alternative asset managers with dominant Secondary platforms. A severe recession could mark down the underlying portfolio values (NAV) of the assets they are buying, regardless of the entry discount.

These stocks (KKR, Aries Management, CBRE, Huntington Bancshares) are explicitly on Garrett's "negative momentum" breakdown list. When stocks fall below key moving averages (20/50 day) and lack insider buying support, they enter a liquidation phase. The "Private Credit is Subprime" narrative, while debatable fundamentally, is driving price action downward in these names. Short/Avoid until momentum stabilizes or insiders step in. A sudden Fed pivot or "QE" announcement would squeeze financials higher immediately.

When asked about "headlines about another fund... struggling to meet redemptions," Waller responds: "I don't see big, really big widespread problems... couple of cases of certainly fraud... I don't think as a whole the private credit market is in any serious trouble." The market currently fears a systemic liquidity crisis in Private Credit (the "shadow banking bubble" narrative). Waller, a key regulator, explicitly isolates these issues as "fraud" rather than systemic failure. This greenlights the major, high-quality asset managers (Blackstone, KKR, Apollo) to continue gaining market share as fears of a regulatory crackdown or sector-wide collapse dissipate. LONG. The "Fed Put" effectively exists for the asset class structure, as they aren't seeing systemic risk. Discovery of contagion where major players actually have bad collateral, disproving Waller's "idiosyncratic" view.

Short ARES due to high multiples and deteriorating financials in the industry, with the speaker skeptical of current valuations.

A Blackstone private credit fund faced record redemption requests (7.9% of the fund), and Blue Owl had to block escape hatches on some funds. Retail investors are panicking that AI (Anthropic/OpenAI) will destroy the enterprise software companies that these private credit funds lend to. This fear is causing a liquidity crunch/redemption cycle. Avoid the sector. The upside is capped (it's debt), but the downside involves illiquidity and panic selling. If the Fed cuts rates or AI fears subside quickly, these yield-generating assets could rebound.

McVey argues we are in a "regime change" favoring real assets (infrastructure/real estate) and that Private Credit is undergoing massive consolidation ("went from 20 players to five"). He notes defaults will rise, making scale and recovery capabilities critical. In a consolidating market with rising defaults, the largest players with the best origination and workout teams win market share from smaller, weaker funds. Additionally, these firms are the primary aggregators of the "hard assets" (infrastructure) McVey recommends for an inflationary environment. Long the "Big 4" Alternative Asset Managers who benefit from the consolidation and demand for real assets. A severe global recession causing a liquidity crisis in private markets; regulatory crackdowns on non-bank lending.

"I think getting larger in private equity could make sense for us... it just hasn't kept pace with the rest of the business... someone of our size and global reach should be larger generally in private equities." Ares is signaling a specific catalyst: M&A-driven expansion. In a difficult fundraising environment, smaller high-quality managers are cheaper to acquire. By bolting these onto the Ares platform ("The Ares Flywheel"), they can scale AUM and fees significantly, bringing the PE division up to parity with their dominant Credit arm. Long ARES as they execute this growth strategy, capitalizing on industry consolidation. Integration risk of acquired firms or overpaying for boutique managers.

Whalen states that the world of private credit is "unraveling" because retail investors are fleeing these illiquid investments. He explicitly notes that companies like Blue Owl (OWL) "have been selling off dramatically" and that putting retail investors into these trades was "always wrong." Retail investors demand liquidity. When they realize they cannot exit private credit positions easily, they panic. This forces a migration out of private credit/equity vehicles. Even though firms like Apollo (APO) and Ares (ARES) have insurance arms for funding, the broader sentiment and retail exodus create significant headwinds for their stock prices. SHORT/AVOID these asset managers as the "liquidity premium" returns to the market. These firms collect management fees regardless of performance, which provides a floor to their revenue; institutional capital may step in where retail flees.

Private credit has expanded massively to fill the void left by banks, lending to risky LBOs (40% in software) at rates that imply "low single B" credit quality. Lenders are seeing a rise in "PIK interest" (borrowers not paying cash). The entire premise of this lending was based on software "recurring revenue" and high equity valuations acting as a cushion. With software equities collapsing and revenue quality questioned, the collateral backing these loans is vaporizing. In a recession, this credit tier historically sees ~30% default rates. Short the sector. While "gold standard" firms like ARES might have better underwriting, the asset class as a whole is opaque, illiquid, and facing a "race to the bottom" in lending standards. A "soft landing" where rates drop quickly, allowing borrowers to refinance before defaults cascade; the "gold standard" firms (ARES) proving resilient enough to gain market share from collapsing smaller players.

Frost states CalPERS has a target allocation of 8% for Private Credit but is currently "hovering around 4%." She affirms "a lot of conviction" in the asset class and a willingness to buy secondary stakes if terms are right. When a massive capital pool ($400B+) is 50% underweight in a specific asset class, it creates a multi-year structural tailwind. The "Big 4" alternative asset managers (Blackstone, KKR, Apollo, Ares) are the primary beneficiaries of these institutional flows, specifically in direct lending and specialty finance. LONG the asset managers collecting these fees. A severe recession causing a spike in default rates within private credit portfolios.